Remuneration Committee Terms of Reference

Group Secretariat
Group Remuneration Committee
Terms of Reference
Issued:
1 November 2012
RSA Insurance Group plc
One Plantation Place, 9 th Floor
30 Fenchurch Street
London EC3M 3BD

RSA Insurance Group plc
Group Remuneration Committee - Terms of Reference
SECTION 1. REMIT
1. Definitions
Board
Code
Committee
Company
Executive Directors
Executive Team
Group
Other Executives
The board of directors of the Company
The UK Corporate Governance Code (FRC, prevailing edition)
The Group Remuneration Committee of the Company
RSA Insurance Group plc
The employed executives who are members of the Board.
The functional and business unit directors who report to the Group
Chief Executive (excluding any Executive Directors) and who are
considered by the Company to be a cohort for the purposes of setting
and implementing its strategy below the Board and therefore are
Persons Discharging Managerial Responsibility as defined in section
96B of the Financial Services and Markets Act 2000.
The RSA Insurance Group plc group of companies
The other senior employees of the Group for whom the Committee
wishes to have oversight, as may be agreed by the Board from time to
time.
2. Purpose
The Committee has delegated authority from the Board to fulfil its oversight responsibilities to
shareholders by ensuring that remuneration principles, policy and practices:
a) are suitable, taking into account the Company’s size, sector, performance, strategy, risk
profile and values;
b) support the principle that levels of variable pay will be aligned to the levels of performance
delivered (on a Group / Company and individual basis);
c) are compliant with regulation and law; and
d) support good risk management principles and corporate governance.
The Committee has specific accountability for the matters set out in paragraphs three and four,
and shall report to the Board on these matters.
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3. Scope
3.1 The Committee shall set and approve the remuneration policy covering the Executive Directors,
Chairman of the Board, the Executive Team and Other Executives. The objectives of such a
policy being to express the over-arching principles and broad framework through which these
individuals’ remuneration will be determined and governed, and which may apply more broadly
across the Group.
3.2 The remuneration and benefits for the Chairman of the Board, the Executive Directors, the
Executive Team and Other Executives.
3.3 The remuneration of Non-Executive Directors shall be a matter determined by a committee with
delegated authority from the Board comprising the Chairman of the Board and Executive
Directors, subject to the constraints contained in the Company’s Articles of Association.
3.4 The Committee shall exercise, or may delegate to a sub-committee of such persons as the
Committee shall determine, certain powers as may become necessary from time to time under
the terms of the Company’s incentive plans, all-employee share plans and other matters as the
Committee may so determine.
4. Responsibilities
The main responsibilities of the Committee are:
4.1 Remuneration Policy
4.1.1 The Committee shall determine the policy for the remuneration, benefits and
compensation (in its widest sense) of the Chairman of the Board, the Executive
Directors, the Executive Team and Other Executives (collectively termed in later clauses
as “Individuals within its Scope”), taking into account all factors that it deems necessary,
including relevant legal and regulatory requirements. It shall review the policy at least
once a year to ensure it remains fit for purpose, is in line with sound risk management
principles and to agree how it will be implemented in the next financial year.
4.1.2 In setting and monitoring the remuneration policy, the Committee shall work with the
Board Risk Committee to ensure that risk is properly considered in line with the Group’s
risk principles, where appropriate, and to ensure that the policy or any of its outputs
avoid potential conflicts of interest from arising.
4.1.3 The Committee shall ensure that the remuneration policy is observed at all times, but
particularly in respect of any newly-appointed, promoted or departing Individuals within
its Scope.
4.1.4 No individuals shall be involved in any decisions relating to their own remuneration, nor
shall they be present during Committee meetings when such matters are discussed,
(Code D.2).
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4.2 Fixed Pay
4.2.1 The Committee shall determine the policy for setting the annual gross basic
salaries/fees, benefits and allowances of the Individuals within its Scope, approving any
specific changes to these elements of remuneration as and when they arise. In
carrying out these activities, the Committee shall take into account relevant market and
other data, any retention issues, legal and regulatory considerations, in addition to
having regard of the remuneration policy and practices applied to other employees
within the Group. In setting and changing basic salaries in particular, the Committee
will have regard to the impact of this on other forms of remuneration which are linked to
basic salary.
4.2.2 The Committee shall agree the scope of pension arrangements, including which
elements of remuneration should be pensionable and which should not.
4.2.3 The policy for authorising claims for expenses from the Group Chief Executive and the
Chairman of the Board shall be set by the Committee.
4.3 Variable Pay
4.3.1 The Committee shall approve the design and rules of any incentive plans covering the
Individuals within its Scope and other employee groups should the plan require the
issue of shares in the Company or share equivalents. The Committee’s remit shall
specifically include (but not limited to): the selection and application of relevant
performance criteria ensuring alignment to Group strategy and risk management
principles, the targets for achievement, the form and timing of awards and the treatment
of leavers.
4.3.2 The Committee shall ensure that these incentive plans encourage enhanced
performance and support the growth of shareholder value, rewarding individuals for
their contribution to the success of the Group in a fair and responsible manner which
aligns their interests with those of shareholders. In particular, the Committee shall
ensure that the levels of award vesting under the plans are appropriately consistent with
the degree of performance achieved, as measured by the plans’ performance conditions
and the overall performance of the Company and/or the Group.
4.3.3 The Committee shall approve all incentive plan awards in respect of the Individuals
within its Scope. In so doing, it shall have regard to the individuals’ level of total
remuneration and ensure that this is appropriate and in accordance with the
remuneration policy.
4.3.4 The Committee shall exercise such functions as fall to it under the terms of the rules
governing the Group’s incentives and other share plans, including the granting and
vesting of awards and the allotment of shares in the Company (including the use of
treasury shares).
4.3.5 The Committee shall determine the parameters under which it shall consider exercising
discretion in relation to the granting or vesting of awards.
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4.3.6 The Committee shall monitor the dilution levels of the Group’s share plans at least once
a year and report on these to the Board and to shareholders when required.
4.3.7 The Committee shall oversee any major changes in incentive plan structures throughout
the Company or Group. The Board Risk Committee shall be advised of any proposed
material change to the performance conditions or targets which underpin both short and
long-term incentive plans, and its advice will be sought on these, as required.
4.3.8 The Committee shall ask the Board, when appropriate, to invite shareholders to approve
all new long-term incentive plans (as defined in the FSA Handbook) and significant
changes to existing schemes, save in the circumstances permitted by the Listing Rules.
The Committee Chairman shall, where appropriate, consult the Company’s major
shareholders / institutional investors and principal corporate governance bodies on
material incentive plan changes that do not require formal shareholder approval.
4.3.9 The Chairman of the Board and Non-Executive Directors are not permitted to participate
in any Group or Company incentive plan.
4.4 Service Agreements and Contractual Matters
4.4.1 The Committee shall approve the terms contained within the service agreements for the
Executive Directors and the Executive Team and the employment contracts for Other
Executives, ensuring they are in accordance with prevailing legal and regulatory
requirements. It shall review such terms to ensure that the service agreements contain
up to date provisions, which are compliant with all appropriate legal and regulatory
requirements. The Committee has the discretion to request amending any existing
service agreement or employment contract in respect of Individuals within its Scope,
provided the reason for doing so is necessary and appropriate. In making such a
proposal, the Committee shall take into account all relevant legal factors and ensure
that the individual is consulted prior to making any contractual changes.
4.4.2 The Committee shall approve the engagement terms of Individuals within its Scope, and
shall ensure that these are in accordance with the remuneration policy. As a point of
principle, the Committee shall ensure that suitable forfeiture terms are in place if
exceptional remuneration is agreed, such as compensation for forfeited incentives or a
relocation package.
4.4.3 The Committee shall approve the payments and awards arising from the employment
termination of Individuals within its Scope, ensuring that these adhere to the
remuneration policy. In agreeing termination arrangements, it shall observe the
principle of not rewarding for failure. Where appropriate, remuneration arising from
employment termination shall be made on a phased basis provided it is contractually
permissible, and the individual’s duty to mitigate loss shall be expected.
4.4.4 In determining appointment and termination packages and arrangements, the
Committee shall give due consideration to relevant legal and regulatory requirements
including but not limited to the provisions of the Code (in particular, Schedule A, the
Design of Performance-Related Remuneration for Executive Directors) and the
requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and
Transparency Rules.
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SECTION 2 – GOVERNANCE AND PROCEDURAL MATTERS
5. Membership
5.1 The Committee shall be appointed by the Board comprising of at least three independent Non-
Executive Directors. Only Committee members have the right to attend Committee meetings
(Code B.1). The Chairman of the Board may serve as a member of, but not chair, the
Committee if he or she was considered independent on appointment (Code D.2.1).
5.2 The Board shall appoint the Committee Chairman, who shall be an independent Non-Executive
Director and determine the period for which he/she will hold office. In the absence of the
Committee Chairman, the remaining members present shall elect one of their number to chair
the meeting who would qualify under these terms of reference.
6. Attendance
The Committee may invite any directors or other executives of the Group or any external
professional advisors to attend all or part of any meetings as and when appropriate. The Group
Chief Executive, Group Human Resources Director and Group Reward Director usually attend
meetings at the invitation of the Committee, except at times when their own remuneration is
under discussion.
7. Secretary
The General Counsel and Group Company Secretary or his duly appointed nominee shall act as
the Secretary of the Committee and shall attend all meetings.
8. Quorum
8.1 The quorum necessary for the transaction of business shall be two members of the Committee,
excluding the Chairman of the Board. A duly convened meeting of the Committee at which a
quorum is present shall be competent to exercise any or all of the authorities, powers and
discretions vested in or exercisable by the Committee.
8.2 In exceptional circumstances, independent Non-Executive Directors who are not members of
the Committee may be invited to serve in order to achieve a quorum; this can be for any reason,
including the absence of a member due to illness or other causes.
9. Frequency of meetings
The Committee shall meet at least twice a year and at such other times as is required.
10. Notice of meetings
10.1 Meetings of the Committee shall be summoned by the Secretary to the Committee (or a person
nominated by him/her) at the request of any of its members.
10.2 Notice of each meeting to confirm the venue, date and time together with an agenda of items to
be discussed and supporting papers, shall be forwarded to each member of the Committee, and
to other attendees as appropriate at a reasonable period of time prior to the date of the meeting.
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11. Minutes of meetings
11.1 The Secretary shall minute the proceedings and decisions of all Committee meetings in addition
to any decisions taken outside of the meeting with its delegated authority. The minutes shall
record the names of those members who are present and absent plus individuals in attendance.
11.2 The members of the Committee shall, at the beginning of each meeting, declare the existence
of any conflicts of interest arising and the Secretary shall minute them accordingly.
11.3 Draft minutes of Committee meetings shall be circulated promptly to the Committee Chairman
and, once agreed, to all members of the Committee. Once approved, minutes of Committee
meetings shall be circulated to all members of the Board, unless it would be inappropriate to do
so for reasons agreed by the Committee Chairman or the Chairman of the Board.
12. Reporting responsibilities
12.1 The Committee Chairman shall report formally to the Board on its proceedings after each
Committee meeting.
12.2 The Committee shall approve the contents of the Directors’ Remuneration Report (‘DRR’) which
is included in the Company’s Annual Report and Accounts and is put to shareholders for
approval at the Annual General Meeting. The DRR shall comply with the prevailing legislation
governing the contents of such a report.
12.3 The Committee shall approve all other remuneration disclosure as may be required under
legislation or regulation.
12.4 The Committee Chairman shall attend the Annual General Meeting prepared to respond to any
shareholder questions on the Committee’s activities and responsibilities. He shall also, if
required, provide explanation or clarification on any matter contained in the DRR.
12.5 The Committee shall conduct an annual self-assessment and make recommendations to the
Board on matters regarding its remit and the support and advice it receives where it believes
action or improvement is needed.
13. Support and Advice
13.1 The Committee shall have access to sufficient resources in order to carry out its duties,
including access to the Group’s Secretariat, Human Resources and Risk functions for
assistance as required.
13.2 The Committee members shall receive such training as is necessary to enable them to
discharge their duties. New Committee members will receive a suitable induction programme
arranged by the Secretary and paid for by the Company should this entail external support.
13.3 To enable it to discharge its responsibility to the Board under the scope of these terms of
reference, the Committee can, at the Company’s expense (within any budget restrictions
imposed by the Board):
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13.3.1 appoint remuneration consultants and other external advisors such as lawyers, and
agree the terms of reference under which they will be engaged including fees. Where
remuneration consultants are appointed a statement, in the form appended to these
terms of reference, shall be made available as to whether they have any other
connection with the Company (Code D.2.1); and
13.3.2 commission independent professional advice, surveys, market data and/or reports
from reliable external sources as it deems necessary and appropriate, and the
outputs of which shall be shared with the regular attendees to the Committee unless it
concerns a matter connected to such an individual directly.
13.4 The Committee shall have the right to terminate any contractual arrangements it may have with
its external advisors, notifying the Secretary in advance of such an intention.
14. Authority
The Committee is authorised by the Board to:
14.1 seek any information it reasonably requires from any employee of the Company in order to be
prepared and effectively perform its duties;
14.2 delegate any of its duties as is appropriate to such persons, person or Committee as it thinks fit
whilst retaining responsibility and oversight for any and all actions taken;
14.3 review its constitution and terms of reference on an annual basis and recommend any changes
it considers necessary to the Board for approval; and
14.4 make available the Committee's terms of reference (Code D.2.1).
Approved by the Board on 1 November 2012
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STATEMENT REGARDING REMUNERATION CONSULTANTS
This document is the statement required by Provision D.2.1 of the UK Corporate Governance Code.
1. The Remuneration Committee of the Board of Directors of RSA Insurance Group plc (the
“Committee”) obtains its principal advice from PricewaterhouseCoopers LLP (“PwC”) as its
remuneration consultants.
2. PwC advises the Committee directly on matters within its terms of reference and on which the
Committee chooses to consult PwC. In relation to these matters, PwC may be requested to
provide advice to the Human Resources Director and Group Reward Director who also support
the Committee.
3. From time to time, PwC may advise the Board of Directors of RSA Insurance Group plc (or
those Directors charged by the Board to make recommendations) on the remuneration of Non-
Executive Directors, including the Chairman of the Board.
4. PwC provides a number of services to RSA Insurance Group plc, other than in the provision of
advice on executive remuneration. However, the Committee is satisfied that this does not impart
the independence of PwC's advice and that the necessary safeguards are in place to manage
any conflicts of interest which may arise from this work. PwC is a signatory to the Voluntary
Code of Conduct for Remuneration Consultants.
Approved by the Board on 1 November 2012
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