Anglo American Annual Report 2012

GOVERNANCE DIRECTORS’ REMUNERATION REPORTFigure 1: Key aspects of the remuneration policy for executive directorsOverallremunerationPurpose Maximum opportunity OperationTo recruit andretain high-calibreexecutives andencourage themto enhance theCompany’sperformance,responsibly, inline with theCompany’sstrategy andshareholderinterestsLevels for individual pay elementsare set out belowSection 2.3 sets out the totalopportunity levels for executivedirectors under differentscenarios of CompanyperformanceThe Committee reviews the structure of the executivedirectors’ arrangements every few years and otherwiseas requiredRemuneration levels are reviewed annually to ensure theyremain competitive with reference to median levels in relevantFTSE 50 and global extractive companiesBasic salaryTo recruitand retainhigh-calibreexecutivesThere is no prescribed maximumannual increase. The Committeeis guided by the general increasefor the broader UK employeepopulation but on occasions mayneed to recognise, for example,development in role, change inresponsibility, and/or specificretention issuesBasic salary levels are reviewed annually by the Committee,taking account of Company performance, individualperformance, changes in responsibility and levels of increasefor the broader UK populationReference is also made to median levels within relevantFTSE 50 and global extractive companies, asmentioned aboveThe Committee considers the impact of any basic salaryincrease on the total remuneration packageBonus Share Plan(BSP)To encourage andreward delivery ofthe Company’sstrategic prioritiesTo help ensure,through theshare-basedelements, thatany resultingperformance issustained over thelonger-term in linewith shareholderinterestsCash awardMaximum award: 87.5% of salaryPerformance measures:50% – earnings per share (EPS)50% – individual objectiveslinked to the Company’sstrategic prioritiesSafety (loss of life and Lost TimeInjury Frequency Rate)Performance period: 1 yearBonus SharesMaximum award: 87.5% of salaryAnnual performance measuresand period: as for the cash awardFurther holding period: 3 yearsEnhancement SharesMaximum award: 75% of BonusShares (65.6% of salary)Performance measure:Real EPS growthPerformance period: 3 yearsThere are three elements to the BSP:• A performance-related cash element, payable after the endof the relevant financial year• A performance-related share element, in the form of aconditional award of Bonus Shares made after the end of therelevant financial year with a value equal to the cash elementand vesting subject to a further three-year holding period• An additional performance-related element, in the form ofEnhancement Shares granted after the end of the financialyear to a face value of 75% of the Bonus SharesThe Committee reviews the BSP measures annually to ensurethey remain appropriateBSP targets are reviewed at the same time to ensure they aredemanding yet realistic, given latest company strategy, priorperformance, and external expectationsDividends are payable on the Bonus Shares during theholding periodThe Committee is able to claw back any unvested Bonus andEnhancement Shares in the event of a material misstatementin the Company’s resultsChange for 2013: In response to investor views, theCommittee has decided to remove the opportunity forexecutives to voluntarily elect to defer up to 50% of the cashelement into Bonus SharesLong-TermIncentive Plan(LTIP)To encourageand rewardsignificantand sustainedoperatingefficienciesand the deliveryof superiorshareholderreturns, in linewith shareholderinterestsMaximum award350% of salary (receivedby the chief executive only)Performance measures50%: Total shareholderreturns (TSR)50%: Asset Optimisationand Supply Chain (AOSC)Performance period3 yearsThe Committee makes an annual conditional award of sharesto each executive directorPrior to grant the Committee reviews the performance targetsfor each measure to ensure they remain sufficiently stretchingDividend equivalents are paid on any shares that vestThe Committee is able to claw back any unvested grant(or future grants) in the event of a material misstatementin the Company’s resultsThe LTIP performance measures will be reviewed once thenew chief executive has assumed his duties. On the basis thatthe review is completed before the end of the financial year theCommittee reserves the right to apply any new measuresretrospectively to the 2013 award110 Anglo American plc Annual Report 2012