including the statement of remuneration policy for the year ended 30 September 2009
It is the Company’s policy that service contracts for the executive directors have no fixed term but are capable of termination on 12 months’ notice from the Company and six months’ notice from the director (12 months for Richard Cousins). The Company also retains the right to terminate the contract immediately by making a payment in lieu of notice equal to 12 months’ pay, on-target bonus, pension supplement and an amount equal to 10% of basic pay in respect of benefits, to be paid in monthly instalments, subject to an obligation on the director to mitigate his loss, such that payments may either reduce or cease completely in circumstances where the departing executive director gains new employment. No special provisions apply in the event of a change of control.
Directors’ service agreements were reviewed by the committee in 2007. The committee is sensitive to shareholders’ concerns regarding bonus payments to directors during their notice period and believes the obligation to mitigate adequately addresses the issue.
The service contracts outline the components of remuneration paid to the individual but do not prescribe how remuneration levels are to be modified from year to year.
The executive directors hold service agreements as set out below:
| Date of contract | |
|---|---|
| Richard Cousins | 22 November 2007 |
| Gary Green | 27 November 2007 |
| Andrew Martin | 27 November 2007 |
Executive directors may take up one non-executive directorship outside of the Group, subject to the Board’s approval. Richard Cousins received a fee of £29,740, which he was permitted to retain, during the year in respect of his directorship of HBOS plc, from which he resigned on 16 January 2009. On 1 October 2009 he was appointed as a non-executive director of Reckitt Benckiser Group plc.
In order that their interests are aligned with those of shareholders, executive directors are expected to build up and maintain a personal shareholding in the Company of at least 100% of gross base salary. New directors will undertake to build up their shareholding within four years of their appointment.
The committee reviewed and noted that these targets were achieved by all executive directors during the year. Directors’ current shareholdings are set out in the Directors' report.
The fee for the Chairman is reviewed annually by the committee each June with any increase taking effect on 1 July. The Chairman’s fee was set at £424,320 per annum, with effect from 1 July 2009 (increased by 2% from £416,000). The Chairman has a letter of engagement for a period of three years, which is renewable at three-year intervals by mutual consent and which is terminable without compensation on six months’ notice from the Company or from the Chairman.
The Chairman is not eligible for pension scheme membership, bonus or incentive arrangements. He is entitled to the provision of life and medical insurance for himself and his spouse, financial planning assistance and car benefit.
The fees for the non-executive directors are reviewed and determined by the Board each year. The base fee for the year ended 30 September 2009 was £70,000 per annum, with an additional fee of £20,000 per annum, £15,000 per annum or £7,500 per annum payable where a non-executive director acts as chairman of either the Audit, Remuneration or Corporate Responsibility Committee respectively. An additional fee of £25,000 per annum is also payable for the director nominated as senior independent non-executive director. Nonexecutive directors are not eligible for pension scheme membership, bonus or incentive arrangements.
Non-executive directors have letters of engagement. They are appointed for an initial period of three years, after which the appointment is renewable at three-year intervals by mutual consent. Details of their appointments, which are terminable without compensation, are set out in the table below.
| Non-executive director |
Original date of appointment |
Letter of engagement |
Total length of service at 30 September 2009 |
|---|---|---|---|
| Sir Roy Gardner | 1 Oct 2005 | 15 Sep 2005 (rev. 8 May 2009) |
4 years |
| Sir James Crosby | 17 Feb 2007 | 16 Feb 2007 (rev. 21 Sep 2009) |
2 years, 7 months |
| Steve Lucas | 7 Jul 2004 | 17 Jun 2004 (rev. 25 Jun 2007) |
5 years, 2 months |
| Susan Murray | 11 Oct 2007 | 11 Oct 2007 | 2 years |
| Tim Parker1 | 1 Nov 2008 | 1 Nov 2008 | 11 months |
| Don Robert | 8 May 2009 | 8 May 2009 | 5 months |
| Sir Ian Robinson | 1 Dec 2006 | 1 Dec 2006 (rev. 21 Sep 2009) |
2 years, 10 months |
There are a number of senior executives, who, with the executive directors, comprise the Executive Committee. These key management roles influence the ability of the Group to meet its strategic targets. The committee has regard to the remuneration level and structure of this group whose total remuneration including salary and other short-term benefits, target (or par) bonus and the expected value of long-term incentives is summarised in the following table:
| Total remuneration for the year ended 30 September 2009 £000 |
Number in band (2008 in brackets) |
|---|---|
| 501–1,000 | 2 (–) |
| 1,001–1,500 | 4 (5) |
| 1,501–2,000 | – (3) |
On behalf of the Board
Sir James Crosby
Chairman of the Remuneration Committee
25 November 2009
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