If an executive director’s employment is brought to an end by either party and if it is necessary to determine a termination payment, the Committee’s policy, in the absence of a breach of the service agreement by the director, is to determine a director’s termination payment in accordance with his/her service agreement. The termination payment will be calculated based on the value of base salary and contractual benefits that would have accrued to the director during the contractual notice period. The Committee will seek mitigation to reduce the amount of any termination payment to a leaving director when appropriate to do so, having regard to the circumstances and the law governing the agreement. It may, for example, be appropriate to consider mitigation if the director has secured another job at a similar level. Mitigation would not be applicable to a contractual payment in lieu of notice.
In addition, the director may be entitled to a payment in respect of his/her statutory rights. No service agreement includes any provision for the payment of compensation upon termination. Any compensation payable in those circumstances would need to be determined at the time and in the light of the circumstances.
All bonus payments are discretionary benefits. The Committee will consider whether a departing director should receive an annual bonus in respect of the financial year in which, and/or immediately preceding which, the termination occurs, pro-rated to reflect the period of the performance year completed at the date of termination. The Committee will take into account performance; co-operation with succession; and any breach of goodwill and adherence to contractual obligations/restrictions. If the termination is by the Company on less than the specified notice in the director’s service agreement, the Committee will also consider whether the director should receive an annual bonus in respect of any period of the financial year following termination for which the director has been deprived of the opportunity to earn annual bonus. If the employment ends in any of the following circumstances, the director will be treated as a “good leaver” and the director will be eligible for a bonus payment:
redundancy; retirement;
ill-health or disability proved to the satisfaction of the Company; and death. Chief Executive £m % Outperformance Target Below threshold £0.5m £1.0m £1.5m £2.0m £2.5m £3.0m
Salary, benefits and pension
Chief Executive Outperformance Target Below threshold 20% 40% 60% 80% 100% Finance Director Outperformance Target Below threshold Finance Director Outperformance Target Below threshold Production Director Outperformance Target Below threshold Production Director Outperformance Target Below threshold
Retail and Trading Director
Outperformance Target Below threshold
Retail and Trading Director
Outperformance Target Below threshold
If the termination is for any other reason a bonus payment will be at the discretion of the Committee. It is the Committee’s policy to ensure that any such bonus payment properly reflects the departing director’s performance and behaviour towards the Company. Therefore the amount of any such payment will be determined as described in the table on page 82, taking into account (i) the director’s personal performance and behaviour towards the Company and (ii) the Group performance. If a bonus payment is made, it will normally be paid as soon as is reasonably practicable after the Group performance element has been determined for the relevant period. There may be circumstances in which the Committee considers it appropriate for the bonus payment to be made earlier, for example, on termination due to ill-health, in which case, “on-target” Group performance score shall be assumed.
No element of any such bonus payment shall be deferred.
The Committee will consider the extent to which deferred and conditional share awards held by the director under the BMP should lapse or vest. Any determination by the Committee will be in accordance with the rules of the BMP (as approved by shareholders). In summary, the rules of the BMP provide that awards will vest (pro-rated to the date of employment termination) if employment ends for any of the following reasons:
redundancy; retirement;
ill-health or disability proved to the satisfaction of the Company; change of ownership; and
death.
If employment ends for any other reason, the rules of the BMP require the Committee to exercise its discretion. In doing so it will take account of all relevant circumstances, in particular the performance of the Company; the director’s performance and behaviour towards the Company during the performance cycle of the relevant awards; as well as a range of other relevant factors, including the proximity of the award to its maturity date. The rules of the BMP also provide that in circumstances where awards vest, deferred bonus shares vest as soon as reasonably practicable following termination. Awards, which vest subject to satisfaction of the relevant performance conditions, will be (time) pro-rated and will be phased over the performance cycle of the relevant awards.
The Committee will consider whether the overall value of any benefits accruing to a leaving director is fair and appropriate taking account of all relevant circumstances. Examples of circumstances in which the Committee may be minded to award an annual bonus payment and/or permit the vesting of BMP awards include:
the director’s continued good performance up to and following the giving of notice; and
the director accommodating the Company in the timing of his/her departure and handover arrangements. Conversely, the Committee may be minded not to allow such payments if the reason for the departure is:
poor performance; or
the director does not continue to perform effectively following notice; or the director is departing to join a competitor.
Section 6
Context
Wider employee population
In determining executive remuneration, the Committee also takes into account the level of general pay increases within the Group.
It is the Committee’s policy that annual salary increases for executive directors should not exceed the average annual salary increase for the wider employee population unless there is a particular reason for a higher increase, such as a change in the nature or scope of responsibilities.
Views taken from the employee population
In the course of discussions on pay with employee representatives, the Group discusses executive remuneration policy and provides details of the process by which the Committee establishes executive remuneration packages. The information provided includes details of the benchmarking of executive director remuneration as well as information benchmarking the pay of employees in the collective bargaining unit with pay elsewhere in the industry.
Mar ket pl ace , per for mance and r isk Sust ai nable busi ne ss re vi e w F inanci als Gover nance Ov e rv ie w
Environmental, social and governance issues
The Committee is able to consider corporate performance on environmental, social and governance issues when setting the remuneration of executive directors. Specific measures can be included in the balanced Corporate Scorecard. The Committee is able to consider those issues in considering whether to exercise its discretion to adjust the overall score, and in considering the performance conditions override under the BMP, as described on page 83.
Shareholder engagement
The Company holds regular meetings with its largest shareholders, and the Committee takes into account any views or representations of shareholders relating to executive remuneration.
The Company has consulted its ten largest shareholders in relation to the formulation of its directors’ remuneration policy.