34 | GOVERNANCE |
Directors’ Remuneration Report
Governance In designing the total compensation arrangements for the Group and in preparing this report, the Board and the Remuneration Committee have complied with the provisions of the UK Corporate Governance Code (the Code), Part 15 of the Companies Act 2006, the Large and Medium sized Companies and Group (Accounts and Reports) Regulations 2008 and the FSA Listing Rules. An ordinary resolution for the approval of this report will be put to shareholders at the forthcoming Annual General Meeting.
Legislation requires the Group’s auditor to audit certain disclosures within this report. Where disclosures have been audited they are indicated as such.
The following policies represent the policies now adopted by the Group for the forthcoming year and subsequent financial years.
The Committee has been established by the Board to:
(a) recommend to the Board the Group’s policy on Directors’ remuneration;
(b) ensure that the Executive Directors and senior employees are fairly rewarded and that a significant proportion of Executive Directors’ remuneration is linked to the Group’s corporate, and their individual, performance;
(c) demonstrate to shareholders that the remuneration of Executive Directors and senior employees of the Group is determined by a committee of Board members which has no personal interest in the level of remuneration of the Group’s Executive Directors or senior employees and who will pay due regard to the interests of shareholders and to the financial and commercial health of the Group; and
(d) ensure that full consideration has been given to Section D and Schedule A of the Code’s best practice provisions as annexed to the Listing Rules.
A Statement of the Remuneration Committee detailing membership of the Committee and the activities and work of the Committee is set out on page 30.
Research and advice During the year the Group Chief Executive provided regular briefings to the Committee. The Committee also received advice from the Group Head of Human Resources.
The Remuneration Committee received advice from Kepler Associates during the year on general remuneration strategy, senior executive pay benchmarking and on the Company’s LTRP. Kepler Associates was appointed by the Committee in 2007 as its independent adviser and provided no other services to the Company during the year.
During the year, the Remuneration Committee also received independent remuneration research undertaken by McLagan & Partners, Deloitte and PricewaterhouseCoopers, leading firms of executive remuneration consultants, to assess comparability of the Group’s remuneration policies to the marketplace.
Statement of the policy on Directors’ remuneration The Company’s compensation policy detailed below is based upon the following key principles:
a) Remuneration policies, procedures and practices should be consistent with and promote sound and effective risk management. The Policy should not incentivise risk-taking that exceeds the approved risk appetite of F&C.
b) The Remuneration Policy should be aligned with the business strategy, objectives, values and long-term interests of F&C.
c) The quantum of total variable remuneration should not limit the ability of F&C to strengthen its capital base.
d) Total variable remuneration should in general reflect the financial performance of the Group without jeopardising the ability to attract, retain and motivate the key talent required to achieve its goals.
In applying its policy the Group takes a total compensation approach with a strong emphasis on variable pay. The Board believes that shareholders’ interests are best served by containing fixed costs and increasing the proportion of total compensation that is directly performance-related and thus aligned with shareholders’ interests. Total remuneration will comprise basic salary, pension provision, annual bonus and any awards under the long term share incentive schemes.
The total cash component of compensation is benchmarked to market median for solid performers and to upper quartile for exceptional performers. A range of benchmark data is used, based on comparable asset management businesses, with appropriate data being used for each geographic location.
Policies on the individual elements of remuneration and employment
(a) Salaries The salaries of all employees, including Executive Directors, are reviewed annually to ensure they remain appropriate and competitive. Increases to salaries may be made periodically although not annually. Salaries are determined by reference to relevant comparator Financial Services companies as reported by external market data providers. The Remuneration Committee also takes into account salary movements for staff across the Group when setting Executive Director salaries.
(b) Discretionary Cash Bonus The size and allocation of the annual discretionary cash bonus pool is recommended by the Remuneration Committee to the Board for approval.
The recommendations of the Committee are determined by the: • performance of the Group relative to pre-agreed targets; • motivation and retention of key employees; • practice of market competitors; and • appropriate balance between fixed and variable pay.
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