ANNUAL REPORT AND FINANCIAL STATEMENTS 2011 | 35
Performance targets have been agreed by the Board and include Investment Performance, Fund Flows, Profitability and a range of other financial and corporate objectives.
All staff including Executive Directors are eligible for discretionary cash bonus awards which recognise individual achievement and contribution relative to agreed annual objectives.
A Purchased Equity Plan operates in conjunction with the discretionary bonus scheme and is intended to encourage shareholding by management and employees of the Group by providing for:
• •
the compulsory purchase of shares using annual bonus above a threshold level; and
the voluntary purchase of shares using annual bonus, with associated matching shares.
Under the terms of the Purchased Equity Plan, participation can arise in two ways:
• on an annual basis, eligible employees who are awarded in a financial year an aggregate bonus in excess of a threshold level of £100,000 will be required to defer one third of the element exceeding £100,000 into shares (comprising a range of investment products managed by the Company or the Company’s shares) (Compulsory Purchased Equity) for three years; and
• as and when determined by the Board, eligible employees may be invited to elect to defer into shares in the Company any remaining proportion of their gross cash bonus not subject to deferral on a compulsory basis for three years (subject to a minimum deferral of £1,500) (Voluntary Purchased Equity). To date, no voluntary purchased equity awards have been made.
The Compulsory Purchased Equity will not benefit from any form of matching award and is subject to forfeiture in the event that the employee leaves the Group for any reason (other than as a “good leaver”) in the three-year retention period.
In 2011, the Board suspended the compulsory element of the Purchased Equity Plan in relation to bonuses paid for all staff.
During 2011 Compulsory Purchased Equity awards made to Alain Grisay and David Logan in 2008 vested. Their gains on vesting, representing the gross value of the shares and the cash equivalent of re-invested dividends thereon, were £688,000 and £183,000 respectively.
At 31 December 2011, 493,810 shares in the Company are held within the Purchased Equity Plan for Mr Grisay as a result of a Compulsory Purchased Equity award made in 2010.
(c) Savings-related share schemes To foster a culture of share ownership throughout the Group, the Board operates a Share Save Scheme (Share Save) and a Share Incentive Plan (SIP) for all eligible employees. Both schemes are “all- employee share schemes” and all employees including Executive Directors who meet certain criteria are eligible to participate.
The SIP is a share scheme that enables employees to purchase F&C shares in a tax efficient manner on a monthly basis at the prevailing market price. The Share Save Scheme is a personal
April 2007 Participation
savings scheme that enables employees to either purchase discounted F&C shares, the price of which is determined at the time of offering, at the end of a three-year or five-year saving period, or to receive the accumulated cash value, including accrued interest, on a tax-free basis.
At 31 December 2011, 274 employees (31 December 2010: 321 employees) participated in the SIP and 18 employees (31 December 2010: 42 employees) participated in the Share Save.
Shares under option within the Share Save at 31 December 2011 are detailed below:
Number
of options 102,663
Term (years)
Exercise price
5 144.3 pence
At 31 December 2011, 783,944 shares (31 December 2010: 739,947 shares) were held in trust for employees within the SIP. Both “all-employee share schemes” seek to buy shares in the market to remove any possible impact of dilution.
(d) Share incentive schemes The Board believes that the share incentive schemes increase the potential for greater importance to be placed upon the performance related element of total remuneration.
In any ten-year period, the aggregate number of Ordinary Shares which will be placed under award under any share incentive scheme, shall not, when aggregated with the number of Ordinary Shares placed under option or issued in that period under any other employees’ share scheme operated by the Company, exceed 10 per cent. of the Company’s issued ordinary share capital at that time. For the purposes of measurement against this limit the following will be disregarded: any Ordinary Shares that have been, or will be purchased, rather than allotted; any Ordinary Shares issued pursuant to the Thames River MRP and/or the MIP; and any awards or grants that have lapsed or become incapable of vesting.
In order to ensure that the assessment of performance conditions in relation to the share incentive schemes detailed below is independent, PricewaterhouseCoopers will report to the Remuneration Committee as to whether the performance criteria under all schemes have been met.
Policy on grants and awards under the share incentive schemes
The Company’s policy for the granting of awards under the LTRP is that awards and grants are based on an assessment of individual contribution to the business and independent advice obtained on current remuneration practices. Award levels will be determined by the Remuneration Committee with reference to Group performance, market competitiveness (assessed on a total compensation basis using independent market total compensation data), and individual performance. Because of the active policy of reducing the emphasis on base salary, the Remuneration Committee will not link or limit any awards under the LTRP explicitly to a multiple of base salary, believing that making such a linkage provides an incentive to increase base salaries, and therefore fixed costs, which is contrary to shareholders’ interests.
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