John Lewis Partnership plc Annual Report and Accounts 2014
75 How is the pay for Executive
Directors determined? The same principles apply to setting pay for the Board as for all Partners.
How do we ensure Committee
member independence? The Remuneration Committee consists of four members, including two Non- Executive Directors and two Elected Directors. No decisions can be made by the Remuneration Committee without at least one Non-Executive Director and one Elected Director present, apart from when considering Non-Executive Directors’ remuneration, when two Elected Directors are required.
There were nine meetings during the year, and Directors’ attendance at meetings is shown in the table on page 74.
No member of the Committee takes part in any deliberations affecting their own remuneration.
Who advises the
Remuneration Committee? The Committee has retained Towers Watson as independent remuneration consultants to advise generally on remuneration and related matters. Towers Watson also provides advice to the Partnership on the Partnership’s job evaluation system.
The Committee was advised during the year by Tracey Killen, Director of Personnel, and Andrew Clark, Head of Reward.
How does the Remuneration
Committee determine pay? When considering rates of pay, the Remuneration Committee takes into account:
– Individual performance, including the achievement of specified personal objectives and the attitude demonstrated in achieving those objectives;
– The performance of the function or division for which the Partner is responsible, and/or Group performance, where appropriate;
– The market context, based on the advice of Towers Watson, who are the Committee’s independent remuneration consultants;
– The overall positioning of Partnership pay against the market, including pension provisions; and
– Rule 63 of the Constitution in the case of the highest-paid Partner.
The Remuneration Committee considers and reviews each Executive Director’s overall package each year, including base pay and pension arrangements. The overall package is compared with amounts paid to Executives in other similar organisations. When looking at the reward packages of other organisations, the Remuneration Committee focusses on the upper quartile value of cash compensation, including salary and target annual bonus, as well as pension value, as a benchmark for rewarding good performance. The comparison excludes the value of long-term incentives, share and share option schemes, which are widely available in the market at executive board level.
Comply or explain?
COMPOSITION OF THE REMUNERATION COMMITTEE
Code Provision D.2.1 states that the board should establish a remuneration committee of at least three independent Non-Executive Directors. This provision supports the Code principle that the committee should be independent of executive management.
The Remuneration Committee comprises two, rather than three, independent Non- Executive Directors and two Elected Directors. This provides a broad mix of members who are independent of executive management and mindful of the Partners’ interests.
Comply or explain?
ROLE OF THE REMUNERATION COMMITTEE
Code Provision D.2.2 states that the remuneration committee should have delegated responsibility for setting remuneration for all Executive Directors and the chairman, including pension rights and any compensation payments. This provision supports the Code principle that remuneration should be set in a formal and transparent manner.
The Remuneration Committee does not have delegated responsibility for setting the Chairman’s remuneration, but instead recommends to the Partnership Board the remuneration package for the Chairman.
Under the terms of Rule 63 of the Constitution, the highest paid Partner’s pay is subject to a cap by reference to a formula related to the pay of other Partners.
THE JOHN LEWIS PARTNERSHIP
OUR PERFORMANCE
GOVERNANCE
FINANCIAL STATEMENTS
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