GOVERNANCE
DIRECTORS’ REMUNERATION POLICY
This part of the report sets out the Company’s Directors’ Remuneration Policy, which, subject to shareholder approval at the 2014 AGM, shall take binding effect from the end of the
Company’s 2014/15 financial year. The Policy is determined by the Committee.
Future policy table
The table below describes each of the elements of the remuneration package for the Executive Directors.
ELEMENT OF
REMUNERATION
PURPOSE / LINK TO
STRATEGY
OPERATION MAXIMUM PERFORMANCE MEASURES
BASE
SALARY
Fixed element of the
remuneration package,
where the balance of fixed
and variable remuneration
is aligned to the commercial
strategy of long-term
profitable growth and reflects
the Company remuneration
philosophy of gearing
reward to performance with
a sharing of risk between
Executive Directors and
shareholders.
Base salaries are normally reviewed annually and have not been
increased since 2002.
Mike Ashley does not currently receive a salary for his role.
Although salaries for existing Executive Directors (other
than Mike Ashley, who does not currently receive a salary)
have been set at £150,000 since 2002, the Company
retains discretion to set salaries at a level commensurate
with other companies of a similar size and complexity as
the Company.
Salaries for new Executive Directors will be set in
accordance with the Committee’s approach to recruitment
remuneration, as described on page 36.
Not applicable.
BENEFITS
Not applicable for current
Executive Directors
The current Executive Directors do not receive any additional benefits.
There is currently no intention to change this whilst the Executive
Bonus Share Scheme and 2015 Bonus Share Scheme remain in place.
Benefits may be provided in line with market practice to recruit a new
Executive Director taking into account individual circumstances. Such
benefits may include relocation expenses.
Whilst the Remuneration Committee has not set an
absolute maximum level of benefits Executive Directors
may receive, the Company retains discretion to set benefits
at a level which the Remuneration Committee considers
appropriate against the market and to support the on-
going strategy of the Company.
Not applicable.
RETIREMENT
BENEFITS
Provide post-employment
benefits to recruit and retain
individuals of the calibre
required for the business.
The Executive Directors are entitled to participate in a stakeholder
pension scheme on the same basis as other employees. The current
Executive Directors have opted out of this arrangement.
The current maximum employer contribution to the
stakeholder pension scheme is 1%.
The Company retains the discretion to set retirement
benefits (including pension contributions and/or a salary
supplement in lieu of a pension contribution) for any
Executive Directors in accordance with the Committee’s
approach to recruitment remuneration, as described on
page 36.
Not applicable.
ANNUAL
BONUS
Not applicable as Executive
Directors do not participate
in an annual bonus scheme.
The Committee has determined that no annual bonus scheme will be
operated for Executive Directors while the 2015 Bonus Share Scheme
is in place.
No annual bonus opportunity for an Executive Director who
participates in the 2015 Bonus Share Scheme for so long
as that scheme is in place. If that scheme is not in place
(for example if one of the Adjusted Underlying EBITDA
targets is not met so that awards under that scheme lapse)
the Committee may award an annual bonus opportunity of
up to 200% of base salary. The Committee will not award
such a bonus opportunity and grant an award under the
Executive Bonus Share Scheme as referred to below.
The annual bonus opportunity for any newly recruited
Executive Director will be set in accordance with the
Committee’s approach to recruitment remuneration as
described on page 36.
Not applicable for so long as Executive Directors
do not participate in an annual bonus scheme.
If an Executive Director does participate in an
annual bonus scheme, performance will be
assessed against one or more metrics determined
by the Committee and linked to the Company’s
strategy, with the weighting between the metrics
determined by the Committee. Bonuses will
be determined between 0% and 100% of the
maximum opportunity based on the Committee’s
assessment of the applicable metrics.
LONG-TERM
INCENTIVE
PAY (2015
BONUS
SHARE
SCHEME
AND
EXECUTIVE
BONUS
SHARE
SCHEME)
To recognise and reward
outstanding performance of
the Executives and to drive
underlying Group EBITDA in
line with Group strategy and
align Executive Directors’
interests with the interests
of shareholders in bringing
consistent long-term
profitable growth to the
Company.
2015 Bonus Share Scheme:
The 2015 Bonus Share Scheme was approved by shareholders at a
General Meeting of the Company in July 2014. Awards may be granted
under the scheme to Executive Directors on an annual (or more
frequent) basis. However, in accordance with the Company’s policy
of granting larger upfront awards which only vest if significant and
consistent growth is delivered year on year, one award may be granted
under the scheme to any Executive Director during the period for which
it is proposed this Directors Remuneration Policy shall apply, with
vesting subject to the satisfaction of the EBITDA targets set out in the
2015 Bonus Share Scheme measured over a period of four financial
years. 75% of an award is subject to a further deferral period such that
it will vest in 2021 (with 25% vesting in 2019).
Following discussions with the Committee Mike Ashley has advised
that he does not wish to participate in the 2015 Bonus Share Scheme
and accordingly the Committee has decided to make no award to Mike
Ashley under the 2015 Bonus Share Scheme.
Unvested Awards are subject to malus provisions, such that the
Committee has the discretion to reduce, cancel or impose further
conditions on the Awards in the event of a material misstatement of
the Company’s results, material failure of risk management or serious
reputational damage.
Executive Bonus Share Scheme:
The Executive Bonus Share Scheme was approved by shareholders
at the Annual General Meeting in September 2010. The Committee
may grant further awards under this scheme if the 2015 Bonus Share
Scheme is not in place (for example, if one of the Adjusted Underlying
EBITDA targets is not met so that awards under the 2015 Bonus Share
Scheme lapse). Mike Ashley is not eligible to be granted awards under
the Executive Bonus Share Scheme.
Any award granted under the Executive Bonus Share Scheme would be
subject to malus provisions on a comparable basis to those that will
apply to awards granted under the 2015 Bonus Share Scheme.
2015 Bonus Share Scheme
Awards over no more than 25 million shares may be
granted under the 2015 Bonus Share Scheme.
No more than 1 million shares (subject to such adjustment
as the Committee determines to reflect any variation in the
Company’s share capital) may be awarded to any Executive
Director (other than Mike Ashley who has advised the
Committee that he does not wish to participate in the 2015
Bonus Share Scheme).
Executive Bonus Share Scheme
Any award granted to an Executive Director under the
Executive Bonus Share Scheme during the period for
which it is proposed this Directors’ Remuneration Policy
shall apply would be over a maximum of 1 million shares
(subject to such adjustment as the Committee determines
to reflect any change in the Company’s share capital).
Stretching performance targets are set reflecting
the business priorities that underpin Group
strategy.
2015 Bonus Share Scheme:
Awards under the 2015 Bonus Share Scheme are
subject to satisfactory personal performance and
will only vest if the following Adjusted Underlying
EBITDA targets (before scheme costs) are met:
FY16: £480 million
FY17: £570 million
FY18: £650 million
FY19: £750 million
For these purposes, “Adjusted Underlying EBITDA”
means Underlying EBITDA as reported in the
Company’s published accounts for the relevant
year after such adjustments as the Committee
considers appropriate.
Executive Bonus Share Scheme:
Any award granted under the Executive Bonus
Share Scheme would be subject to stretching
performance targets determined by the
Committee based on Adjusted Underlying EBITDA,
which would be disclosed in the Directors’
Remuneration Report following the grant of any
such award.
DIRECTORS’ REMUNERATION REPORT
CONTINUED
34