This Report contains the information required under the Code
on Corporate Governance and under the Directors’
Remuneration Report Regulations 2002. A resolution to approve
the Report will be proposed at the 2005 Annual General
Meeting. The Chairman of the Remuneration Committee will be
available to answer questions about directors’ remuneration at
the Annual General Meeting.
Remuneration Committee
At the commencement of 2004, the Remuneration Committee
comprised David Bell (Chairman of the Committee), Alison
Carnwath and John Potter. During the year Alison Carnwath left
the Committee and Michael Harper, Nigel Moore and Will Wyatt
joined the Committee.
Under its terms of reference, the Committee, on behalf of the
Board, determines the remuneration packages including bonus
arrangements, participation in incentive schemes, pension
contributions and all other benefits received by the executive
directors. In the event of the termination of employment of those
directors, the Committee would also determine any
compensation payments, after taking appropriate legal advice.
The Committee also makes recommendations to the Board,
within its terms of reference, on the framework of senior
executive remuneration including terms of service, pay
structure, bonus and share incentive arrangements and other
benefits.
The Chief Executive, Gareth Rhys Williams, attends meetings by
invitation of the Committee but is not present when his
remuneration is being considered. The remuneration of the nonexecutive
directors is determined by the Board as a whole with
the relevant non-executive director abstaining when his or her
remuneration is considered.
Remuneration policy
The executive directors’ remuneration comprises a basic salary
plus, under the Executive Bonus Scheme, company and/or
individual performance-related elements of up to 100% of
salary. Therefore, if they achieve maximum performance in
relation to the performance-related elements of their
remuneration, these elements would, in total, account for 50%
of their total cash remuneration.
Remuneration packages are formulated to attract, retain and
motivate executive directors and senior executives of the quality
required, without being excessive, by reference to salary and
benefit surveys supplied by one or more external sources. They
take into account the responsibilities involved, remuneration
packages in comparable companies that have similar
international operations, relative performance and both internal
and external advice. Remuneration and benefits reflect
responsibility and market comparisons.
The notice period by the Company under the service contracts
of the executive directors is 12 months. The normal retirement
age of executive directors is 60. Executive directors’ service
contracts do not provide for pre-determined amounts of
compensation in the event of early termination by the
Company. The Committee’s policy in the event of early
termination of employment is to mitigate compensation to
the fullest extent practicable.
The Committee believes that it is beneficial for an executive
director to take up one external, non-executive appointment.
Remuneration received by a director in respect of such an
external appointment would be retained by the director.
The Committee currently has no intention of amending the
above stated policy for 2005 and future years, although it will be
reviewed from time to time.
When reviewing and determining executive and non-executive
directors’ and senior management’s remuneration, advice is
sought and received from one or more external remuneration
and benefit consultants and their various surveys of
remuneration and fees and also internally from the Chief
Executive, Gareth Rhys Williams, and the Company Secretary,
Roland Peate. Towers Perrin, which was formally appointed in
early 2003, has, during the year, provided independent advice
to the Committee. The Committee has also received external
advice from Monks Partnership and Deloitte & Touche.
Chairman and the other non-executive directors
The Chairman and the other non-executive directors do not
have service contracts but have letters of appointment. The
initial period of their appointments is normally three years but
may, by mutual consent and with the approval of the
Nominations Committee and the Board, be extended for a
further three years. In exceptional circumstances appointments
may be extended beyond six years, by mutual consent and with
the approval of the Nominations Committee and the Board, if it
is in the interests of the Group to do so.
Executive directors
Executive directors’ remuneration comprises basic salary, bonus,
share incentives, company vehicle or cash allowance, fuel where
a company vehicle is provided, medical health insurance,
membership of the Group’s Executive Pension Scheme, life
assurance and additionally, for Gareth Rhys Williams,
contributions towards a permanent health arrangement.
Contributions are also paid by the Company to a funded
unapproved retirement benefits scheme for Gareth Rhys
Williams of an amount equal to the difference between the
Inland Revenue earnings cap and his basic salary.
It is the Company’s policy to make provision for pensions for
executive directors through funded retirement benefit schemes.
Up to the maximum level permitted by Inland Revenue rules,
retirement benefits are provided through an approved retirement
benefit scheme. For further information, see the table entitled
Pensions Related Remuneration.