Corporate Governance (p2)

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Remuneration Committee

The Committee is chaired by Will Wyatt. The other members of the Committee are Simon Beresford-Wylie, Nigel Moore and John Potter. Sir David Bell stepped down as a member of the Committee on 1 March 2006. Each member of the Committee is independent. During 2005, the Committee met four times and all the members attended all the Committee meetings except for Sir David Bell who was unable to attend the December Committee meeting due to unavoidable absence abroad on business.

Duties of the Committee:

determining and agreeing with the Board the framework or broad policy for the remuneration of the Company’s Chairman, the executive directors, the Company Secretary and such other members of the executive management as it is designated to consider. No director or manager may be involved in any decisions as to their own remuneration;
in determining such policy, taking into account all factors which it deems necessary. The objective of such policy is to ensure that members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company;
reviewing the ongoing appropriateness and relevance of the remuneration policy;
approving the design of, and determining targets for, any performance related pay schemes operated by the Company and approving the total annual payments made under such schemes;
reviewing the design of all share incentive plans for approval by the Board and shareholders. For any such plans, determining each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to executive directors and other senior executives and the performance targets to be used;
determining the policy for, and scope of, pension arrangements for each executive director and other senior executives;
ensuring that contractual terms on termination, and any payments made, are fair to the individual, and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised;
within the terms of the agreed policy and in consultation with the Chairman and/or Chief Executive as appropriate, determining the total individual remuneration package of each executive director and other senior executives including bonuses, incentive payments and share options or other share awards;
in determining such packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the Code and the UK Listing Authority’s Listing Rules and associated guidance;
reviewing and noting annually the remuneration trends across the Company or Group;
overseeing any major changes in employee benefits structures throughout the Company or Group;
agreeing the policy for authorising claims for expenses from the Chief Executive and Chairman;
ensuring that all provisions regarding disclosure of remuneration including pensions, as set out in the Directors’ Remuneration Report Regulations 2002 and the Combined Code are fulfilled; and
be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee, and to obtain reliable, up-to-date information about remuneration in other companies. The Committee shall have full authority to commission any reports or surveys that it deems necessary to help it fulfil its obligations.

Reporting Responsibilities

The Committee Chairman reports formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
The Committee makes whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

Other Responsibilities

The Committee, at least once a year, reviews its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommends any changes it considers necessary to the Board for approval.

Authority

The Committee is authorised by the Board to seek any information it requires from any employee of the Company in order to perform its duties. The Committee is also authorised by the Board, in connection with the Committee’s duties, to obtain, at the Company’s expense, any outside legal or other professional advice.

Nominations Committee

The Committee is chaired by Michael Harper. The other members of the Committee are Sir David Bell, Simon Beresford- Wylie, Nigel Moore, John Potter and Will Wyatt. The Committee is delegated authority by the Board to deal with succession planning and making recommendations to the Board on all new Board appointments. During 2005, the Committee met on four occasions but also met by conference telephone and with the executive directors in attendance on a number of occasions to consider and discuss progress on the appointment of a new nonexecutive director. All the members attended all the Committee meetings except for Sir David Bell who was unable to attend the August and December Committee meetings due to unavoidable absences abroad on business.

Duties of the Committee:

regularly reviewing the structure, size and composition (including the skills, knowledge and experience) required of the Board in the future compared to its current position and making recommendations to the Board with regard to any changes;
giving full consideration to succession planning for directors and other senior executives, taking into account the challenges and opportunities facing the company, and the skills and expertise needed on the Board in the future;
being responsible for identifying and nominating for the approval of the Board, candidates to fill board vacancies as and when they arise;
before appointment is made by the Board, evaluating the balance of skills, knowledge and experience on the Board, and, in the light of this evaluation preparing a description of the role and capabilities required for a particular appointment. In identifying suitable candidates the Committee:
uses open advertising or the services of external advisers to facilitate the search;
considers candidates from a wide range of backgrounds; and
considers candidates on merit and against objective criteria, taking care that appointees have enough time available to devote to the position;
keeping under review the leadership needs of the Company, both executive and non-executive, with a view to ensuring the continuing ability of the Company to compete effectively in the marketplace;
keeping up to date and fully informed about strategic issues and commercial changes affecting the company and the market in which it operates;
reviewing annually the time required from non-executive directors. Performance evaluation should be used to assess whether the non-executive directors are spending enough time to fulfil their duties; and
ensuring that on appointment to the Board, non-executive directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside board meetings.

The Committee also makes recommendations to the Board concerning:

formulating plans for succession for both executive and nonexecutive directors and in particular for the key roles of Chairman and Chief Executive;
suitable candidates for the role of Senior Independent Director;
membership of the Audit and of the Remuneration Committees, in consultation with the Chairmen of those Committees;
the re-appointment of any non-executive director at the conclusion of their specified term of office having given due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required;
the continuation (or not) in service of any director who has reached the age of 70;
the re-election by shareholders of any director under the ‘retirement by rotation’ provisions in the Company’s articles of association having due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required;
any matters relating to the continuation in office of any director at any time including the suspension or termination of service of an executive director as an employee of the Company subject to the provisions of the law and their service contract; and
the appointment of any director to executive or other office other than to the positions of Chairman and Chief Executive, the recommendation for which would be considered at a meeting of the full Board.

Reporting Responsibilities

The Committee Chairman reports formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
The Committee makes whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

Other Responsibilities

The Committee, at least once a year, reviews its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommends any changes it considers necessary to the Board for approval.

Authority

Appointments and re-elections to the Board

The Chairman and the other non-executive directors are appointed for an initial period of three years which, with the approval of the Nominations Committee and the Board, would normally be extended for a further three years. In exceptional circumstances, appointments of non-executive directors may be extended beyond six years, with the approval of the Nominations Committee, the Board and the individual director concerned, if it is in the interests of the Group to do so.

Under the Company’s Articles of Association, each director is required to be re-elected at the third Annual General Meeting following that at which he or she was last elected or re-elected. Sir David Bell, Alastair Hewgill and Will Wyatt will retire and will be proposed for re-election at the 2006 Annual General Meeting. A new non-executive director, Simon Beresford-Wylie, was appointed by the directors on 1 March 2006 and will be proposed for election at the 2006 Annual General Meeting.

As announced in the Interim Report 2005, John Potter, who has completed just over seven years as a non-executive director, will be standing down immediately after the Annual General Meeting for 2006.

Information correct at 03/05/2006