Aviva 2013 Annual Report Download - page 89

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
87
Directors’ remuneration report continued
Directors’ remuneration policy
This section sets out Aviva’s remuneration policy for directors, in accordance with the requirements of the Companies Act 2006
(as amended) and the Large & Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended).
We have already implemented within our remuneration structures the policy approach set out in this section. We intend to apply
this policy formally from the date of Aviva’s 2014 AGM, subject to shareholders approving this policy report at that meeting.
Table 1 below provides an overview of our remuneration policy for executive directors (EDs). For an overview of the
remuneration policy for non-executive directors (NEDs) see table 3 below.
Table 1: Remuneration policy for executive directors – overview
Element Purpose and link to strate
gy
Operation and recovery provisions
(if applicable) Maximum opportunit
y
Performance measures
Basic salary To provide core market
related pay to attract and
retain the required level
of talent.
Annual review, with changes
normally taking effect from
1 April each year. The review
is informed by:
 Relevant pay data including
market practice among the 25
FTSE listed companies either
side of Aviva in terms of market
capitalisation
 Levels of increase for the
broader UK employee
population
 Individual and business
performance
Current basic salaries are
disclosed on pages 95 and 96.
There is no maximum increase
within the policy. However,
basic salary increases take
account of the average basic
salary increase awarded to UK
employees. Different levels of
increase may be agreed in
certain circumstances at the
committee’s discretion,
such as:
 An increase in job scope
and responsibility
 Development of the
individual in the role
The committee is aware of
shareholder concern on ED
basic salary ratcheting and
would consult on proposed
increases if they were
significantly to exceed the
general level of increases for
UK staff.
Any movement in basic
salary takes account of
performance.
Annual bonus To incentivise EDs to
achieve the annual
business plan.
Deferral provides alignment
with shareholder interests
and aids retention of key
personnel.
Awards are based on performance
in the year. Targets are set annually
and pay-out levels are determined
by the committee based on
performance against those targets.
Two-thirds of any bonus awarded
is deferred into shares which vest
after three years.
Additional shares are awarded at
vesting in lieu of dividends paid on
the deferred shares.
Unvested awards are subject to
reduction for misconduct or
materially adverse misstatement
of accounts.
Discretion remains with the
committee to amend the bonus
payout taking account of financial,
market and other considerations.
In particular the committee will
review the alignment of bonus
awards with the experience of
shareholders.
Maximum bonus opportunity
is 150% of basic salary with
75% of basic salary payable
for performance in line
with target.
Threshold performance would
result in a bonus payment of
no more than 25% of basic
salary.
Performance below threshold
would result in no bonus
being paid.
Performance is assessed
against a range of relevant
financial, employee and
customer targets and
personal objectives as set
by the committee. For
example in 2013 the
financial KPI’s were:
 Net capital returns
 IFRS profit before tax
 MCEV value of new
business
 Combined operating
ratio
 Total expenses
Financial performance is the
major factor in considering
overall expenditure on
bonuses.