Aviva 2013 Annual Report Download - page 91

Strategic report Governance IFRS Financial statements Other information
Aviva plc
Annual report and accounts 2013
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Directors’ remuneration report continued
Notes to the table:
Performance measures
For the annual bonus, performance measures are chosen to align to the Group’s KPIs and include financial, employee and customer
measures. Achievement against personal objectives is also taken into account.
LTIP performance measures are chosen to provide an indication of both absolute and relative return generated for shareholders.
In terms of target setting, a number of reference points are taken into account each year including, but not limited to, the Group’s
business plan and external market expectations of the Company. Maximum payouts require exceptional performance that
significantly exceeds performance targets or expected performance, under both the annual bonus and LTIP.
Discretions
In addition to the discretions referred to in the DRR, the discretions the committee has in relation to the operation of the Annual
Bonus Plan (ABP) and LTIP include, but are not limited to, who participates, the timing and size of awards, setting additional
conditions (and the discretion to change or waive those conditions), whether dividend equivalents will be awarded, the
determination of vesting and adjustment in certain circumstances such as rights issues. In addition, in relation to the LTIP, in
accordance with its terms, the committee has discretion to waive or change a performance condition if anything happens which
causes the committee reasonably to consider it appropriate to do so. Any use of the discretions will be disclosed, where relevant,
in the Annual report and accounts and, where appropriate, be subject to consultation with Aviva’s major shareholders.
In the event of a change in control, unless a new award is granted in exchange for an existing award, or if there is a significant
corporate event like a demerger, awards under the LTIP would normally vest to the extent that the performance conditions have
been satisfied as at the date of the change in control, and unless the committee decides otherwise, would be pro-rated to reflect
the time between the start of the performance period and the change in control. Awards under the ABP would normally vest on
the date of the change in control and may vest if there is a significant corporate event.
The use of discretion in Aviva’s HMRC all employee share plans is set out in the rules and exercised in accordance with
HMRC rules.
Consistency of executive remuneration policy across the Group
The remuneration policy for our EDs is designed as part of the remuneration philosophy and principles that underpin remuneration
for the wider Group. Remuneration arrangements for employees below the EDs take account of the seniority and nature of the
role, individual performance and local market practice. The components and levels of remuneration for different employees may
therefore differ from the policy for EDs. Any such elements are reviewed against market practice and approved in line with internal
guidelines and frameworks.
The committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any
discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above
where the terms of the payment were agreed (i) before the policy came into effect or (ii) at a time when the relevant individual was
not a director of the Company and, in the opinion of the committee, the payment was not in consideration for the individual
becoming a director of the Company. For these purposes “payments” includes the committee satisfying awards of variable
remuneration and, in relation to an award over shares, the terms of the payment are “agreed” at the time the award is granted.
Approach to recruitment remuneration
On hiring a new ED, the committee would align the remuneration package with our remuneration policy.
In determining the actual remuneration for a new ED, the committee would consider the package in totality, taking into
account elements such as the likely contribution of the individual, local market benchmarks, remuneration practice, and the
existing remuneration of other senior executives. The committee would ensure any arrangements agreed would be in the best
interests of Aviva and its shareholders. It would seek not to pay more than necessary to secure the right candidate.
The committee may make awards on hiring an external candidate to ‘buyout’ remuneration arrangements forfeited on leaving
a previous employer. In doing so the committee would take account of relevant factors including any performance conditions
attached to these awards, the form in which they were granted (e.g. cash or shares) and the timeframe of awards. It would seek to
structure buyout awards on a “like for like” basis when compared to awards forfeited.
The maximum level of variable pay which could be awarded to a new ED, excluding any buyouts, would be in line with the
policy set out above and would therefore be no more than 500% of basic salary (150% of basic salary annual bonus opportunity
and 350% of basic salary as the face value of a LTIP grant).
On hiring a new non-executive director, the committee would align the remuneration package with the remuneration policy for
NEDs, outlined below in table 3, including fees and travel benefits.