Carphone Warehouse 2008 Annual Report Download - page 44

Directors’ Report: Governance
Remuneration Report
32The Carphone Warehouse Group PLC Annual Report 2008
Compliance
This Remuneration Report has been prepared in accordance with the
Directors’ Remuneration Report Regulations 2002 (“Regulations”) and
the Combined Code on Corporate Governance (“Code”). The constitution
and operation of the Remuneration Committee are in compliance with
the Code. In framing its remuneration policy the Committee has given full
consideration to the matters set out in Schedule A of the Code. As required
by the Regulations, a resolution to approve this Report will be proposed
at the Annual General Meeting to be held on 31 July 2008 (“AGM”).
The Regulations require the Company’s auditors to report to the members
on the “auditable part” of this Report (marked *) and to state, in their opinion,
that this part of the Report has been properly prepared in accordance
with the Companies Act 1985 (as amended by the Regulations).
Remuneration Committee
Responsibility for the establishment of overall remuneration policy for
the Group lies with the Board of Directors. The Remuneration Committee
is responsible for making recommendations to the Board on the
remuneration of the Chairman, Executive Directors and senior managers.
The terms of reference of the Committee are available on the Group’s
website (www.cpwplc.com) or on request from the Company Secretary.
The Committee’s current composition is Sir Brian Pitman (Chairman),
Steven Esom, David Mansfield, Baroness Morgan, Adrian Martin and
David Grigson, all of whom are Independent Non-Executive Directors.
None of the members of the Committee has any personal financial
interest, other than as shareholders, in the matters to be decided by
the Committee, no potential conflicts of interest arising from cross-
memberships and no day-to-day involvement in running the Group’s
business. The members of the Committee met four times during
the period to consider matters relating to the remuneration of
Executive Directors as well as the terms and conditions of their
service with the Company.
Mercer Ltd (“Mercer”) act as lead advisors to the Committee. Advice has
been sought from Mercer on matters surrounding remuneration policy
design and benchmarking for individual Executive Directors and members
of senior management and the design of remuneration packages based
on current market trends. Mercer has no other connection with the Group.
Deloitte & Touche LLP (“Deloitte”) provided advice to the Committee on
employment tax and the administration of share option and Save-As-You-
Earn (“SAYE”) schemes. Deloitte are the Group’s auditors and provide
other services to the Group as set out in the Corporate Governance
Report on pages 28 to 31. The Deputy Chairman, the Group Director
of Human Resources and the Company Secretary also provided internal
advice in respect of matters raised by the Committee. No Director nor
any person advising the Committee plays a part in any discussion about
his or her own remuneration.
Remuneration policy
The Committee seeks to ensure that remuneration and incentive
schemes are in line with best practice, providing a strong link to individual
and business performance and ensuring alignment between employees
and shareholders.
Rewards are designed to attract and retain individuals of high quality
who have the requisite skills and who are incentivised to achieve levels
of performance which exceed that of competitor companies. This requires
packages to be market-competitive and capable of rewarding exceptional
performance. The approach is to set fixed remuneration at market median
levels and to offer variable rewards, linked to the performance of the
Group, which can provide significant overall levels of remuneration for
exceptional performance and shareholder value creation.
Approximately 72% of Executive Directors’ total remuneration earned in
2008 was performance related.
In view of his significant shareholding, Charles Dunstone does not receive
long-term incentive share awards.
In setting remuneration levels, the Committee takes independent
advice on market-level remuneration, based on comparisons with other
companies ranked 15 places above and below the Company in the FTSE
100 index as ranked by market capitalisation. On the date of the market
review the Company was ranked 82nd and the comparator group was
made up of companies ranked 67th to 97th. This group was selected as it
captures organisations of similar size and complexity.
In particular, the Committee has recognised that the size and complexity
of the Group has increased significantly.
In 2008, the Committee made its recommendations to the Board by
taking into account:
• The experience of Executive Directors and other senior managers;
• The Group’s competitiveness in the market place, assessed through
independent external market comparisons;
• The growing international nature of the Group; and
• The development of new business streams and the added complexity
to the business, e.g. joint ventures with Best Buy and Virgin.
In order to align closely the interests of Executive Directors and
shareholders, the Company requires Executive Directors to build up
and retain a shareholding in the Company of at least 200% of their annual
salary (previously 100%). The Committee expects Executive Directors
to meet their shareholding targets within five years of appointment.
Components of remuneration
The main fixed and performance-related elements of remuneration
that can be awarded to Executive Directors are as follows:
• basic salary, benefits and pension contribution (fixed);
• annual performance bonus (variable);
• share options (variable); and
• Performance Shares (variable).
Salaries and benefits
Executive Directors’ basic salaries are reviewed on 1 July annually and
take into account the roles, responsibilities, performance and experience
of the individuals and information obtained from published market data
on the salary rates for similar positions in the remuneration comparator
group. Basic salaries had not been increased since 1 July 2006 and the
market data showed that the Executive Directors were below median
against the peer group.
The Committee therefore decided to make increases to basic salaries
to bring them closer to market median. Executive Director salaries from
1 July 2008 will therefore be: Charles Dunstone £600,000 (2007: £550,000),
Roger Taylor £400,000 (2007: £350,000), David Goldie £325,000 (2007:
£275,000) and Andrew Harrison £275,000 (2007: £225,000).