Carphone Warehouse 2014 Annual Report Download - page 49

LONG‑TERM INCENTIVES
CARPHONE WAREHOUSE SHARE PLAN
Under the Carphone Warehouse Share Plan, participants share 10%
of the incremental value created in CPW in excess of an opening
valuation (assessed over a three month period prior toapproval
byshareholders in June 2013) and beyond an annual rate of return
of 7% on investedcapital. The plan is underpinned by a minimum
annual compound TSR growth of 5% and outperformance of the
median TSR of the FTSE 250.
Participants acquired at market value participation shares in a
subsidiary company that holds the Company’s interests in CPW
Europe. The Group granted loans to participants at a commercial
rate of interest to acquire the shares. Loans are ordinarily
repayablein full if performance conditions aremet.
The performance of the scheme will ordinarily be measured in or
around June 2017, when 60% of the shares vest, with 40% deferred for
a further year. When the awards vest, the value of the shares held
byparticipants will be based on the incremental value (if any) of
CPW in excess of the opening valuation together with the minimum
return on invested capital. These shares will then be purchased by
the Company for cash and/or the Company’s ordinary shares.
A ‘bad leaver’ will be required to transfer the participation shares
tosuch party as the Company designates for an amount equal to
the total amount outstanding under the loan. If the market value of
the shares is less than the amount of the outstanding loan (and any
accrued interest) then the participant may be required to repay 20%
of the shortfall out of their own resources.
A participant shall only be a ‘good leaver’ atthe sole discretion
ofthe Remuneration Committee and may be permitted to retain
anaward notwithstanding the termination oftheir employment.
The mechanics of the plan may be varied by the Remuneration
Committee if necessary to ensure that participants are neither
advantaged nor disadvantaged by a variation of the share capital
ofthe Company, bona fide merger, reconstruction or similar
reorganisation. As part of the Merger, proposals to amend
theplanare set out in the Prospectus and Circular.
CARPHONE WAREHOUSE SHARE SCHEME
The Carphone Warehouse Share Scheme allows nil-priced
andmarket-priced options to be offered to senior employees
whoare not participants in the Carphone Warehouse Share Plan.
Options granted in January 2014 are subject to continuing
employment and are subject to performance conditions based
onacombination of absolute TSR performance and relative TSR
performance against the FTSE 250.
RECRUITMENT POLICY
On appointment, base salary levels will be set taking into account
arange of factors including market levels, experience, internal
relativities and cost. If an individual is appointed on a base salary
below the desired market positioning, the Committee retains the
discretion to re-align base salary over one to three years, contingent
on individual performance, which may result in an exceptional rate
of annualised increase above ordinary levels. If the Committee intends
to rely on this discretion, it will be noted in the first remuneration
report following an individual’s appointment. Other elements of
annual remuneration will be inline with the policy set out in the
Policy Table. As such, short-termvariable remuneration will be
capped as set out in the Policy Table.
The following exceptions will apply:
+in the event that an internal appointment is made or an executive
director joins as a result of a transfer of an undertaking, merger,
reconstruction or similar reorganisation, the Committee retains
the discretion to continue with existing remuneration provisions
relating to pensions and benefits;
+as deemed necessary and appropriate to secure an appointment,
the Committee retains the discretion to make additional payments
linked to relocation; and
+the Committee retains the discretion to provide an immediate
interest in Company performance by making a long-term incentive
award on recruitment in accordance with the Policy Table under
its existing long-term incentive schemes or such future schemes as
are introduced by the Company with the approval of its shareholders.
The Committee will determine the level of the award, the performance
conditions and time horizon that would apply to such awards at
the time of award, taking into account the strategy and business
circumstances of the Company.
Service contracts will be entered into on terms similar to those
forthe existing executive directors, summarised in the Recruitment
Table; however, the Committee may authorise the payment ofa
relocation and/or repatriation allowance, as well as other associated
international mobility terms and benefits, such as tax equalisation
and financial advice.
In addition to the annual remuneration elements noted above,
theCommittee may consider buying out bonuses and/or incentive
awards that an individual forfeits in accepting the appointment. The
Committee will have the authority to rely on Listing Rule 9.4.2(2) or
exceptional limits within the existing shareholder approved share
and share option plans to make awards. If made, the Committee will
be informed by the structure, time horizons, value and performance
targets associated with any forfeited awards while retaining the discretion
to make any payment or award deemed necessary andappropriate.
The Committee may also require the appointee topurchase shares
in the Company in accordance with its shareholding policy.
ELEMENT
PURPOSE AND
LINK TO STRATEGY OPERATION OPPORTUNITY
ASSESSMENT OF
PERFORMANCE
Share ownership
guidelines
Provides close
alignment between
the longer-term
interests of executive
directors and
shareholders in
terms of the
Company’s growth
and performance.
We recognise that senior employees should
hold a minimum level of shares in the Company
and we currently believe the number of shares
held by our executive directors as set out in
this report satisfies this requirement without
the need currently to specify a precise minimum
number. However, this policy will be regularly
reviewed by the Committee, in particular in
light of the Merger, and any proposed changes
will be set out in next year's report.
Not applicable. Not applicable.
Carphone Warehouse Group plc
Annual Report 2014 47
CORPORATE GOVERNANCE