Holiday Inn 2013 Annual Report Download - page 76

Format of this report
This year sees the introduction of a binding shareholder vote on the
Directors’ Remuneration Policy (see pages 78 to 86) in addition to
the advisory vote on the Annual Report on Directors’ Remuneration
(see pages 87 to 96). The new regulations and guidelines have
helped clarify best practice in sharing information with shareholders.
Consistent with our historic approach of transparency with
shareholders, our 2012 Directors’ Remuneration Report
reflected as much as possible of the direction and spirit of the
then draft new rules. The 2012 Directors’ Remuneration Report
won the PwC Building Public Trust Award for Executive
Remuneration Reporting in the FTSE 100.
Board changes
Paul Edgecliffe-Johnson was appointed to the Board as
Chief Financial Officer on 1 January 2014 following the resignation
of Tom Singer with effect from that date. Paul Edgecliffe-Johnson
was previously Chief Financial Officer of IHG’s Europe and Asia,
Middle East and Africa regions. Paul Edgecliffe-Johnson’s annual
salary on appointment was £420,000, with the first review date
being 1 April 2015. The usual annual and long-term incentive
award levels will apply.
Directors’ Remuneration Policy at IHG
Our Remuneration Policy remains largely unchanged from last
year. In presenting the policy we have looked to explain how the
elements relate to the business strategy and also clearly identify
where the Committee has reserved the ability to use its discretion
to ensure that actual remuneration reflects underlying business
performance and shareholder return.
We believe that the current policy as a whole is well-aligned to
the business strategy and growing long-term shareholder value.
We are comfortable that the outcomes have reflected business
performance. During 2013, the Committee discussed a number
of issues that were raised by shareholders in the context of the
public debate about executive remuneration. These included
Executive Director shareholdings, the use of the TSR as an LTIP
measure and pension arrangements.
Executive Director shareholdings
We encourage senior executives to hold shares. The Chief Executive
Officer has a minimum requirement to hold 300% of salary in
shares; other Executive Directors 200%. At the end of 2013,
the Chief Executive Officer held 1,011% of salary in shares owned
outright and a further 974% of salary in unvested share awards.
Given this level of shareholding, we do not consider it necessary at this
time to change our policy or require a post-vesting holding period.
Use of TSR as an LTIP measure
We believe that the combination of TSR, relative growth
in net rooms and RevPAR, provides the right balance and
focus for driving and rewarding long-term success at IHG.
However, we do understand that achievement of these measures
has to be underpinned by improvements across a whole range
of financial performance metrics. To support this, during 2013,
the Committee decided to reserve the discretion to review the
vesting outcomes under all of the LTIP measures at the end
of each three-year cycle against an assessment of the Group’s
earnings and the quality of financial performance over the
period, including sustainable growth and the efficient use of
cash and capital.
Dear Shareholder
2013 corporate performance and incentive outcomes
IHG continued to deliver sustainable and attractive returns for
shareholders in 2013, as shown by the financial corporate
performance indicators in the table below.
This is the first year in which the Annual Performance Plan (APP)
has included measures of guest satisfaction (Guest HeartBeat)
and employee engagement; overall there were encouraging
performance improvements at both global and regional levels.
Under the Long Term Incentive Plan (LTIP) 2011/13 cycle, strong
three-year Total Shareholder Return (TSR) resulted in maximum
vesting of this element (50% of total award). However, there was only
partial vesting for the Revenue per available room (RevPAR) growth
element (25%), and no vesting against the net rooms growth target
(25%). This LTIP cycle was the first with relative RevPAR and rooms
growth targets.
Executive Director remuneration has reflected this overall
performance with APP awards slightly above target and
comparable to last year, and 59% vesting under the 2011/13
LTIP cycle, down on last year’s full vesting.
Corporate performance
indicators 2013 2012 2011
Operating profit before
exceptional items
+10.4%
$668m1
+10.4%
$605m2*
+25.9%
$548m3*
Full-year dividend per
share(excluding any
special dividends and
capital returns)
70¢
43.2p
64¢
41.2p
55¢
34.5p
Three-year total
TSR (annualised) +18.4% +28.2% +29.8%
1 Includes three liquidated damages receipts in 2013: $31m in The
Americas, $9m in Europe and $6m in AMEA.
2 Includes one significant liquidated damages receipt in 2012 of $3m in
The Americas.
3 Includes two significant liquidated damages receipts in 2011: $10m in
The Americas and $6m in AMEA.
* With effect from 1 January 2013 the Group has adopted IAS 19 (Revised)
‘Employee Benefits’ resulting in the following additional charges to
operating profit: $5m for the six months ended 30 June 2012; $9m for the
12 months ended 31 December 2012; $6m for the six months ended 30
June 2011 and $11m for the 12 months ended 31 December 2011.
Committee membership
Luke Mayhew Chairman
Members
Ian Dyson, David Kappler, Jonathan Linen, Ying Yeh
For full biographies, please see pages 57 to 59.
74 IHG Annual Report and Form 20-F 2013
Directors’ Remuneration Report
Remuneration Committee Chairman’s statement