Holiday Inn 2013 Annual Report Download - page 84

Notes to Future Policy table
Use of discretion by Remuneration Committee
1. Malus in incentive plans
For awards made from January 2012, the APP and LTIP rules allow the Committee discretion to reduce the level of unvested share awards
if circumstances occur which, in the reasonable opinion of the Committee, justify a reduction in one or more awards granted to any one or
more participants. The malus provisions relate to unvested awards only. The circumstances in which the Committee may consider it
appropriate to exercise its discretion include the following:
• misconduct that causes significant damage or potential damage to IHG’s prospects, finances or brand reputation; and/or
• actions that lead to material misstatement or restatement of accounts.
This may include, where appropriate, negligence on the part of Executive Directors.
This feature helps ensure alignment between executive reward and shareholder returns.
2. Other uses of discretion
The Committee reserves certain discretions in relation to the outcomes for Executive Directors under the Company’s incentive plans.
These operate in two main respects:
• enabling the Committee to ensure that outcomes under these plans are consistent with the underlying performance of the business and
the experience of shareholders; and
• enabling the Committee to treat leavers in a way that is fair and equitable to individuals and shareholders under the incentive plans.
The Committee will also use its judgement as to what is appropriate within the terms of the Directors’ Remuneration Policy to make
decisions that do not involve the exercise of discretion.
The discretions that can be applied in the case of leavers under the APP and LTIP are set out in the section on ‘Policy on payment for
loss of office’ on page 84. In all cases, the discretions are reserved as part of the Directors’ Remuneration Policy in order to allow the
Committee flexibility to ensure that remuneration outcomes for Executive Directors are consistent with business performance, at the
same time as providing a high degree of clarity for shareholders as to remuneration structure and potential quantum. Any exercises of
discretion by the Committee will be fully disclosed and explained in the relevant year’s Implementation of Remuneration Policy report.
The following key discretions apply under the incentive plans:
APP LTIP
• The Committee may exercise reasonable discretion to adjust
anaward made under the APP upwards or downwards, after
application of the performance measures, to take into
account any relevant factors including, but not limited to,
performance relative to IHG’s competitors and extent of
achievement across all measures, provided that in no case
will an award exceed the maximum opportunity stated.
• The Committee will review the vesting outcomes under all of
the LTIP measures at the end of each three-year cycle against
an assessment of Group earnings and the quality of financial
performance over the period, including sustainable growth
and the efficient use of cash and capital. If the Committee
determines that the vesting outcomes do not appropriately
reflect the financial performance of the Group, it may reduce
the number of shares that vests.
3. Corporate transactions
If there is a takeover or merger:
APP LTIP
• During a performance period: awards for that period will be
pro-rated to the date of the event, or such later date as the
Committee may determine, and will consist of a cash award and
not a deferred share award, unless the Committee determines
otherwise. There will be no acceleration of award unless the
Committee determines otherwise.
• After the end of a performance period and before the making
of awards: awards for that period will be made in full, and will
consist of a cash and not a deferred share award, unless the
Committee determines otherwise. There will be no acceleration
of award unless the Committee determines otherwise.
• Unvested deferred share awards will vest unless the Committee
decides otherwise. If the takeover or merger involves the
exchange of IHG shares for shares in another company, the
Committee may, in its discretion, determine the existing deferred
share award will be replaced by a right to the appropriate number
of shares in that other company.
• The Committee has discretion to take such action as it may
think appropriate if other events happen which may have an
effect on awards.
• The vesting of unvested awards may be accelerated and the
Committee will determine the extent of vesting, taking account of
the proportion of the performance period that has elapsed, and
the degree to which performance conditions have been satisfied.
• The Committee will procure, as soon as reasonably practicable,
the delivery to each participant of the vested shares in a
Conditional Award or payment of the cash so determined.
• If the takeover or merger involves the exchange of IHG shares for
shares in another company, the Committee may, in its discretion,
determine that the existing award will be replaced by a right to
the appropriate number of shares in that other company.
• The Committee has discretion to take such action as it may
think appropriate if other events happen which may have an
effect on awards.
82 IHG Annual Report and Form 20-F 2013
Directors’ Remuneration Report continued
Directors’ Remuneration Policy continued