Marks and Spencer 2006 Annual Report Download - page 43

41Marks and Spencer Group plc
Expected value of future annual remuneration package
for executive directors
‘On-target’ performance
‘Maximum’ performance
The value placed on long-term incentives comprises the
expected cash value to executives after three years, discounted
back to its present value, of (i) bonus compulsorily deferred into
shares and (ii) performance shares awarded under the
Performance Share Plan.
Chairman’s and non-executive directors’ remuneration
The remuneration for the non-executive directors is determined
by the Chairman and executive directors and is designed both
to recognise the responsibilities of non-executive directors and
to attract individuals with the necessary skills and experience
to contribute to the future growth of the Company. The non-
executive directors are paid a basic fee with additional fees
payable for Committee membership and to the chair of the
Committees. These fees are neither performance related nor
pensionable. Non-executive directors do not participate in any
of the Company’s share schemes nor the Annual Bonus
Scheme. The fees shown in the emoluments table reflect the
fees paid during the year. The basic fee increases from £40,000
to £50,000 per annum with effect from 1 April 2006. The
additional fees for acting as Committee Chairman or member
remain unchanged at £10,000 and £5,000 per annum
respectively. The Chairman indicated that he did not wish his fee
of £200,000 to be reviewed during the year.
Salaries and benefits
Salaries for executive directors are reviewed annually and any
change to salary is normally effective from 1 January. The
Remuneration Committee takes into consideration a range of
factors when reviewing salaries such as Company performance,
level of salaries for large retailers and for other major FTSE 100
companies, market conditions, the level of increase awarded to
employees throughout the business and the responsibilities of
individual directors. Current annual salaries for executive
directors are set out in the Directors’ emoluments table (page 45).
Stuart Rose, Ian Dyson and Steven Sharp received payments of
20% of total salary in lieu of pension. This payment rises to 25%
of total salary with effect from 1 April 2006 following an exercise
to benchmark pension-related benefits taking into account
market practices and changes in legislation. A payment was
also made to Charles Wilson of 20% of total salary until his
resignation from the Company on 31 October 2005.
For executive directors, where applicable, the provision of a car
or car allowance, fuel and chauffeur is included in the
emoluments table as part of benefits.
Annual Bonus Scheme
The Annual Bonus Scheme is designed to focus and reward
executives for specific operational improvements which will drive
the Company’s recovery. The 2005/06 bonus for directors
started at 60% of salary for on-target performance rising to
a maximum of 150% for exceeding targets.
The targets for the Company are determined annually by the
Committee and for 2005/06 incorporated a mixture of corporate
profit before tax and business unit sales and profit. The targets
for the executive directors were entirely based on the delivery
of corporate profit before tax. The Committee assesses the
achievement of targets for all executive directors and senior
management prior to any bonus awards being made.
This year the profit before tax targets have been delivered above
target and represent a significant improvement both on the
reported profits for 2004/05 and against market expectations at
the beginning of the financial year. As a result, maximum awards
under the scheme of 150% of salary have been made to Stuart
Rose, Ian Dyson and Steven Sharp.
The executive directors are required to defer 50% of the bonus
paid into shares which will be held for three years. There will be
no match paid against these deferred shares, although the value
of dividends accrued will be paid at the end of the period. The
emoluments table and notes give the level of cash payments
and the value of shares to be awarded at the beginning of June
2006, which will be based on the average share price over the
preceding five trading days.
For 2006/07 the Committee intends to increase the bonus
potential for executive directors to a maximum of 250% for
exceeding targets. The level for on-target performance will
remain at 60%. The level of deferred shares will increase from
50% of any bonus earned to 60%. Bonus potential is being
raised to this maximum level for the three executive directors
to help incentivise and secure further significant growth in
corporate profits.
Long-term incentives
77%
Annual
cash
bonus
10%
Pension 3%
Salary
10%
Long-term incentives
46%
Annual
cash
bonus
9%
Pension 9%
Salary
36%