Marks and Spencer 2006 Annual Report Download - page 45

43Marks and Spencer Group plc
The pre-tax value of the invested bonus is matched by an
award of shares, with the extent of the match determined by
performance conditions. The performance conditions are:
•50% of the invested bonus receives a matching award
based on the Company’s Total Shareholder Return (TSR)1
compared to the constituents of the FTSE 100 at the start of
the performance period; and
•50% of the invested bonus receives a matching award
based on the Company’s TSR compared to a selected
comparator group of UK retailers.
At the end of the three-year performance period2, the
Company’s TSR performance is ranked against the two
comparator groups and the following matching ratios applied:
TSR performance Ratio of Matching Award to relevant
Ranking in group portion of Invested Bonus
Top Decile 2.5:1
Between Median and
Top Decile Pro-rata between 1:1 and 2.5:1
Median 1:1
Below Median Zero3
1TSR – The return to shareholders comprising the increase or decrease in share
price plus the value of dividends received assuming that they are reinvested.
2The performance period for the 2002 award consisted of the three consecutive
years following the most recent announcement of results prior to the date of
award. For subsequent awards, the performance period will consist of three
consecutive financial years.
3Any element of bonus that is compulsorily invested in the Plan receives a
minimum matching ratio of 0.25:1 irrespective of performance.
All-Employee Share Schemes
Executive directors can also participate in the share schemes
open to all employees of the Company, currently the Save As
You Earn scheme (SAYE). Details of participation by executive
directors in the SAYE scheme are given in part 2 of this report.
A SAYE Option Scheme was approved by shareholders in 1981
and renewed by shareholders in 1987 and 1997. HMRC rules
limit the maximum amount saved to £250 per month. When the
savings contract is started, options are granted to acquire the
number of shares that the total savings will buy when the
contract matures. Options cannot normally be exercised until a
minimum of three years has elapsed.
Director changes during the year
There were two new executive directors appointed to the Board
during the year. Ian Dyson was appointed Group Finance
Director with effect from 27 June 2005 and Steven Sharp was
appointed Executive Director of Marketing, E-commerce, Store
Design and Development with effect from 8 November 2005.
Charles Wilson resigned from the Board and left the Company
at the end of October 2005.
Non-executive director Anthony Habgood resigned from the
Board on 30 August 2005. Lord Burns was appointed to the
Board as Deputy Chairman on 1 October 2005 and will be
appointed as Chairman following the AGM in July 2006 when
Paul Myners retires. Louise Patten and Jeremy Darroch were
appointed to the Board on 1 February and David Michels was
appointed on 1 March 2006, all as non-executive directors.
Shareholding policy
A requirement was introduced in 2002 that, within five years of
1 June 2002 or within five years of appointment (whichever is
the later), the Chief Executive should hold shares whose market
value at that time is equivalent to or greater than twice his then
current gross annual base salary and for executive directors to
hold shares equivalent to or greater than their, then current
salary. The Remuneration Committee is satisfied that under
these rules, all current executive directors will have sufficient
holdings in the Company to be able to comply with this
requirement in the appropriate timescale.
Pension provision
The Marks & Spencer Retirement Plan
Employees joining the Company on or after 1 April 2002 are, on
completion of one year’s service, invited to join the contributory
Retirement Plan. The Plan is a defined contribution
arrangement, where employees may choose to contribute
between 3-15% of their salary. Member contributions of 3-6%
are matched by Company contributions of 6-12%. The
employee is free to choose from a range of investment vehicles,
where the total contribution will be invested. During the first year
of membership, employees can contribute 3-15% of their salary
and receive 6-24% from the Company to enable the employee
to be compensated for the waiting period.
During the one-year waiting period before joining the Plan,
employees will be covered for death in service by a capital
payment of twice salary, increasing to four times salary from the
date of joining the Plan, subject to the statutory earnings cap.
There are no current executive directors who are a member of
this plan.
The Marks & Spencer Pension Scheme
Employees with a permanent appointment date prior to
1 April 2002 are eligible to participate in the Company’s Defined
Benefit Pension Scheme. The Scheme is non-contributory and
the subject of an Independent Trust. The normal retirement age
under the Pension Scheme for senior management is 60.
Alison Reed was the only executive director during the period
under review who was a member of this scheme until she left
the Company on 30 April 2005.
The Marks & Spencer Pension Scheme was closed to new
members with effect from 31 March 2002.