Marks and Spencer 2011 Annual Report Download - page 54

There have been some significant changes at Marks & Spencer
during the financial year which are reviewed in this report. Marc
Bolland’s appointment as Chief Executive Officer has led to a
fullstrategic review of the Company’s business plan, with the
evolution of our corporate strategy communicated to investors
aspart of our market update in November.
In last year’s report, the Remuneration Committee outlined its
intention to review the Company’s remuneration framework to
ensure it remains fully aligned with business priorities. The clarity
we now have around the strategy, and the medium to long-term
objectives Marc has established for the business, has enabled the
Committee to design a framework that reflects this updated
business plan.
In addition, the review has also allowed us to respond to a number
of views that our investors have expressed in relation to historic
remuneration arrangements and practices. We have engaged in
dialogue with a number of our key institutional investors in the
development of these proposals, and we are grateful for their
constructive engagement throughout this process.
In summary the long term remuneration framework has been
developed to underpin the key business objectives of:
– focus on UK business: enhancing our brand, Clothing, Home,
Food and stores;
– focus on our UK space and like-for-like growth;
– building our multi-channel capabilities to create best in class
operations; and
– becoming a more international company with a global outlook
and international capabilities.
As a Committee, our long-term philosophy for remuneration
remains to attract and retain leaders who are focused and
encouraged to deliver business priorities within a framework that
is aligned with the interests of the Company’s shareholders.
Our proposals seek to rebalance the package in the following
fundamental ways, with each discussed in greater detail in the
body of this report:
Annual Bonus Plan:
– reduce the maximum annual incentive opportunity from 250%
to 200% of salary, decreasing the emphasis on short term in
favour of medium to long-term performance;
– maintain compulsory bonus deferral, with directors deferring
50% of any bonus due into Marks & Spencer shares for three
years; and
– rebalance the focus on financial and strategic goals in the
annual bonus, with 60% of bonus based on underlying Group
Profit Before Tax (PBT), and the remaining 40% determined
by performance against strategic measures which will be
quantifiable, challenging, and subject to rigorous annual review.
Two strategic measures will be collective so that all directors are
focused on common goals, with the remaining measures
relevant to each director’s specific business area.
Long Term Incentive Plan (LTIP):
– remove the exceptional award limit of 400% of salary and
establish the maximum individual award opportunity at a
reduced level of 300% of salary. The Committee’s intention is
for award levels to be conventionally referenced to 250% of
salary. This change, taken together with the change to the
annual bonus opportunity, will give a greater weighting in the
package towards long-term performance and value creation
for shareholders; and
– move away from the use of adjusted (underlying basic) earnings
per share (EPS) as the sole metric for LTIP awards, reflecting
the strategic priorities we have for the business. LTIP awards in
2011/12 will drive performance based on the following key
metrics: cumulative EPS performance (50% of the total award),
Revenue (30% based equally on performance in three business
segments: the UK, Multi-channel and International) and Return
on Capital Employed (20%).
As previously indicated, these proposals have been finalised after
a thorough consultation and taking into account the feedback we
received from our key institutional investors and shareholder
representative bodies.
The Committee believes that we have developed an incentive
structure that will clearly support and motivate the team in a way
that is aligned with the business strategy to deliver quality
long-term growth for the business, and we will be seeking
shareholder approval for these amendments to the LTIP at the
2011 AGM.
Steven Holliday, Chairman of the Remuneration Committee
This Remuneration report has been prepared on behalf of the
Board by the Remuneration Committee. The Committee adopts
the principles of good governance as set out in the UK Corporate
Governance Code (published June 2010) and complies with the
Listing Rules of the Financial Services Authority and the relevant
schedules of the Companies Act 2006 and the Directors’
Remuneration Report Regulations in Schedule 8 to The Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008. These regulations require the Company’s
auditors to report on the ‘Audited Information’ in the report and to
state that this section has been properly prepared in accordance
with these regulations. For this reason, the report is divided into
audited and unaudited information, and is subject to shareholder
approval at the Annual General Meeting (AGM) on 13 July 2011.
Steven Holliday
Marks and Spencer Group plc Annual report and financial statements 2011
52
Governance
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Remuneration Committee