Marks and Spencer 2011 Annual Report Download - page 59

Deputy Chairman
As per the Chairman’s role, the fee for the Deputy Chairman
reflects the level of commitment and responsibility of the role and
is determined by the Chairman and executive directors. With the
appointment of a Non-executive Chairman in January 2011, the
fee for the Deputy Chairman was reviewed to take into account
the new role and associated responsibility, together with
consideration of fee levels for the role in comparably sized
companies. As a result the agreed fee was reduced to £100,000.
It is paid monthly in cash, and is inclusive of all committee
memberships and Sir David Michels’ continuing role as Senior
Independent Director. The fee is not performance related or
pensionable, and there are no other benefits other than employee
product discount on the same terms as other employees.
Non-executive directors
The fees for non-executive directors are determined by the
Chairman, Deputy Chairman and executive directors. Fees are set
at a level that ensures the Company can attract and retain
individuals with the required skills, experience and knowledge so
that the Board is able to effectively carry out its duties.
The fees recognise the responsibility of the role and the time
commitments required, and are not performance related or
pensionable. They are paid monthly in cash and there are no other
benefits other than employee product discount.
A review of non-executive director fees was carried out in
December 2010 which indicated that they were no longer
appropriate in the current market (fees, although reviewed
annually, had not been increased since April 2007). As a result,
thefee structure was realigned from 1 January 2011, with the fee
for committee membership being consolidated into an increased
basic annual fee. In addition, the fee for the role of Audit and
Remuneration Committee Chairman was increased. The revised
fee structure is as follows:
Basic annual fee: £70,0001
Committee Chairman: £15,0002
1 Inclusive of all committee memberships
2 Audit and Remuneration Committee only
The new annual fees for non-executive directors are shown in the
Contract terms table on page 61 and the Directors’ emoluments
table on page 63 shows the fees paid during the year to each
non-executive director.
What are the details of the proposed short-term and
long-term incentive schemes (variable remuneration)?
Annual Bonus Scheme – short-term incentive
Deferred Share Bonus Plan – long-term incentive
The Annual Bonus Scheme is reviewed each year and is designed
to drive individual performance and profitability across the whole
organisation. As described in the introduction to this report, a
number of changes are being made to the bonus structure for
2011/12 as part of the review of our senior remuneration
framework. These changes are set out in detail under ‘Bonus
scheme structure for 2011/12’ further on in this section. However,
the basic principles of scheme remain unchanged, with targets
based on PBT and individual performance and a compulsory
percentage of bonus deferred into Company shares which vest
after three years, subject to continued employment. Further
details of the Deferred Share Bonus Plan can be found in note 13
to the financial statements on page 92 of this Annual Report.
Bonus scheme structure for 2011/12
The bonus potential for executive directors is being reduced to
200% of salary for ‘maximum’ performance (previously 250%).
Ashighlighted earlier, we are maintaining a compulsory deferral
requirement, with the executive directors required to defer 50%
oftheir bonus into Company shares which vest after three years,
subject to continued employment.
For 2011/12, PBT will remain the primary performance measure,
with 60% of the annual bonus being determined by performance
against demanding profit targets set by the Committee at the start
of the year. The balance of 40% will relate to performance against
strategic individual objectives independent of PBT.
The Committee believes that this approach provides an
appropriate focus on annual profitability targets while ensuring
that participants are also focused on driving the changes in the
business which underpin our medium-term strategy.
1#5UBSHFUT
As in previous years, the PBT targets have been set basedon the
Company’s own internal operating plan, external forecasts for the
retail sector and analysts’ profit forecasts. Forthere to be any
payment under the PBT measure in 2011/12, there is a
requirement for both year-on-year PBT growth and
outperformance of the operating plan. Very significant
outperformance of the operating plan will be required for the
highest bonus payment under this measure.
4USBUFHJDJOEJWJEVBMPCKFDUJWFT
The choice of quantifiable and challenging strategic individual
objectives, and the specific performance targets that apply, will be
subject to rigorous annual review by the Committee at the time
they are set for the year ahead, and at the end of the year when
assessments of performance are made.
The strategic individual objectives that have been set for 2011/12
are directly referenced to workstreams that flow from the
objectives outlined in the introduction to this report. Each
executive director will be assessed on the basis of targets set in
relation to four clearly articulated business objectives. Two of
these will be ‘collective’, so that all directors are focused on these
common goals, encouraging collaboration across the senior
management group. For 2011/12, these shared objectives will
relate to:
– delivery against UK operating plan cost targets; and
– progression in implementing ‘Plan A’ commitments.
The remaining two strategic individual objectives will relate to the
specific business area for which the executive director has
primary responsibility. For 2011/12, these objectives will be drawn
from specific workstreams relevant to the business area, or relate
to specific operating challenges. By way of illustration, these may
include objectives relating to logistics and supply chain, product
availability and brand management and impact.
Quantifiable performance metrics have been established in
relation to each objective, and the Committee has agreed both
‘threshold’ and ‘stretch’ targets that must be achieved to
demonstrate value-added performance.
In keeping with the principle that has applied for a number of
years, no ‘strategic’ component of the bonus may be earned
unless a ‘threshold’ level of PBT has been achieved. Given the
importance of the strategic objectives to the success of the
business, the PBT ‘threshold’ for this purpose is set below the
entry point for the PBT performance target range. Any such
bonus payment will be subject to the Committee’s objective
assessment of the overall performance of the business during
theperiod.
Our strategy Our performance & marketplace Operating review Financial review
Financial statements & other informationGovernanceChairman’s introduction
To find out more visit marksandspencer.com/annualreport2011 Directors’ report
57