Marks and Spencer 2011 Annual Report Download - page 61

Executive Share Option Scheme – long-term incentive
The scheme was adopted at the 2005 AGM, but there is currently
no intention to use the scheme on a regular basis. No grants have
been awarded under the Executive Share Option Scheme for
2010/11. The Committee will continue to review the use of the
scheme and retains the flexibility to grant awards under the
scheme if appropriate.
All outstanding awards met their performance targets in previous
years and are exercisable by participants. Individual executive
directors have options granted in 2004 under the 2003 scheme as
shown in the Share Option Schemes table on page 65.
All-Employee Share Schemes – long-term incentive
Executive directors can participate in Sharesave, the Company’s
Save As You Earn (SAYE) scheme which is open to all employees.
The current scheme was approved by shareholders for a ten-year
period at the 2007 AGM.
The scheme is subject to HMRC rules which limit the maximum
monthly savings to £250. 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, at a discounted price
set at the start of the scheme. Options cannot normally be
exercised until a minimum of three years has elapsed.
The details of the options granted to executive directors are
shown in the Share Option Schemes table on page 65. All were
granted at a 20% discount on the share price at the start of the
scheme.
What were the outcomes in 2010/11 for the short-term
and long-term incentive schemes?
Annual Bonus scheme outcome for 2010/11
75% of the executive directors’ bonus was based on PBT
performance. The PBT targets set by the Committee at the
startofthe year were judged to be highly demanding by
referenceto the internal operating plan, analysts’ profit forecasts
and external forecasts for the retail sector. Higher levels of
bonuspayments required very significant stretch above plan.
Theunderlying PBT performance of £714.3m was marginally
above ‘on target’ performance.
The remaining 25% of the executive directors’ bonus for 2010/11
was based on individual director objectives aligned to the
business priorities for the year. The personal performance by each
director against these individual objectives has been reviewed by
the Committee. Alongside relatively strong financial performance,
the Committee has noted in particular that strong progress has
been made in delivering the specific workstreams applicable to
each business area; continued progress and a clear commitment
to Plan A objectives is evident; and that these results have been
underpinned by high level of leadership among the executive team
in developing the strategy and building business capability.
Based on the review of achievement against the combination of
financial and individual performance measures, bonus payments
to executive directors for 2010/11 were agreed by the Committee
at approximately 45% of the bonus maximum.
Performance Share Plan Outcome 2010/11
The performance condition attached to outstanding PSP awards
is adjusted (underlying basic) EPS growth over the respective
three-year performance period. The targets for all outstanding
awards are shown in the table below:
Average annual EPS growth
in excess of infla tion (RPI) Adjusted EPS
for start of schemeAward 20% vesting1100% vesting1
2008 3%
3%
6%
8% 43.6p
2009 3%
3%
6%
8% 28.0p
2010 3%
4%
9%
12% 30.0p2
1 The lower range is for awards up to 200% of salary and the upper range is for
awards between 200% and 400% of salary.
2 The adjusted EPS for the start of the 2010 scheme is based on the 52 week result,
ensuring a like-for-like measure.
The minimum EPS target of RPI+3% over the three-year
performance period for awards made in 2008 has not been
achieved and so all awards under this PSP grant will lapse in June
2011.
Dilution limits
What is the current dilution of share capital by
employee share plans?
Awards granted under the Company’s Save As You Earn scheme
and the Executive Share Option scheme are met by the issue of
new shares when the options are exercised (all other share plans
are met by market purchase shares). The Company monitors the
number of shares issued under these schemes and their impact
on dilution limits. The Company’s usage of shares compared to
the relevant dilution limits set by the Association of British Insurers
(ABI) in respect of all share plans (10% in any rolling ten-year
period) and executive share plans (5% in any rolling ten-year
period) was 6.52% and 1.39% respectively on 2 April 2011.
Board appointments and contracts
What were the changes to the Board during the year?
Directors appointed to the Board
Marc Bolland
Marc Bolland was appointed Chief Executive Officer from
1May2010. His remuneration package is consistent with the
structure for executive directors outlined in this report, and the full
terms of his package, including awards made to facilitate his
appointment were disclosed in last year’s report.
Alan Stewart
Alan Stewart was appointed Chief Finance Officer on
28October2010 on an annual salary of £550,000. He is entitled
toparticipate in the executive incentive schemes in line with the
framework for other executive directors. He is paid a 25% salary
supplement in lieu of a pension contribution.
In connection with his appointment, Alan Stewart was made an
award of restricted shares with a value of £300K, vesting on the
first and second anniversary of grant, subject to continued
employment and was granted a PSP award of one times salary,
subject to the same performance conditions as apply to awards
made under the scheme to other participants in 2010/11.
The restricted share award is not pensionable and was made
under the terms of the Listing Rules 9.4.2R(2) in order to facilitate
his appointment.
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