Marks and Spencer 2016 Annual Report Download - page 52

50
MARKS AND SPENCER GROUP PLC
DIRECTORS’ REPORT: GOVERNANCE
REMUNERATION
REMUNERATION
OVERVIEW
On behalf of the Board, I am pleased to
present our Remuneration Report for 2016.
We have sought to improve our disclosures
further this year. As a result, we have
introduced a summary section highlighting
the key elements of our remuneration
framework. This ‘Remuneration at a Glance’
overview is intended to illustrate our
Remuneration Policy in action, the
alignment between our senior
remuneration strategy and the Company’s
performance for the 2015/16 fi nancial year.
This year, we have also summarised the
Remuneration Policy approved by
shareholders at the 2014 AGM rather than
reproduce the Policy in full. This gives
an overview on the directors’ annual
remuneration framework.
BOARD CHANGES
As highlighted earlier, there were a
number of changes to the Board during
the year. Helen Weir joined us in April 2015,
JohnDixon left in July 2015 and
Marc Bolland retired from the Board in
April 2016. I believe that our Remuneration
Policy provides the fl exibility to manage
our pay arrangements while providing
certainty to our shareholders that any
payments made in the implementation
of our Policy are in the best interests of
both the Company and our shareholders.
After a rigorous selection process,
I am delighted that we appointed
Steve Rowe to succeed Marc Bolland
as Chief Executive O cer with e ect
from 2 April 2016. The remuneration
arrangements relating to Steve in this
report cover his roles during the year;
as the Executive Director for Food and
later for GM. Steve’s remuneration as
Chief Executive O cer began after
the fi nancial year-end. Full details for
Steve’s appointment were disclosed at the
time and are detailed later in this report on
page 68 with a starting salary in this role of
£810,000. In line with the provisions in
the Policy, the Committee intends that
Steve’s salary will be reviewed annually
refl ecting performance and operational
delivery. The fi rst review will be in July 2017,
15 months after his appointment.
PAY AND PERFORMANCE
The charts shown on pages 52 and 53
demonstrate the clear linkage between
M&S business strategy and payments
made to the executive directors.
The key business priorities are referenced
on pages 18 to 21 of this report and the
executive directors’ bonus measures
for the year were aligned with this focus.
In addition, each executive director was set
a number of strategic priorities which the
Committee considered relevant to the
delivery of the short- to medium-term
goals in their areas of responsibility.
Annual Bonus Scheme
As highlighted earlier, our performance
during the year was mixed. Overall
underlying profi ts were up 3.5% with
strong cash fl ow delivery. We delivered
positive Food growth in a tough market;
improved customer experience of
M&S.com, and progressed our end to
end Clothing & Home supply chain
infrastructure. In Clothing & Home,
margins improved but sales performance
was unsatisfactory. Our International
business was impacted by a number
of macro-economic factors and
operational challenges.
Bonus payments to the executive
directors were determined by the above
performance, as well as an evaluation of
individual performance against a number
of challenging targets and average around
35% of maximum (70% of salary).
Taking into account overall Company
performance and balance of the team,
the Committee determined that the
bonus for the CEO be subject to a
discretionary downward adjustment of
20% (from c.80% to c.64% of salary). Bonus
payments awarded to the executive team
are summarised on page 60. We are
satisfi ed that the payments to the CEO,
the executive directors and elsewhere in
the business are fair and balanced in the
context of overall Company performance.
Performance Share Plan
The Performance Share Plan awards
granted in 2013 were measured for the
three year period up to 2 April 2016 against
challenging EPS, ROCE and revenue targets.
As a result, executive directors will receive
only 4.8% of the original award when it vests
in June 2016. Full details are provided on
page 62.
SALARY INCREASES
While the Committee was minded to
award an annual increase of 2% of salary to
Patrick Bousquet-Chavanne, Helen Weir
and Laura Wade-Gery, all executive
directors have declined their respective
pay increases, in recognition of the new pay
arrangements proposed across the rest
of the UK business. All executive directors
have similarly stated that they will decline
their annual salary reviews in July 2017,
should the Committee deem it appropriate
to award any increases at that time. The
Committee are fully supportive of their
collective decision to support the business
in ensuring pay arrangements are
a ordable and appropriate across M&S.
We are committed to fair and motivating remuneration;
and to creating value for our shareholders.
VINDI BANGA CHAIRMAN OF THE REMUNERATION COMMITTEE