National Grid 2008 Annual Report Download - page 616

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 29579
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 92
Description: EXHIBIT 15.1
0/7288.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/288/7*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 29579
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 92 Description: EXHIBIT 15.1
0/7288.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/288/7*
Table of Contents
Directors’ Remuneration Report
100
Directors’ Remuneration Re
p
ort
National Grid plc
We are pleased to present the Directors’ Remuneration
Report for 2007/08. Our policy of relating pay to the
performance of the Company continues to be a strong
principle underlying the Remuneration Committee’s
consideration of executive remuneration. We aim to ensure
the Company continues to attract, motivate and retain high
calibre individuals to deliver the highest possible
performance for our shareholders.
The acquisition of KeySpan completed during this
performance year, resultin
g
in lar
g
er and more complex roles
for many of our senior employees. Last year, we consulted
with our major shareholders and reported we had increased
the maximum annual bonus opportunity for Executive
Directors to 150% of salary for the year 2007/08 onwards.
While doing so, we amended performance targets to be
more stretching and adjusted the framework so that, for
Executive Directors, only 40% of the bonus (60% of salary)
is payable for target performance (previously 50% of the
bonus was payable for target performance).
Following the 2007 Annual General Meeting, where our
shareholders supported our proposal to increase the
maximum permissible award under our long term incentive
plan (the Performance Share Plan) to 250% of salary, we
introduced a more challenging Earnings per Share
(EPS) upper target for the 2007 award. However, as
disclosed last year, we plan to continue with the maximum
awards to Executive Directors being on the basis of 200% of
salary.
We have made no other changes to our arrangements and
firmly believe the changes detailed above provide an
appropriate and balanced opportunity for executives. Our
incentive plans remain aligned with the Company’s strategic
objectives and our shareholders’ interests generally, while
continuing to motivate and engage the team leading the
Company to achieve stretching targets.
Overall, we believe salary levels and the mix between fixed
and variable compensation continues to be appropriate,
however, we shall continue to review the remuneration
package on a regular basis to ensure it remains so.
During the year, we have welcomed both Bob Catell and
Tom King to the Board. Bob, who joins us from KeySpan,
brings a wealth of experience in the US energy industry to
his Executive Director role as Chairman of National Grid
USA and will play a key role, through a fixed two year
contract, in our integration activities. Following the
completion of the acquisition, Bob’s maximum potential
bonus and long term incentive arrangements were
significantly reduced from those applicable at KeySpan. To
effect this contractual change and on the basis we did not
want historical KeySpan entitlements outstandin
g
, the
Remuneration Committee decided to buy out Bob’s KeySpan
contractual severance arrangements and place him on a
National Grid contract. This now aligns his arrangements
with our other Executive Directors and remuneration policy.
Details of these payments follow later in the report.
Tom, who has joined us from Pacific Gas and Electric
Company, has 20 years’ experience in the US energy
industry and has a strong track record in reliability
improvement and customer
service. As part of a contractual commitment made on his
recruitment, Tom received a Special Retention Award in
November 2007, details of which can be found later in this
report.
John Allan
Chairman of the Remuneration Committee
Remuneration Committee
The Remuneration Committee members are John Allan, Ken
Harvey, Stephen Pettit and George Rose. Each of these
Non-executive Directors is regarded by the Board as
independent and served throughout the year.
The Global Human Resources Director and Global Head of
Compensation & Benefits provide advice on remuneration
policies and practices and are usually invited to attend
meetings, along with the Chairman and the Chief Executive.
No Director or other attendee is present during any
discussion regarding his or her own remuneration.
The Remuneration Committee is responsible for developing
Company policy regarding executive remuneration and for
determining the remuneration of the Executive Directors and
executives below Board level who report directly to the Chief
Executive. It also monitors the remuneration of other senior
employees of the Company and provides direction over the
Company’s share plans.
The Board has accepted all the recommendations made by
the Remuneration Committee during the year.
The Remuneration Committee has authority to obtain the
advice of external independent remuneration consultants. It
is solely responsible for their appointment, retention and
termination; and for approval of the basis of their fees and
other terms.
In the year to 31 March 2008, the followin
g
advisors provided
services to the Remuneration Committee:
Remuneration policy
The Remuneration Committee determines remuneration
policy and practices with the aim of attractin
g
, motivatin
g
and
retaining high calibre Executive Directors and other senior
employees to deliver value for shareholders and high levels
of customer service, safety and reliability in an efficient and
responsible manner. The Remuneration Committee sets
remuneration policies and practices in line with best practice
in the markets in which the Company operates.
Remuneration policies continue to be framed around the
following key principles:
Deloitte & Touche LLP, independent remuneration
advisors. They also provide taxation and financial
advice to the Company;
Alithos Limited, provision of Total Shareholder
Return calculations for the Performance Share Plan
and Executive Share O
p
tion Plan;
Linklaters LLP, advice relating to Directors’ service
contracts as well as providing other legal advice to
the Com
p
an
y
; and
Mercer Human Resource Consultin
g
Limited, advice
relating to pension taxation legislation. They also
provide general advice with respect to human
resource issues across the Com
p
an
y
.