National Grid 2014 Annual Report Download - page 64

Remuneration
Report
continued
Annual
Performance Plan
Purpose and link to strategy: to incentivise andreward the achievement of annual financial
and strategic business targets and the delivery of annual individual objectives.
Operation Maximum levels
Performance metrics, weighting
and time period applicable
Performance metrics and targets are
agreedat the start of each financial year.
Performance metrics are aligned with
strategic business priorities. Targets are set
with reference to the budget. Awards are paid
in June.
For APP awards made in 2013/14, 50% of
any award was deferred into shares in the
Deferred Share Plan (DSP). The DSP has no
performance conditions and vests after three
years, subject to continued employment.
These shares are subject to forfeiture for
leavers in certain circumstances.
For APP awards made in respect of years
from 2014/15, it is proposed discontinuing
theDSP. Instead 50% ofawards will be paid
in shares, which (after any sales to pay tax)
must be retained until the shareholding
requirement is met, and in any event for
twoyears after receipt.
Awards are subject to clawback and
malusprovisions.
From 2014/15, it is proposed that
the maximum award will reduce
from 150% of salary to125%
ofsalary.
A significant majority of the APP isbased
onperformance against corporate financial
measures, with the remainder based on
performance against individual objectives.
Individual objectives are role specific.
The Committee may use its discretion to set
measures that it considers appropriate in
each financial year and reduce the amount
payable, taking account of significant safety
or customer service standard incidents,
environmental and governance issues.
For 2013/14, the APP was structured so
thatpayout at threshold, target and stretch
performance levels were 6.67%, 40% and
100% respectively.
From 2014/15, it is proposed thepayout
levels will be amended so that payouts at
threshold, target and stretch performance
levels will be 0%, 50% and 100%respectively.
Long Term
Performance Plan
Purpose and link to strategy: to drive long-term performance, aligning Executive Director
incentives to keystrategic objectives and shareholder interests.
Operation Maximum levels
Performance metrics, weighting
and time period applicable
Awards of shares may be granted each
year,with vesting subject to long-term
performance conditions.
The performance metrics have been
chosenas the Committee believes they
reflectthe creation of long-term value within
the business. Targets are set each year with
reference to the business plan.
Awards are subject to clawback and malus
provisions. Notwithstanding the level of
award achieved against the performance
conditions, the Committee may use its
discretion to reduce the amount vesting, and
in particular will take account of compliance
with the dividend policy.
From 2014, it is proposed that the
maximum award for the CEO will
increase from 225% of salary to
350%of salary and from 200% of
salary to 300% of salary for the
other Executive Directors.
For awards between 2011 and 2013 the
performance measures and weightings were:
• adjusted EPS (50%) measured over three
years;
• TSR relative to the FTSE 100 (25%)
measured over threeyears; and
• UK or US RoE relative to allowed regulatory
returns (25%) measured over four years.
From 2014, it is proposed that the
performance measures will be:
• value growth and Group RoE (for the CEO
and Finance Director); and
• value growth, Group RoE and UK or US
RoE (for the UK and US Executive
Directorsrespectively).
LTPP table continued opposite
62 National Grid Annual Report and Accounts 2013/14