National Grid 2014 Annual Report Download - page 66

Remuneration
Report
continued
Shareholding requirement
The requirement of Executive Directors to build up and hold a
relatively high value of National Grid shares ensures they share
a significant level of risk with shareholders and their interests
are aligned.
From 2014/15 it is proposed that the existing shareholding
guidelines for Executive Directors will be replaced by a firm
requirement to build up and retain shares in the Company.
Thelevel of holding will increase from 200% of salary to 500%
of salary for the CEO and from 125% of salary to 400% of
salary for the other Executive Directors.
Unless the shareholding requirement is met, Executive
Directors will not be permitted to sell shares, other than to pay
tax or in exceptional circumstances.
Differences in remuneration policy for all employees
The remuneration policy for the Executive Directors is designed
with regard to the policy for employees across the Company as
awhole. However, there are some differences in the structure
ofremuneration policy for the senior executives. In general,
thesedifferences arise from the development of remuneration
arrangements that are market competitive for our various
employee categories. They also reflect the fact that, in the case
ofthe Executive Directors, a greater emphasis tends to be placed
on performance-related pay in themarket, in particular long-term
performance-related pay.
All employees are entitled to base salary, benefits and pension.
Many employees are eligible for an APP award based on Company
and/or individual performance. Eligibility and the maximum
opportunity available is based on market practice for the
employee’s job band. In addition, around 350 senior management
employees are eligible to participate in the LTPP.
The Company has a number of all-employee share plans that
provide employees with the opportunity to become, and to think
like, a shareholder. These plans include Sharesave and the SIP
inthe UK and the 401(k) and 423(b) plans in the US. Further
information is provided on page 60.
Consideration of remuneration policy elsewhere
inthe Company
In setting the remuneration policy the Committee considers
theremuneration packages offered to employees across the
Company. As a point of principle, salaries, benefits, pensions
andother elements of remuneration are benchmarked regularly
toensure they remain competitive in the markets in which we
operate. In undertaking such benchmarking our aim is to be at
mid-market level for all job bands, including those subject to
unionnegotiation.
As would be expected, we have differences in pay and benefits
across the business which reflect individual responsibility and
there are elements of remuneration policy which apply to all,
forexample, flexible benefits and share plans.
When considering annual salary increases, the Committee reviews
the proposals for salary increases for the employee population
generally, as it does for any other changes to remuneration policy
being considered. This will include a report on the status of
negotiations with any trade union represented employees.
The Company includes in its annual employee opinion survey
questions on the appropriateness of the pay arrangements within
the Company. It does not specifically invite employees to comment
on the Directors’ remuneration policy but any comments made by
employees are noted.
Policy on recruitment remuneration
Salaries for new Executive Directors appointed to the Board will
beset in accordance with the terms of the approved remuneration
policy in force at the time of appointment, and in particular will take
account of the appointee’s skills and experience as well as the
scope and market rate for the role.
Where appropriate, salaries may be set below market level initially,
with the Committee retaining discretion toaward increases
insalary in excess of those of the wider workforce and inflation
tobring salary to a market level over time, where this is justified
byindividual and Company performance.
Benefits consistent with those offered to other Executive Directors
under the approved remuneration policy in force at the time of
appointment will be offered, taking account of local market
practice. The Committee may also agree that the Company will
meet certain costs associated with the recruitment, for example
legal fees, and the Committee may agree to meet certain
relocation expenses or provide tax equalisation asappropriate.
Pensions for new Executive Directors appointed to the Board will
be set in accordance with the terms of the approved remuneration
policy in force at the time of appointment.
Ongoing incentive pay (APP and LTPP) for new Executive Directors
will be in accordance with the approved remuneration policy in
force at the time of appointment. This means the maximum APP
award in any year would be 125% of salary and the maximum
LTPP award would be 300% of salary (350% of salary for a
newCEO).
For an externally appointed Executive Director, the Company
mayoffer additional cash or share-based payments that it
considers necessary to buy out current entitlements from the
former employer that will be lost on recruitment to National Grid.
Any such arrangements would reflect the delivery mechanisms,
time horizons andlevels of conditionality of the remuneration lost.
In order to facilitate buy out arrangements as described above,
existing incentive arrangements will be used to the extent possible,
although awards may also be granted outside of these
shareholder-approved schemes if necessary and as permitted
under the Listing Rules.
For an internally appointed Executive Director, any outstanding
variable pay element awarded in respect of the prior role will
continue on itsoriginal terms.
Fees for a new Chairman or Non-executive Director will be set in
line with the approved policy in force at the time of appointment.
64 National Grid Annual Report and Accounts 2013/14