Vodafone 2011 Annual Report Download - page 64

62 Vodafone Group Plc Annual Report 2011
Letter from the Remuneration Committee
Dear Shareholder
Although business conditions were somewhat more stable this year
compared to the prior year, the global economy still remained
challenging. As a consequence, the Remuneration Committee has
maintained its focus on ensuring that the Company’s remuneration
policies in general, and the packages of the executive directors in
particular, were designed to allow the Company to recruit, retain and
motivate its talented people and to ensure those people were fully
incentivised to maximise shareholder value.
The key principles of our reward philosophy are set out on page 63. Each
year the Remuneration Committee reviews these principles as well as the
operation and design of the compensation packages provided to
executives. If changes are required, the Committee is both willing and
able to effect those changes. The key changes made during the year are
detailed below:
■ In order to reflect the equal importance of growing revenue and profit
we rebalanced the relative weightings of these two measures in the
short-term incentive plan. At the same time we also changed the
definition of profit from adjusted operating profit to EBITDA. Details of
this are on page 65.
■ In order to simplify the long-term incentive awards both the
co-investment requirement and the matching awards are now
defined in terms of a percentage of gross salary. Details of this plan are
on page 64.
■ In order to ensure greater alignment with shareholders we have
re-emphasised the importance of share ownership for executives and
have introduced share ownership goals to all our operating company
chief executives and to the rest of the senior leadership team. Details
of the current ownership levels are on page 63 where it is noted that
at the year end the value of shares held by the Executive Committee
exceeded £15 million.
■ Finally after reviewing base salaries for the Executive Committee it was
decided appropriate to make some modest salary increases. Details of
the increases for the executive directors are found on page 67 but it
should be noted that the average increase for the Executive Committee
is 3% which is in line with general increases for employees of the Group
based in the UK.
As in previous years the Remuneration Committee has had dialogue with
its shareholders about the changes and appreciates the feedback from
them. The Remuneration Committee will continue to take an active
interest in investors’ views and the voting on the remuneration report.
As such, it hopes to receive your support at the AGM on 26 July 2011.
Luc Vandevelde
Chairman of the Remuneration Committee
17 May 2011
Directors’ remuneration
Remuneration Committee
The Remuneration Committee is comprised to exercise independent
judgement and consists only of independent non-executive directors. In
anticipation of the retirement of Simon Murray on 27 July 2010, the Board
appointed Samuel Jonah to the Remuneration Committee. Further details
can be found on page 58.
Remuneration Committee
Chairman Luc Vandevelde
Committee members Samuel Jonah (from 1 June 2010)
Simon Murray (until 27 July 2010)
Anthony Watson
Philip Yea
The Remuneration Committee regularly consults with the Chief Executive
and the Group HR Director on various matters relating to the appropriateness
of awards for executive directors and senior executives, though they are not
present when their own compensation is discussed. In addition, the Group
Reward and Policy Director provides a perspective on information provided
to the Committee, and requests information and analyses from external
advisors as required. The Deputy Group Company Secretary advises the
Committee on corporate governance guidelines and acts as secretary to
the Committee.
Management attendees at Remuneration
Committee meetings
Chief Executive Vittorio Colao
Group HR Director Ronald Schellekens
Group Reward and Policy Director Adrian Jackson
Deputy Group Company Secretary Philip Howie
External advisors
The Remuneration Committee appointed Towers Watson (‘TW’) and
PricewaterhouseCoopers LLP (‘pwc’) as independent advisors in 2007.
During the year TW supplied market data and advice on market practice and
governance and pwc provided performance analyses and advice on plan
design and performance measures. The advisors also provided advice to the
Company on general human resource and compensation related matters.
In addition, pwc provided a broad range of tax, share scheme and advisory
services to the Group during the year.
As noted in his biographical details on page 53 of this annual report,
Philip Yea sits on an advisory board for pwc. In light of their role as advisor to
the Remuneration Committee on remuneration matters, the Committee
continue to consider this position and have determined that there is no
conflict or potential conflict arising.
Meetings
The Remuneration Committee had five meetings during the year. The
Committee’s work during these meetings and throughout the year included,
but was not limited to:
■ a review of the total compensation packages of the executive directors
and the most senior management of the company;
■ approval of the global short-term incentive bonus framework and targets;
■ approval of the 2011 global short-term incentive bonus payout;
■ approval of the long-term incentive framework, targets and 2011
grant levels;
■ approval of the July 2008 global long-term incentive vesting level;
■ approval of the introduction of share ownership goals to all operating
company chief executive officers and selected senior leadership
individuals below the Board and Executive Committee;
■ a review of the current UK corporate governance environment and the
implications for our company;
■ a review of the director’s remuneration report; and
■ a review of Chairman’s fees.
On an annual basis, the Committee’s effectiveness is reviewed as part of the
evaluation of the Board.