Aviva 2006 Annual Report Download - page 92

Aviva plc
Annual Report and Accounts 2006 88
Directors’ remuneration report continued
Governance continued
Policy How delivered Details
Total remuneration –Basic salary
–Annual bonus
–LTIP
–Pension
–Long-term savings
–Benefits
–All-employee share schemes
Positioned at median against a FTSE 30
comparator group, although account is taken
of relative size and complexity of comparator
organisations.
Basic salary
Basic salary is benchmarked within the range of
median to upper quartile for comparable jobs.
Progression within this range is dependent upon
performance.
–Monthly in cash
–Reviewed annually
Basic salary depends upon:
–Benchmarked salaries for comparable roles in
the FTSE 50 and UK/European financial
institutions;
–An individual’sperformance;
–Predicted market movement;
– Aviva’s financial performance; and
–Anticipated pay increases for other
Aviva employees.
Annual bonus
The discretionary annual bonus plan exists to
motivate directors towards the achievement of
the annual business plan.
75% of basic salary is payable for “on target”
performance, and up to 150% is payable for
“stretch” performance.
–Annually,one-thirdis paid in cash and two-
thirds in deferred shares.
–The shares vest on the thirdanniversary of the
date of grant, subject to the recipient
remaining in service.
– A resignation in the year of a bonus award
would result in the forfeitureof the shares
awarded that year. A resignation in the
following year would result in a 50%
forfeiture, and in the year after that a
25% forfeiture.
–All shares would be forfeited should the
director be dismissed for cause.
Business performance (of the Aviva Group in
the case of the Group Chief Executive and the
Group Finance Director and of the Group and
appropriate business units in the case of the
other executive directors) determines 70% of the
bonus awards, with the remainder dependent
upon the achievement of personal objectives,
relating to strategic action, operating
performance and leadership.
“Business performance” covers, inter alia,
new business contribution, operating profit,
combined operating ratio, total expenses, return
on capital employed, customer satisfaction and
employee engagement.
Target and maximum bonus levels (75% and
150% of basic salary respectively) wereset with
reference to the FTSE 30 and a global financial
services comparator group. These levels are
reviewed annually as part of the total
compensation review.
Constituent elements of reward as a percentage
of total remuneration
Proportion of remuneration paid in cash and shares
Remuneration package overview: constituent elements at “target” and “stretch” (maximum)
0% 50% 100%
Salary,
45.5%
Bonus,
34.0%
LTIP,
20.5%
Salary,
25.0%
Target
Stretch Bonus,
37.5%
LTIP,
37.5%
0% 50% 100%
Shares,
43.2%
Cash,
56.8%
Shares,
62.5%
Target
Stretch Cash,
37.5%
Remuneration package
The remuneration package for the Group’s senior executives is described in the table below. It reflects the Board’s philosophy that senior
executives’ interests should be aligned with those of the Company’s shareholders, and that, while paying a competitive basic salary, a
substantial proportion of the total remuneration package should be closely linked to the performance of the business and paid in shares.
The illustrations above would vary slightly for Richard Harvey, whose long-term incentive plan award is 175% of basic salary.
The illustrations assume “on target” performance when 30% of an LTIP awardvests and “stretch” performance when 100% of an
LTIP award vests.