Aviva 2013 Annual Report Download - page 67

Aviva plc
Annual report and accounts 2013
65
Strategic report Governance IFRS Financial statements Other information
Extract of directors’ remuneration report continued
Directors’ remuneration policy for Executive Directors (EDs)
Element Operation and recovery provisions (if applicable) Maximum opportunity Performance measures
Basic salary Annual review, with changes normally taking effect from
1 April each year. The review is informed by:
§Relevant pay data including market practice among
the 25 FTSE-listed companies either side of Aviva in
terms of market capitalisation
§Levels of increase for the broader UK employee
population
§Individual and business performance
Current basic salaries are disclosed in the
full DRR. There is no maximum increase
within the policy. However, basic salary
increases take account of the average
basic salary increase awarded to UK
employees. Different levels of increase
may be agreed in certain circumstances
at the committee’s discretion, such as:
§An increase in job scope and
responsibility
§Development of the individual in
the role
The committee is aware of shareholder
concern on ED basic salary racheting and
would consult on proposed increases if
they were to signicantly exceed the
general level of increases for UK staff.
Any movement in basic salary takes account
of performance.
Purpose and link to strategy
To provide core, market related pay
to attract and retain the required
level of talent.
Element Awards are based on performance in the year. Targets are
set annually and pay-out levels are determined by the
committee based on performance against those targets.
Two-thirds of any bonus awarded is deferred into shares
which vest after three years. Additional shares are
awarded at vesting in lieu of dividends paid on the
deferred shares.
Unvested awards are subject to reduction for
misconduct or materially adverse misstatement of
accounts. Discretion remains with the committee to
amend the bonus payout taking account of nancial,
market and other considerations.
In particular the committee will review the alignment of
bonus awards with the experience of shareholders.
Maximum bonus opportunity is 150%
of basic salary with 75% of basic salary
payable for performance in line with
target.
Threshold performance would result in a
bonus payment of no more than 25% of
basic salary.
Performance below threshold would
result in no bonus being paid.
Performance is assessed against a range of
relevant nancial, employee and customer
targets and personal objectives as set by the
committee. For example, in 2013 the
nancial KPIs were:
§Net capital returns
§IFRS prot before tax
§MCEV value of new business
§Combined operating ratio
§Total expenses
Financial performance is the major factor in
considering overall expenditure on bonuses.
Annual bonus
Purpose and link to strategy
To incentivise EDs to achieve the
annual business plan.
Deferral provides alignment with
shareholder interests and aids
retention of key personnel.
Element Shares are awarded which vest dependent on the
achievement of performance conditions over a three year
period. Additional shares are awarded at vesting in lieu of
dividends on any shares which vest.
Unvested awards are subject to reduction in the event
of misconduct or materially adverse misstatement of
accounts.
The committee has discretion to amend vesting
downwards depending on business or individual
performance or conduct.
The plan rules allow for awards to be
made up to a maximum of 350% of
basic salary.
Threshold performance would result in
a vesting level of 20% of maximum.
Performance below threshold on both
targets would result in the award lapsing
in its entirety.
Currently, performance targets over three
years are:
§50% vest based on targets for absolute
ROE performance
§50% vest based on relative Total
Shareholder Return (TSR) against a
comparator group.
Actual targets for ROE and the appropriate
TSR comparator group are agreed by the
committee annually and disclosed in the
annual remuneration section of the full DRR.
Long-Term Incentive
Plan (LTIP)
Purpose and link to strategy
To motivate EDs to achieve the
Company’s longer-term objectives,
to align ED’s interests with those of
shareholders and to aid the retention
of key personnel.
Element EDs are eligible to participate in a dened contribution
plan up to the annual limit. Any amounts above the
annual or lifetime limits are paid in cash.
The level of benet takes account of the
seniority of EDs and of the local market.
Ordinarily, the employer contribution to
pension benets under UK contracts
does not exceed 31% of basic salary,
minus an employee contribution of 8%
of the ‘Scheme Specic Earnings Cap’,
(£141,600 for 2013/14).
N/A
Pension
Purpose and link to strategy
To give a market competitive level of
provision for post-retirement income.
Element Benets are provided on a market related basis. The
Company reserves the right to deliver benets to EDs
depending on their individual circumstances, which may
include a cash car allowance, life insurance and private
medical insurance. In the case of non-UK executives, the
committee may consider additional allowance in line with
standard relevant market practice.
EDs employed under UK contracts are eligible to
participate in any HMRC-approved all employee share
plans operated by the Company on the same basis as
other eligible employees.
Set at a level which the committee
considers is appropriate against
comparable roles in companies of a
similar size and complexity to provide
a reasonable level of benet.
Cost would normally be limited to
providing a cash car allowance, private
medical insurance, life insurance, and
reasonable travel benets, including the
tax cost where applicable. In addition,
there may be one-off or exceptional
items on a case by case basis, which
would be reported in the DRR.
N/A
Benets
Purpose and link to strategy
To provide EDs with suitable core
benets as part of a competitive
remuneration package, which
enables us to attract and retain the
right level of talent necessary to
deliver the Company’s strategy.
Element Employees who are relocated or re-assigned either in
country or internationally receive relevant benets to assist
them and their dependants in moving home and settling
in to the new location.
Dependent on location and family size,
benets are market related and time
bound. They are not compensation for
performing the role but to defray costs
of a relocation or residence outside the
home country. The committee would
pay no more than it judged reasonably
necessary, in the light of all applicable
circumstances.
N/A
Relocation & mobility
Purpose and link to strategy
To assist with mobility across the
Group to ensure the appropriate
talent is available to execute
strategy locally.
Element A requirement to build a shareholding in the Company
equivalent to 200% of basic salary for the Group CEO
and 150% of basic salary for other EDs.
N/A N/A
Shareholding requirement
Purpose and link to strategy
To align EDs’ interests with those of
shareholders.