Aviva 2014 Annual Report Download - page 96

Aviva plc Annual report and accounts 2014
Directors’ remuneration report continued
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Directors’ remuneration policy
This section sets out Aviva’s remuneration policy for directors, in accordance with the requirements of the Companies Act 2006 (as
amended) and the Large & Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). The policy
approach set out in this section incorporates changes proposed as part of our SRR.
It is intended that this policy will formally apply from the date of Aviva’s 2015 AGM, for a duration of three years, subject to shareholders
approving this policy at that meeting.
Alignment of Group strategy with executive remuneration
The committee considers alignment between Group strategy and the remuneration of its EDs is critical. Our remuneration policy provides
market competitive remuneration, and incentivises EDs to achieve both the annual business plan and the longer term strategic objectives
of the Group. Significant levels of deferral and an aggregate shareholding requirement align EDs’ interests with those of shareholders and
aid retention of key personnel. As well as rewarding the achievement of objectives, variable remuneration can be zero if performance
thresholds are not met.
Table 1 below provides an overview of our proposed remuneration policy for EDs. For an overview of the remuneration policy for Non-
Executive Directors (NEDs) see table 4.
Table 1: Remuneration policy for Executive Directors – overview
Element
Purpose and link to
strategy
Operation and recovery provisions
(if applicable) Maximum opportunity Performance measures
Basic
salary
To provide core market
related pay to attract and
retain the required level of
talent.
Annual review, with changes normally taking
effect from 1 April each year. The review is
informed by:
• Relevant pay data including market practice
among relevant FTSE listed companies of
comparable size to Aviva in terms of market
capitalisation, large European and global
insurers; and UK financial services
companies
• Levels of increase for the broader UK
employee population
• Individual and business performance
Current basic salaries are disclosed on
page 106.
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
• A significant increase in the size,
value or complexity of the Group
Any movement in basic
salary takes account of
performance of the
individual and the Group.
Annual
bonus
To incentivise EDs to
achieve the annual business
plan.
To reward EDs who achieve
the Company’s strategic
objectives and demonstrate
the Aviva values and
behaviours.
Deferral provides alignment
with shareholder interests
and aids retention of key
personnel.
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.
Cash and deferred awards are subject to malus
and clawback. Details of when these may be
applied are set out in the notes below.
The committee retains discretion to amend
annual bonus pay-outs for a range of factors,
including financial, market and other
considerations. The committee will exercise its
discretion to reduce otherwise unreasonable
reward outcomes. If extraordinary
circumstances were to arise where the
committee felt an adjustment upwards is
warranted, it would consult with major
stakeholders before making any adjustment.
Any exceptional adjustment would not exceed
the stated maximum.
Maximum bonus opportunity for the
Group CEO is 200% of basic salary
with 100% of basic salary payable for
performance in line with target.
Maximum bonus opportunity for
other EDs is 150% of basic salary
with 100% 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
financial, employee,
customer and risk targets
designed to incentivise the
achievement of our
strategy, as well as
individual strategic
objectives as set by the
committee. Although
financial performance is the
major factor in considering
overall expenditure on
bonuses, performance
against non-financial
measures including
behaviours in line with our
values will also be taken
into consideration.
92 | Aviva plc Annual report and accounts 2014