Carphone Warehouse 2002 Annual Report Download - page 21

Remuneration Committee
The Remuneration Committee is responsible for making recommendations to the Board on remuneration policy for Executive Directors and
senior management. It ensures that remuneration packages are appropriate for their responsibilities, taking into account the overall financial
and business position of the Group, the highly competitive industry of which the Group is a part, and the importance of recruiting and retaining
management of the most appropriate calibre.
Remuneration policy
Responsibility for the establishment of overall remuneration policy lies with the full Board. The Remuneration Committee comprising
exclusively Non-Executive Directors, advises the Board on total remuneration plans that will attract, retain and motivate the highest calibre
people who will maintain and enhance the performance of the Group and increase shareholder value. The primary aim of the Committee is to
ensure that remuneration aligns the interests of management and shareholders and reinforces behaviour that will lead to the continued
long-term development of the business.
The Committee makes its recommendations by taking into account:
• The experience of Executive Directors and other senior management;
• The Group's competitiveness in the market place as assessed through independent market comparisons;
• The growing international nature of the Group;
• The move towards performance based remuneration plans.
The base salaries of Executive Directors are positioned at market levels and are then supplemented by variable rewards at a level
consistent with market practice. Variable rewards are governed by performance conditions to ensure that maximum variable rewards are paid
only for exceptional performance. Such remuneration packages are aligned with shareholder interests through an annual bonus scheme which
is based on an earnings per share formula and through the provision of a share option plan which can only be exercised if total shareholder
returns exceed an acceptable level as compared with relevant indices.
Components of remuneration
Annual performance bonus
The Company operates a performance related annual bonus designed to reflect the performance of the Group.
The bonus is based on earnings per share and the achievement of strategic corporate goals, up to a maximum of 60% of annual salary. The
Company has the discretion to pay 50% of the bonus in fully paid ordinary shares, and if this discretion is exercised Directors have the option of
also taking the balance in fully paid ordinary shares. The shares may be sold after twelve months of continued service. There will be an
optional holding period of up to a further two years. During this holding period the number of shares will be increased by 12.5% at the
beginning of each year. The share equivalent of dividends payable on the shares will be added to the award each year.
Share options
A UK savings related share option scheme is open to all eligible employees in the UK. The Company also has a performance related share option
scheme for Executive Directors and senior managers both in the UK and overseas. Subject to satisfactory personal performance share options
are granted as a percentage of an individual’s base salary. Normally options can only be exercised after they have been held for a minimum
period of three years. Options granted from April 2002 will be subject to the achievement of an additional performance measure of Total
Shareholder Return (‘TSR’). The rate of TSR is measured against an index comprising UK FTSE general retailers and European telecoms
businesses. If the Company performs at the median level the allocation will be made; if performance is in the upper quartile an additional
100% of the allocation will be made; if the Company performs below the median the award will be reduced by 50%; and if the Company is in
the lower quartile the award will be cancelled.
Service contracts
Executive Directors have service contracts which are all terminable by the Company with twelve months notice or less.
Fees for Non-Executive Directors
The fees for each of the Non-Executive Directors are determined by the Board after considering external market research. The Non-Executive
Directors do not take part in discussions on their remuneration.
Each of the Non-Executive Directors except Hans Roger Snook may have their appointment terminated by the Company with immediate
effect and are not entitled to receive any compensation for loss of office. Hans Roger Snook has a service contract which is terminable by either
party on twelve months notice. Hans Roger Snook also has an interest in 1 million share options in the Company and is not therefore
considered to be an independent Non-Executive Director.
The Carphone Warehouse Group PLC Annual Report 2002 19
Remuneration report