Carphone Warehouse 2006 Annual Report Download - page 31

The Company operates a minimum shareholding policy, requiring Executive Directors to build up and retain a shareholding in the Company equal
to at least 100% of their annual salaries.
Salaries and benefits
Executive Directors’ basic salaries are reviewed annually and take into account the roles, responsibilities, performance and experience of the individuals and
information obtained from published market data on the salary rates for similar positions in companies of a similar size. Salaries are reviewed on 1 July each year.
Following the most recent review, salaries from 1 July 2006 will be as follows:
Charles Dunstone £550,000, Roger Taylor £350,000, Jim Dale £185,000 (pro-rated for 4 days), David Goldie £275,000, Andrew Harrison £225,000.
The increases over the year reflect very strong Group performance and a further increase in the size of the business and the complexity of the Directors’
roles. Executive Directors also receive benefits in respect of cars or car allowances, private medical cover and a defined contribution pension scheme.
In considering the base salary levels, it is recognised that pension contributions to most senior executives are, generally, significantly below market levels.
Annual Performance Bonus
The Company operates a bonus scheme designed to reflect the performance of the Group. Bonuses are governed by performance conditions set by the
Remuneration Committee to ensure that maximum variable rewards are paid only for exceptional performance. The bonus scheme for the period ending
31 March 2007 will have targets based on improvements in Headline EPS (see note 10 to the financial statements) for 80% of the bonus and the
successful implementation of Free Broadband for the remaining 20%.
As with the Headline EPS range set for the period ended 1 April 2006, targets set for the forthcoming financial year will require exceptional performance
of the Group. The initial threshold for annual bonus will be significantly ahead of the actual Headline EPS achieved in 2006.
In view of the significant strategic challenges in rolling out Free Broadband, the Committee has determined that a significant proportion of all Executive
Directors’ bonuses should be subject to a range of quantifiable targets relating to the achievement of key operational milestones.
The Remuneration Committee has determined that for the forthcoming financial year the annual bonus potential should be increased from 195% to
200% of base salary and that the threshold for compulsory deferral (into the Annual Deferred Bonus Plan) should only be enforced if Directors do not
have a shareholding equivalent to at least 100% of their salary. The gain on any share options vested in the period (net of tax) and the value of any
deferred and matching shares earned under the Deferred Annual Bonus Plan will be taken into account for this purpose.
Annual Deferred Bonus Plan
Executive Directors and senior managers have the option of taking some or all of their cash bonus in the form of a deferred share award. The rights
to deferred shares cannot be exercised for 12 months. Matching shares may also be awarded if the deferred share award is not exercised for up to
a further two years. The number of matching shares awarded equates to 12.5% of the deferred amount at the beginning of each year. The share
equivalent of dividends which would have been paid on the shares is added to the deferred share award each year. Given the challenging annual bonus
targets in order to earn a bonus in the first place, the modest level of potential match and the Committee’s aim of encouraging Executive Directors to
build up a significant shareholding, no additional performance criteria are attached to the matching shares.
Share options
The Company has a performance related share option scheme for Executive Directors and senior managers both in the UK and overseas. No options
were granted to Executive Directors in the period ended 1 April 2006 and it is currently not envisaged that grants will be made to them in the
forthcoming year. A UK savings-related share option scheme is open to all eligible employees in the UK, including Executive Directors. David Goldie
had 10,958 options available to buy shares in the company under the UK savings-related share option scheme at 1 April 2006. The options are
exercisable from 1 August 2006 at an excercise price of £0.73 per share. The options expire on 1 February 2007. No other Executive Director
currently participates in the scheme.
Performance Share Plan
During the period ended 2 April 2005, senior managers, including Executive Directors, received awards of Performance Shares (as defined in the
Annual General Meeting on 28 July 2004). These awards are subject to a mixture of Headline EPS and Total Shareholder Return (TSR) performance
targets measured over a three or four year performance period. Further Performance Shares were awarded to certain senior managers in the period
ended 1 April 2006. Details of the grants to Executive Directors and the performance targets are set out in the share tables later in the Report.
The Remuneration Committee is currently considering the terms of further grants to be made under the Performance Share Plan for the forthcoming
year, which will vest in 2009 and 2010. Grant will be subject to performance and will be made within the limits agreed by shareholders when the Plan
was adopted in 2004. The performance conditions applying to awards to Executive Directors will continue to be a mixture of stretching Headline EPS
and TSR targets.
Details of the performance conditions for grants under the Performance Share Plan during the forthcoming financial year will be disclosed in next
year’s Annual Report.
Remuneration Report continued www.cpwplc.com 27
Governance