Carphone Warehouse 2009 Annual Report Download - page 37

www.cpwplc.com 33
Directors’ Report – Governance
Directors’ Report – Governance
Remuneration Report
Compliance
This Remuneration Report has been
prepared in accordance with the
Directors’ Remuneration Report
Regulations 2002 (“Regulations”) and
the Combined Code on Corporate
Governance (“Code”). The constitution
and operation of the Remuneration
Committee are in compliance with
the Code. In framing its remuneration
policy the Committee has given full
consideration to the matters set out in
Schedule A of the Code. As required by
the Regulations, a resolution to approve
this Report will be proposed at the
Annual General Meeting to be held on
23 July 2009 (“AGM”). The Regulations
require the Company’s auditors to report
to the members on the “auditable part”
of this Report (marked *) and to state,
in their opinion, that this part of the
Report has been properly prepared in
accordance with the Companies Act
1985 (as amended by the Regulations).
Remuneration Committee
Responsibility for the establishment of
overall remuneration policy for the Group
lies with the Board of Directors. The
Remuneration Committee is responsible
for making recommendations to the
Board on the remuneration of the
Chairman, Executive Directors and senior
managers. The terms of reference of the
Committee are available on the Group’s
website (www.cpwplc.com) or on request
from the Company Secretary.
The Committee’s current composition
is Sir Brian Pitman (Chairman), Steven
Esom, David Manseld, Baroness
Morgan and David Grigson, all of whom
are Independent Non-Executive
Directors. None of the members of the
Committee has any personal nancial
interest, other than as shareholders,
in the matters to be decided by the
Committee, no potential conicts of
interest arising from cross-memberships
and no day-to-day involvement in running
the Group’s business. The members of
the Committee met four times during the
year to consider matters relating to the
remuneration of Executive Directors as
well as the terms and conditions of their
service with the Company. Adrian Martin
attended the rst meeting before
standing down on 31 July 2008.
Mercer Ltd (“Mercer”) act as lead
advisors to the Committee. Advice has
been sought from Mercer on matters
surrounding remuneration policy design
and benchmarking for individual
Executive Directors and members of
senior management and the design of
remuneration packages and medium-
and long-term incentive plans based on
current market trends. Mercer has no
other connection with the Group. Deloitte
LLP (“Deloitte”) provided advice to the
Committee on employment tax and the
administration of share option and SAYE
schemes. Deloitte are the Group’s
auditors and provide other services to
the Group as set out in the Corporate
Governance Report on pages 29 to 32.
Advice was also provided by
PricewaterhouseCoopers LLP in relation
to the valuation of share option schemes.
The Group Director of Human Resources
and the Company Secretary also
provided internal advice in respect
of matters raised by the Committee.
No Director nor any person advising the
Committee plays a part in any discussion
about his or her own remuneration.
Remuneration Policy
The Committee seeks to ensure that
remuneration and incentive schemes are
in line with best practice, providing a
strong link to individual and business
performance and ensuring alignment
between employees and shareholders.
Rewards are designed to attract and
retain individuals of high quality who
have the requisite skills and who are
incentivised to achieve levels of
performance that exceed those of
competitor companies. This requires
packages to be market-competitive
and capable of rewarding exceptional
performance. The approach is to set xed
remuneration at market median levels and
to offer variable rewards, linked to the
performance of the Group, which can
provide signicant overall levels of
remuneration for exceptional performance
and shareholder value creation.
In order to closely align the interests of
Executive Directors and shareholders,
the Company requires Executive
Directors to build up and retain a
shareholding in the Company of at least
200% of their annual salary.
Components of Remuneration
The main xed and performance-related
elements of remuneration that can
be awarded to Executive Directors are
as follows:
▪
basic salary, benets and pension
contribution (xed);
▪
annual performance bonus
(variable); and
▪
share options and performance
shares (variable).
Salaries and Benefits
A pay freeze has been introduced for
the forthcoming year. As a result
Executive Directors will receive no
increase to their basic salary this year.
Annual Performance Bonus
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 ended 31 March
2009 was based on Headline EPS
(see notes 11 and 12 to the nancial
statements) before tax. The target has
not been met and accordingly no
bonuses will be paid to Executive
Directors this year.
The bonus scheme for Executive
Directors for the period ending
31 March 2010 will have targets based
on improvements in Headline EPS before
tax, together with specic business unit
targets based on a balanced scorecard
approach, with a maximum payment of
200% of annual salary.
The Remuneration Committee is satised
that this bonus structure will provide
an excellent link between reward
and improved performance for all
stakeholders and the creation of further
shareholder value.
Medium-Term Incentive Plan
The Company has introduced a medium-
term incentive plan for Executive
Directors measured against a 10%
to 30% increase in the total market
capitalisation of the Company between
June 2009 and December 2010, with a
maximum payment capped at 250% of
annual salary. The share price for the
start of the plan will be the average
closing price of the Company’s shares
during the 30 day period immediately
prior to the announcement of the
Company’s preliminary results in June
2009. The share price for the end of the
plan will be the average closing price
of the Company’s shares during the
30 day period immediately prior to the
announcement of the Company’s
trading update in January 2011. The
Remuneration Committee believes that
this plan is directly related to an increase
in shareholder value and is for the benet
of all stakeholders. Charles Dunstone will
not participate in the plan.