Carphone Warehouse 2012 Annual Report Download - page 46

Carphone Warehouse Group plc Annual Report 201242
COMPONENTS OF REMUNERATION
The main fixed and performance‑related elements of remuneration for executive directors are as follows:
COMPONENT REASON
— Basic salary and benefits (fixed) — Provide fixed remuneration and benefits reflecting
skills,experience and responsibilities to attract and
retainkeyemployees.
— Pension (fixed) — Provide reasonable and competitive retirement benefits.
— Annual performance bonus (short‑term variable) — Reward individual and Group performance on both
financialand non‑financial measures.
— Value enhancement and share option schemes
(long‑termvariable)
— Align long‑term interests of key employees and shareholders,
through incentivising the creation of shareholder value.
The remuneration strategy of the Group is also applied as far
aspossible within Best Buy Europe and Virgin Mobile France.
Directors of the Company do not participate in any of the joint
venture schemes described below.
SHORT‑TERM INCENTIVES
BASIC SALARY AND BENEFITS
Salaries are reviewed annually with changes ordinarily taking effect
on 1 July each year. Salary reviews take into account individual and
business performance and market data. There has been no change
in the salaries of the executive directors over the past two years.
Taxable benefits consist of car allowances and private medical cover.
PENSION
The Company pays 5% of the executive directors’ basic salary to
defined contribution pension schemes or self‑invested pension plans.
The Company does not operate any defined benefit pension schemes.
Non‑executive directors do not participate in any pension schemes.
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 year ended 31 March 2012 was based on Headline EPS together
with specific business unit targets based on a balanced scorecard
approach. The scorecard considers the achievement of financial,
customer, employee and strategy‑related objectives.
The bonus scheme has a maximum payment of 200% of annual salary.
The bonus scheme for 2012–13 will be based on TSR rather than
Headline EPS, but will otherwise have a similar structure. For the
year ended 31 March 2012 a bonus of 50% was awarded to executive
directors. Roger Taylor has waived his right to receive his bonus for
the year and has instead chosen for it to be paid directly to charity.
The Remuneration Committee is satisfied that this bonus structure
provides a strong link between reward and performance and that
itdrives the creation of further shareholder value.
The Chairman and non‑executive directors do not receive an annual
performance‑related bonus.
Best Buy Europe and Virgin Mobile France have similar annual
performance‑related bonus schemes, in which senior management
of these joint ventures participate. Directors of the Company
donotparticipate in these schemes.
LONG‑TERM INCENTIVES
VALUE ENHANCEMENT SCHEMES
BEST BUY EUROPE VES
Prior to the Demerger during the year ended 31 March 2010,
OldCarphone Warehouse introduced the Best Buy Europe VES,
toprovide long‑term incentives to its senior management group
inrelation to Best Buy Europe.
The Best Buy Europe VES allowed participants to invest at market
value in shares which enabled them to share in up to 2.24% of any
increase in the value of Best Buy Europe over an opening valuation
determined by the Old Carphone Warehouse board as at1April 2009.
The incremental value was measured after aminimum annual rate of
return of 7% on this valuation, and was subject to an adjustment for
any change in the Company’s market capitalisation since 6April2009.
The Group advanced loans totalling £5.8m to participants to enable
them to purchase A shares in CPW Retail Holdings Limited, which held
part of the Group’s investment in Best Buy Europe. The Company
had an obligation to acquire these shares if performance conditions
were met, to provide participants with the share of value described
above. Performance was to be measured over performance periods
to July2013 and July 2014, at which point participants had put
options over the shares.
In order to facilitate the Best Buy Mobile Disposal and the B/CShare
Scheme, these shares were exchanged for shares in the Company
at fair market value, as determined by the Remuneration Committee,
supported by third party advisors. As part of this agreement,
participants are not permitted (unless the Remuneration Committee
determines otherwise) to sell these shares until June 2015.
REMUNERATION REPORT CONTINUED