Holiday Inn 2010 Annual Report Download - page 53

OVERVIEW BUSINESS REVIEW
THE BOARD,
SENIOR MANAGEMENT AND
THEIR RESPONSIBILITIES
GROUP FINANCIAL
STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS USEFUL INFORMATION
Remuneration report 51
Executive Directors’ annual base salaries are shown in the
table below:
2011 2010
Director £ £
Andrew Cosslett 850,780 826,000
James Abrahamson 477,117* 469,348
Kirk Kinsell 477,117* 462,875
Richard Solomons 540,000 523,000
* Messrs Abrahamson and Kinsell are paid in US dollars. James Abrahamson’s
annual base salary for 2010 was $725,000 and for 2011 is $737,000. Kirk Kinsell’s
annual base salary for 2010 was $715,000 and for 2011 is $737,000. The sterling
values in the table above have been calculated using an exchange rate of $1=£0.65.
4. Annual Bonus Plan
Structure and outcomes in 2010
Awards under the ABP require the achievement of challenging
performance goals before bonus is payable. Achievement of target
performance results in a bonus of 115% of salary. Half of any bonus
earned is compulsorily deferred in the form of shares for three
years. No matching shares are awarded by the Company.
Awards under the ABP are linked to individual performance and
EBIT. Individual performance is measured by the achievement
of specific KPOs linked directly to the Group’s strategic objectives,
a selection of which is set out in the table on page 50, and an
assessment against leadership competencies and behaviours.
Each year, specific quantitative targets are set for each Executive
Director and Executive Committee member, as relevant to their
role. Performance is reviewed at the end of each year to determine
an OPR. The OPR determines 30% of the bonus outcome.
EBIT performance determines 70% of the bonus outcome. In 2010,
under the financial measure (EBIT), threshold payout was 90% of
target performance, with maximum payout at 120% or more of
target. Payout for individual performance would be reduced by half
if EBIT performance was below threshold. In addition, no annual
bonus would be payable on any measure if EBIT performance was
lower than 85% of target.
The maximum result for each measure is double its target value.
However, the combined payout result of the two measures was
capped at 175% of base salary.
The 2010 EBIT result was 159%, resulting in a maximum combined
payout for all Directors, as shown below:
Measure Key performance indicator Payout as % of salary
Target Max
Financial EBIT (70%) 80.5 161
Individual OPR (30%) 34.5 69
Total 115 175*
Actual 2010 result as % of salary
Andrew Cosslett 175
James Abrahamson 175
Kirk Kinsell 175
Richard Solomons 175
* Combined EBIT and OPR payout subject to a maximum of 175% of base salary.
The normal policy for all Executive Directors and Executive
Committee members is that their target performance-related
incentives will equate to approximately 70% of total annual
remuneration (excluding pensions and benefits).
The following table shows the split of fixed and variable
compensation for the Executive Directors, assuming target
performance is achieved (where applicable):
Short-term Long-term
Director Fixed pay variable pay variable pay
Andrew Cosslett 30% 35% 35%
James Abrahamson 30% 35% 35%
Kirk Kinsell 30% 35% 35%
Richard Solomons 30% 35% 35%
The Committee also reviews the balance of fixed and variable
remuneration provided to the wider management population to
ensure these are appropriate, given relativities to the Executive
Directors and to market practice.
The Company recognises that its Executive Directors may be invited
to become Non-Executive Directors of other companies and that
such duties can broaden experience and knowledge, and benefit the
Company. Executive Directors are, therefore, permitted to accept
one non-executive appointment (in addition to any positions where
the Director is appointed as the Group’s representative), subject to
Board approval, as long as this is not, in the reasonable opinion of
the Board, likely to lead to a conflict of interest. Executive Directors
are generally authorised to retain the fees received. Current Executive
Directors hold no Non-Executive Directorships of other companies.
3. Base salary and benefits
The salary for each Executive Director is reviewed annually and
is based on both individual performance and relevant competitive
market data. Base salary is the only element of remuneration
which is pensionable. In addition, benefits are provided to Executive
Directors in accordance with local market practice.
In assessing levels of pay and benefits, IHG analyses those offered
by different groups of comparator companies. These groups are
chosen having regard to participants’:
• size – market capitalisation, turnover, profits and the number
of people employed;
• diversity and complexity of business;
• geographical spread of business; and
• relevance to the hotel industry.
Internal relativities and Group-wide remuneration approaches
are also taken into account. The Committee reviews average
base salary levels and average salary increase percentages for
the broader IHG workforce.