Marks and Spencer 1998 Annual Report Download - page 40

REPO RT OF TH E REM UNERATION CO M M ITTEE
STRATEGY
Marks & Spencer operates in an increasingly international trading
environment and it is an essential part of our strategy that we
continue to attract, train, develop and retain a large pool of talent at
all levels within the Company.
The level of remuneration and benefits we are able to offer is a key
factor in successfully achieving this objective. The Company sets out
to provide highly competitive salaries and benefits for all its employees
consistent with its growth, strategy and increasingly international
dimensions.
This yearÕs repor t to shareholders by the Remuneration Committee
acknowledges the recommendations of the Greenbur y Committee on
DirectorsÕ Remuneration. The Remuneration CommitteeÕs composition,
responsibilities and operation comply with the best practice provisions
in Section A of the A nnex to the Listing Rules of the London Stock
Exchange. In implementing its policy, the Committee has given full
consideration to the provisions of Section B of the Annex to the
Listing Rules.
REMUNERATION COMMITTEE
The remuneration of ex ecutive directors and divisional directors is
determined by the Remuneration Committee which is composed of five
non-ex ecutive directors of the Company. The Remuneration Committee
is responsible for determining the appropriate policy for rewarding the
CompanyÕs ex ecutive directors, divisional directors and ex ecutives,
and its approach is consistent with the CompanyÕs overall philosophy
that all staff should be appropriately rewarded. The Committee keeps
itself aware of the developments in best practice in the field of
remuneration.
REMUNERATION POLICY
The consistent policy of the Company is to align the interests of all
staff as closely as possible with the interests of shareholders.
Schemes encouraging employees at all levels to acquire and hold
shares in the Company are an impor tant element of that policy. Share
ownership remains ver y popular within the Company, illustrated by the
fact that over 40,000 staff hold approx imately 28 million shares in
their own right and 32,000 staff hold options on 56 million shares
under the SAYE Scheme.
The policy of the Remuneration Committee is to reward senior
management competitively taking account of both Company and
individual per formance. Senior
management comprises the ex ecutive
directors, divisional directors and ex ecutives. Their total remuneration
is made up of three major components: salary and benefits, annual
bonus and long-term incentive in the form of Ex ecutive Share Option
Schemes.
Internal targets required to meet the thresholds of payment under both
schemes are considered to be consistently stretching and motivating.
In developing appropriate remuneration schemes, we focus on the
objective of establishing a correct balance between the fixed and
variable elements of total remuneration.
Salary
Salary is the major element of our remuneration policy. We believe it
should be highly competitive and that appropriate reviews should take
place, normally annually, reflecting market conditions and personal
per formance. For guidance the Remuneration Committee uses
information available in specific published job-matched surveys of
similar companies and annual repor ts. A s appropriate, it also
commissions specific surveys to supplement the published
information. This is considered to be essential research even though
comparator companies are not large in number.
The salaries of the Chairman, the ex ecutive directors and the
divisional directors are set by the Remuneration Committee. They are
determined in June of each year after a review of the per formance of
the individual. In the cases of the ex ecutive directors, other than the
Chairman, and in the cases of divisional directors, the Committee is
assisted by the Chairman in this review.
A special review of cer tain executive and divisional director salaries
was carried out in Januar y 1997 in order to correct identified
anomalies. Directors and divisional directors not included in this
special review received an average salar y increase of 4.5% in July
1997. A ll ex ecutive directorsÕ and divisional directorsÕ salaries will be
reviewed in July 1998.
Benefits
In common with certain other management categories, members of
senior management working in the United Kingdom are entitled to a
company car. They also receive fuel.
Annual Bonus Scheme
An annual bonus scheme is the second component of senior
management remuneration. Bonus payments are based upon actual
achievement against challenging Group per formance targets set in the
annual operating plan approved by the Board. In the year under review,
a bonus of 14.5% was paid out of a possible max imum of 30% of a
participantÕs salary. Since 1988 when the Scheme was introduced,
the annual bonus payment has averaged 14.7% of salar y. This bonus
is not pensionable.
The Company does not have a long-term bonus scheme.
Long-Term Incentive Scheme
A long-term incentive in the form of Ex ecutive Share Option Schemes is
the third component of senior management remuneration. Share
options are readily understood by the par ticipants, fit the culture of
the business and have historically delivered an appropriate level of
reward. Senior management hold options under the 1984 and 1987
schemes, details of which are given in note 5 of this report. Both
schemes ex pired in 1997. A new share option scheme was approved
by shareholders at the A GM in 1997, and grants will be made under
the new scheme for the first time in June 1998.
SERVICE CONTRACT
No director has a Ser vice Contract with the Company or any of its
subsidiaries.
NON-EXECUTIVE DIRECTORS
The remuneration of non-ex ecutive directors is determined by the
Non-Ex ecutive DirectorsÕ Remuneration Committee which comprises
the Chairman, the Deputy Chairman and the Joint Managing Directors.
Non-ex ecutive directors are not invited to par ticipate in the CompanyÕs
Profit Sharing, Save A s You Earn or Senior Option Schemes. They do
not par ticipate in the A nnual Bonus Scheme or the Early Retirement
Plan: their fees are non-pensionable.
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