Marks and Spencer 2008 Annual Report Download - page 52

Download and view the complete annual report

Please find page 52 of the 2008 Marks and Spencer annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

The performance targets are based on adjusted earnings
per share (EPS) over a three-year period. EPS has shown
substantial growth over the time since the first grants were
made in July 2005. The first awards under this plan will
vest in full in July 2008 as the Company has significantly
outperformed the challenging EPS targets that were set.
The Committee has reviewed the use of alternative
performance measures but considers that EPS is still the
most effective measure of management performance, in
addition to being simple to understand and a transparent
measure of the Company’s success and shareholder return.
In 2007, four awards were made in excess of 200% of salary,
recognising exceptional performance. The Committee is likely
to award a very small number over 200% in 2008 to ensure
retention of key individuals.
The targets for 2008 awards have been set by the
Remuneration Committee following consultation with our
10 largest investors, in addition to the ABI and RREV. The
principle of splitting the performance targets as adopted last
year will continue, with any element of an award over 200%
having a more stretching target. While the Company’s financial
performance continued to improve in 2007/08, and we are
confident in its long-term growth prospects, the short-term
economic outlook means that it is likely to be much more
difficult to achieve such high growth in the next few years.
To this end, the Committee considers that the EPS ranges
set for the 2008 awards are at least as challenging as the
previous EPS ranges were when they were set. Before any
2008 PSP awards in excess of 200% of salary vest, the
Committee will first satisfy itself that it is reasonable to approve
vesting of the awards, taking into account the Company’s
actual performance over the three-year performance period
as well as EPS performance. The targets for all awards are:
Average Annual EPS Growth
in excess of Inflation (RPI)
Adjusted EPS for
Award 20% vesting 100% vesting start of scheme1
2005 8% 15% 22.2p
2006 5% 12% 31.4p
200724% 10% 40.4p
200734% 12% 40.4p
200823% 6% 43.6p
200833% 8% 43.6p
1 The base EPS figure for 2005 Awards was 23.5p, which was the adjusted EPS
figure for 2004/05 on a proforma basis. The figure has been restated to 22.2p
as the Group is now reporting under IFRS. Full details of EPS are described in
note 8 to the financial statements on page 68 of the Annual report.
2 Awards up to 200% of salary.
3 Awards between 200% and 400% of salary.
Executive Share Option Scheme – Long-term incentive
No grants have been awarded under the Executive Share
Option Scheme for the year under review. Whilst the Company
can still make awards under the scheme adopted at the 2005
AGM, there is no intention currently to use the scheme on
a regular basis. The Committee will review the use of the
scheme and may grant awards if it is appropriate to do so.
The final outstanding options will vest in full in June 2008
having achieved their EPS targets. The targets were based
on adjusted EPS growth measured from the date of grant
to the most recent financial year end as follows:
• RPI plus an average of 3% per annum for 50% of each
grant; and
• RPI plus an average of 4% per annum for the remaining
50% of each grant.
Executive directors (excluding Steven Esom) have options
granted in 2004 under the 2002 scheme which met their
targets in 2007 and are exercisable in full as shown in the
table on page 55.
All-Employee Share Schemes – Long-term incentive
The Company has offered a Save As You Earn (SAYE)
scheme called Sharesave since 1981. The scheme was
renewed by shareholders at the 2007 AGM for a further
10 years. Executive directors can also participate in this
scheme. Details of participation by executive directors in
Sharesave are given in part 2 of this report.
The scheme is subject to HMRC rules which limit the maximum
amount saved to £250 per month. When the savings contract
is started, options are granted to acquire the number of shares
that the total savings will buy when the contract matures, at
a discounted price set at the start of the scheme. Options
cannot normally be exercised until a minimum of three years
has elapsed.
What are the current service contracts and terms
of employment?
Chairman
Lord Burns was appointed Chairman on 11 July 2006, and will
retire from the Board on 31 May 2008. His service agreement
requires 12 months’ notice from the Company. The agreement
contains a phased payment clause in line with executive
directors’ contracts.
50 MARKS AND SPENCER GROUP PLC
Remuneration report
continued