Marks and Spencer 2009 Annual Report Download - page 69

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What are the pay and benefits received by the Board?
Executive directors’ remuneration
Salary
Taking into account the Company’s performance in 2008/09 and
current market conditions for base pay, the Remuneration Committee
agreed not to award any salary increases to executive directors in
January 2009. Base salaries for each of the executive directors have
therefore not increased during the year. This is against an average
salary review for the rest of the business of 3.3%. Current annual
salaries for executive directors are shown in the Contract terms
table on page 67.
Benefits
Executive directors receive a 25% salary supplement in lieu of
membership of the Group’s Pension Scheme, with life assurance
provided through a separate policy. Further details of the Group’s
Pension Scheme available to other employees can be found in note
11 to the financial statements on page 92 of this Annual Report.
Each executive director also receives a car or car cash allowance
and is offered the benefit of a driver. The value of the benefits
and allowances for each director is shown within the Directors’
emoluments table on page 69. Employee product discount is
also received but no specific value is placed on this
all-employee benefit.
Deputy Chairman’s remuneration
The fees for the Deputy Chairman are determined by the Executive
Chairman and executive directors and are paid monthly in cash.
The fee reflects the level of commitment and responsibility of
the role, and is inclusive of all committee memberships and
Sir David Michels’ continuing role as Senior Independent Director.
The fee has not increased since his appointment to the role in
June 2008 (£245,000, as reported in last year’s Remuneration
report). The fee is not performance related nor pensionable and
there are no other benefits other than employee product discount.
Non-executive directors’ remuneration
The fees for non-executive directors are determined by the Executive
Chairman, Deputy Chairman and executive directors and are paid
monthly in cash. Fees are set at a level that ensures the Company
can attract and retain individuals with the necessary skills, experience
and knowledge so that the Board is able to discharge its duties
effectively. The fees recognise the responsibility of the role, the time
commitment required, and are not performance related nor
pensionable. There are no other benefits other than employee
product discount.
A review of non-executive director fees was carried out in
February 2009 which indicated that the fee levels were appropriate
for the role in the current market. No increases were therefore made
to either the basic annual fee or for any Committee Chairman or
membership. The current fees are as follows:
– basic annual fee: £55,000
– Committee Chairman: £12,000*
– Committee member: £6,000*
* Audit and Remuneration Committee only.
The Directors’ emoluments table on page 69 shows the fees paid
during the year to each non-executive director.
What are the current short-term and long-term
incentive schemes?
Annual Bonus Scheme – short-term incentive
Deferred Share Bonus Plan – long-term incentive
The Annual Bonus Scheme is reviewed each year and is designed to
drive profitability and sales across the whole organisation. The bonus
potential for executive directors is 60% of salary for ‘on-target’
performance and 250% of salary for ‘maximum’ performance.
For all senior managers, there is a compulsory deferral into shares.
Further details of the Deferred Share Bonus Plan can be found in
note 12 to the financial statements on page 97 of this Annual Report.
Bonus scheme outcome for 2008/09
The targets for 2008/09 were extremely demanding in another very
challenging trading year for the retail sector. The stretching Profit
before tax (PBT) target set at the start of the year was not achieved
and therefore the executive directors will not receive any bonus
payment based on this measure. 50% of Kate Bostock’s bonus was
based on profit and sales targets in Clothing, and as these targets
were also not met, she will not receive this element of her bonus
payment for 2008/09. While the Company has delivered over £1.6bn
in profits over the last two years, no executive director bonuses have
been earned. This demonstrates that targets are demanding and
have not been subject to downward review during the bonus period
in either year.
Bonus scheme for 2009/10
The scheme will have the same ‘on-target’ and ‘maximum’ bonus
potentials as in 2008/09 at 60% and 250% of salary respectively.
PBT will continue to be the main target, with 75% of the executive
directors’ bonus based on this measure. The remaining 25% bonus
potential will be based on individual director objectives aligned to
the Company’s strategic priorities. However, no individual element
can be earned unless 90% of ‘on-target’ PBT has been achieved.
This policy for individual objectives aligns executive directors, senior
managers and other employees within the Annual Bonus Scheme.
The PBT targets have been set based on the consensus of
analysts’ profit forecasts and the Company’s own internal operating
plan. At 90% of ‘on-target’ PBT, 11.25% of salary becomes payable,
rising to 45% of salary for achieving ‘on-target’ PBT. In order for the
maximum bonus to be earned, executive directors will be required
this year to achieve an additional ‘stretch’ target, which is above that
for the rest of the organisation, and is around 40% greater than the
‘on-target’ PBT. As noted previously, 60% of any bonus earned is
deferred into shares for three years with no further performance
conditions.