Marks and Spencer 2009 Annual Report Download - page 70

66 Marks and Spencer Group plc Annual report and financial statements 2009 Directors’ report
Performance Share Plan (PSP) – long-term incentive
This continues to be the primary long-term incentive for executive
directors and senior managers in the Company. The plan normally
allows awards up to 200% of salary, although up to 400% of salary
may be awarded to recognise exceptional performance or to
address key retention issues. The performance targets are based
on adjusted earnings per share (EPS) over a three-year period.
Performance Share Plan Outcome 2008/09
The minimum EPS target of RPI+5% over the three-year
performance period for awards made in 2006 has not been achieved
and so no shares under this PSP award will vest in July 2009.
Performance Share Plan Awards 2009/10
The Committee has again this year reviewed alternative performance
measures for this plan, considering in each case the current
economic climate and their alignment to business strategy.
The Committee concluded that EPS is still the most effective
measure of management performance, being easy to understand
and a transparent measure of the Company’s success and
shareholder return.
The targets for 2009 awards will remain unchanged from last year
(as shown in the table below) as the Committee believes that the
achievement of these targets will reflect significant long-term growth
by the Company in a challenging and uncertain economic climate.
As indicated in last year’s report, fewer awards in excess of 200%
of salary were made in 2008 (three awards compared to four in
2007). In all cases, these were made to ensure the retention of key
individuals. In 2009, the Committee will only consider awards in
excess of 200% of salary where there is evidence of exceptional
performance, or retention issues due to the current vesting forecast
for existing PSP awards. Should any awards over 200% of salary
be made, the principle of more stretching targets will apply, and
the Committee will review the Company’s actual performance over
the three-year period, as well as EPS performance, to satisfy itself
that the vesting of these awards is reasonable. The targets for all
awards are:
Average Annual EPS Growth
in excess of inflation (RPI) Adjusted EPS
20% 100% for start
Award vesting vesting of scheme
2006 5% 12% 31.4p
200714% 10%
4% 12% 40.4p
200813% 6%
3% 8% 43.6p
200913% 6%
3% 8% 28.0p
1 The lower range is for awards up to 200% of salary and the upper range is for 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 2008/09. The scheme was adopted at the 2005 AGM,
but there is currently no intention to use the scheme on a regular
basis. The Committee will continue to review the use of the scheme
and may grant awards if appropriate.
All outstanding awards met their performance targets in previous
years and are exercisable by participants. Executive directors have
options granted in 2004 under the 2002 scheme as shown in the
Directors’ Share Option Schemes table on page 71.
All-Employee Share Schemes – long-term incentive
Executive directors can participate in Sharesave, the Company’s
Save As You Earn (SAYE) scheme which is open to all employees.
The current scheme was approved by shareholders for a 10 year
period at the 2007 AGM. The level of employee participation in the
scheme is highlighted on page 46 of this Annual Report.
The scheme is subject to HMRC rules which limit the maximum
monthly savings to £250. 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.
All executive directors have options granted in 2008, at a 20%
discount on the share price at the start of the scheme. The details
of the options granted are shown in the Directors’ Share Option
Schemes table on page 71.
What is the current dilution of share capital by employee
share plans?
Awards granted under the Company’s Save As You Earn scheme
and the Executive Share Option scheme are met by the issue of new
shares when the options are exercised. All other share plans are met
by market purchase shares when the awards vest. The Company
monitors the number of shares issued under these schemes and
their impact on dilution limits. The Company’s usage of shares
compared to the relevant dilution limits set by the Association of
British Insurers (ABI) in respect of all share plans (10% in any rolling
ten year period) and executive share plans (5% in any rolling 10 year
period) was 9.65% and 3.03% respectively on 28 March 2009.
Remuneration report
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