Marks and Spencer 2010 Annual Report Download - page 66

Marks and Spencer Group plc Annual report and financial statements 2010 Directors’ report 62
What are the pay and benefits received by the Board?
Executive directors’ remuneration
Salary
In setting salary levels for 2010, the Committee considered current
market conditions, the Company’s performance in 2009/10 and the
general salary increase applying to the rest of the organisation. It
also took into account that no salary increases were awarded to
executive directors in 2009. Following this review, the Committee
agreed an increase of approximately 2.5% to executive director
salaries from January 2010. The average salary increase for the rest
of the business over the same two year period was 5.3% (3.3% in
2008/09 and 2% in 2009/10).
The Committee also approved salary adjustments of
approximately 12% in July 2009 for both Kate Bostock, to reflect
her new role as Executive Director, General Merchandise with an
extended remit covering per una and the Home business, and for
Steven Sharp, to reflect the continuing importance of the branding
and marketing of M&S.
Current annual salaries for executive directors are shown in the
Contract terms table on page 65.
Benefits
Where applicable, current executive directors receive a 25% salary
supplement in lieu of membership of the Group Pension Scheme,
with life assurance provided through a separate policy. 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 67. Employee product discount is also
received but no specific value is placed on this all-employee benefit.
Pension provision
Employees with a permanent employment date prior to 1 April 2002
are eligible to participate in the Company’s Defined Benefit Pension
Scheme. The scheme is non-contributory and subject of an
Independent Trust. The normal retirement age under this scheme
for senior management is 60. John Dixon is the only executive
director who is a member of this scheme. In addition, he receives a
25% salary supplement on a portion of his non-pensionable salary.
Further details of the Group Pension Scheme, including the Marks &
Spencer Retirement Plan for employees who joined the Company
on or after 1 April 2002 can be found in note 11 to the financial
statements on page 91 of this Annual Report.
Deputy Chairman
The fee for the Deputy Chairman reflects the level of commitment
and responsibility of the role and is determined by the Executive
Chairman and executive directors. It is paid monthly in cash, 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. The fee is
not performance related or 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.
Fees are set at a level that ensures the Company can attract and
retain individuals with the required skills, experience and knowledge
so that the Board is able to effectively carry out its duties.
The fees recognise the responsibility of the role and the time
commitments required, and are not performance related or
pensionable. They are paid monthly in cash and there are no other
benefits other than employee product discount.
A review of non-executive director fees was last carried out in
February 2009 which indicated that they 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 fee in 2009/10. 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 67 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 annually and is designed to
drive individual performance and profitability across the whole
organisation. The bonus potential for executive directors is up to
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 95 of this Annual Report.
Bonus scheme outcome for 2009/10
75% of the executive directors’ bonus for 2009/10 was based on
Profit Before Tax (PBT) performance. The Committee, in line with
best practice, has used the same methodology for a number of
years for setting PBT targets, namely stretching targets set by
reference to the operating plan, believing it is appropriate to maintain
a consistent application of the scheme. This approach, coupled with
the Board’s track record of setting highly challenging plans, means
that even in years when significant profit has been delivered, no
bonus payments have been made, for example, in 2007/08, despite
the achievement of PBT in excess of £1bn (as the relevant operating
plan figure was higher).
For 2009/10, the PBT targets set by the Committee were
again highly demanding by reference to the internal operating
plan, analysts’ profit forecasts and external forecasts for the retail
sector. Higher levels of bonus payments required very significant
stretch above plan. Actual PBT performance of £694.6m was in
excess of the stretch target set for full payment and therefore the
Committee approved maximum bonus payments under this
measure for 2009/10.
The remaining 25% of the executive directors’ bonus for 2009/10
was based on individual director objectives aligned to business
strategy. The personal performance by each director against these
individual objectives for the year has been reviewed by the
Committee, and the agreed level of achievement is reflected in the
payments made.
Remuneration report continued