Marks and Spencer 2010 Annual Report Download - page 67

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Bonus scheme for 2010/11
The scheme will have the same ‘maximum’ bonus potential as in
2009/10 of 250% of salary. PBT will continue to be the main target.
75% of the executive directors’ bonus will be based on this measure
with the exception of Sir Stuart Rose, who will have 60% of his
bonus based on this measure, reflecting his change in role during
the year. The remaining bonus potential will be based on pre-set
individual director objectives aligned to the Company’s strategic
priorities. In the case of Sir Stuart Rose, these objectives will relate
to both the performance of the Company during the year against
other financial measures and key strategic targets as well as
measures linked to the handover of his executive responsibilities.
However, no individual element can be earned unless a threshold
PBT target 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 again been set based on Company’s
own internal operating plan, external forecasts for the retail sector
and analysts’ profit forecasts. For there to be any payment under
the PBT measure in 2010/11 there is a requirement for both year
on year PBT growth and outperformance of the operating plan.
Very significant out-performance of the operating plan will be
required for higher bonus payments. As noted above, 60% of any
bonus earned is usually deferred into shares for three years with
no further performance conditions. However, due to his imminent
departure from the Company, and in line with the policy for ‘good
leavers’, any bonus earned by Sir Stuart Rose for 2010/11 would
be paid wholly in cash in July 2011.
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 recruitment and retention issues. The performance
targets are currently based on adjusted earnings per share (EPS)
over a three-year period.
Performance Share Plan Outcome 2009/10
The minimum EPS target of RPI+4% over the three-year
performance period for awards made in 2007 has not been achieved
and so no shares under this PSP award will vest in June 2010.
Performance Share Plan Awards 2010/11
The Committee has again reviewed alternative performance
measures for this scheme for this year, 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 Committee intends to undertake a full strategic review of the
long-term incentive plan and assess the relevance of the associated
performance criteria, including the use of a sole metric such as EPS.
The Committee felt it advisable to undertake this review once Marc
Bolland has had a chance to assess the Company’s strategy.
When the PSP was adopted, shareholders were informed that the
Committee may set different EPS targets for awards made in future
years, provided that the Committee considers that any new targets
are at least as challenging in the circumstances as the previous
targets. On this basis, the Committee has considered the targets
for each year’s award in light of anticipated future growth. In recent
years, as the economic outlook worsened, the targets were
reduced. However, the Committee considers that for 2010, both
maximum vesting targets should be increased as well as the
minimum target for exceptional awards over 200% of salary.
For the 2010 award, the Committee has decided that 20% of
the award will vest if EPS growth is equal to RPI plus 3% p.a., rising
on a straight-line basis so that 100% vests for growth of RPI plus
9% p.a. This will be the target applying to all awards up to 200%
of salary. Should any awards over 200% of salary be made, the
principle of more stretching targets will apply. For the element
of awards over 200% of salary, 20% of the award will vest if EPS
growth is equal to RPI plus 4% p.a., increasing on a straight-line
basis so that 100% vests for growth of RPI plus 12%.
The Committee considers that these targets are challenging
and at least as demanding in the circumstances as targets set in
previous years.
The targets for all awards are:
Average Annual EPS Growth in
excess of inflation (RPI) Adjusted EPS
for start of
schemeAward
20%
vesting1
100%
vesting1
2007 4%
4%
10%
12% 40.4p
2008 3%
3%
6%
8% 43.6p
2009 3%
3%
6%
8% 28.0p
2010 3%
4%
9%
12% 30.0p2
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.
2 The adjusted EPS for the start of the 2010 scheme is based on the 52 week result,
ensuring a like-for-like measure.
Executive Share Option Scheme – long-term incentive
The scheme was adopted at the 2005 AGM, but there is currently
no intention to use the scheme on a regular basis. No grants have
been awarded under the Executive Share Option Scheme for
2009/10. 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 2003 scheme as shown in the
Share Option Schemes table on page 70.
Operating & Financial review p16 
Governance 
Financial statements p78 