Marks and Spencer 2010 Annual Report Download - page 68

Marks and Spencer Group plc Annual report and financial statements 2010 Directors’ report 64
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 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 Share Option Schemes
table on page 70.
Appointment of new Chief Executive
Marc Bolland was appointed Chief Executive from 1 May 2010.
His ongoing remuneration package is consistent with the standard
structure for executive directors previously outlined. He has a
starting salary of £975,000, a 30% salary supplement in lieu of
membership of the Group Pension Scheme, will participate in the
Annual Bonus Scheme and will receive an annual award of shares
under the Performance Share Plan. In addition, he will receive
relocation payments under the normal terms of the Company’s
relocation policy for new recruits.
In order to facilitate his recruitment, the Committee agreed to
compensate Marc Bolland for outstanding incentive awards, the
expected levels of which reflected the turnaround of his previous
employer’s performance during his tenure. These included his
2009/10 annual bonus award and share awards due to vest in
2010, 2011 and 2012. In determining the level and form of
compensation, the Committee took into account the extent to which
the performance conditions applying to these awards had been met
or were likely to be met, mindful of the Committee’s duty not to pay
more than was necessary to secure his recruitment.
The Committee’s assessment was that there was significant
value in all of his outstanding awards. Where an entitlement to
incentives existed and were due to be paid this year had Marc
Bolland remained in employment, the Committee agreed to pay the
value of these awards on joining. However, a proportion of awards
that had a certainty of vesting with his previous employer were
exchanged for awards that will be ‘at risk’ due to performance
conditions attached to the M&S incentive schemes.
Having undertaken this assessment, the Committee agreed
one-off awards to be made in June 2010. These compensatory
awards have only be granted without performance conditions where
the Committee was satisfied that Marc Bolland’s outstanding
awards from his previous employer due to vest in 2010 and 2011
had already satisfied or were likely to satisfy their performance
conditions in full, or to a significant degree. The Committee
therefore agreed:
As compensation for bonus and share awards that would have –
vested in 2010 had he remained with his previous employer,
£1.6m in cash and £1m in shares, both subject to Income Tax
and National Insurance. These shares vest immediately but must
be retained in accordance with the Company’s shareholding
policy outlined later in this report;
As compensation for share awards that were on track and likely to –
vest in 2011 and 2012 had he remained with his previous employer,
the Committee agreed awards that remain ‘at risk’ through:
(i) a restricted share award worth £1m. These shares will vest in
two tranches in December 2011 and June 2012, subject to
continued employment until the vesting date. He will also
receive the value of any dividends occurring on the awarded
shares between grant and vesting; and
(ii) a performance share award worth £3.9m (equivalent to 400%
of salary). These shares will vest in June 2012 subject normally
to continued employment until the vesting date and subject to
satisfaction of a performance condition. This is based on EPS
growth targets equivalent to those applying to awards granted
under the PSP during 2009. These targets are set out in the
table on page 63. To the extent that the performance shares
vest, he will also receive the value of any dividends occurring
on the shares between grant and vesting.
If, prior to the normal vesting date, Marc Bolland ceases to be an
employee then the restricted share and performance share awards
will lapse unless his departure is by reason of death, retirement,
redundancy, disability or in other circumstances at the Committee’s
discretion in which case the award shall vest subject (where
relevant) to performance and subject to time pro-rating (unless
disapplied at the Committee’s discretion). Similar provisions apply to
these awards in the event of vesting following a change
of control.
The restricted share and performance share awards, which
are not pensionable, were granted to facilitate Marc Bolland’s
recruitment on 1 May 2010 under the terms of the Listing Rules
9.4.2R(2).
The number of shares subject to Marc Bolland’s awards
described above may be adjusted in the event of any variation of
share capital or a demerger, special dividend or other similar event.
The awards cannot be transferred, charged or otherwise disposed
of by him. The awards will be satisfied with existing shares other
than treasury shares. The awards cannot be amended to the
advantage of Marc Bolland in relation to the basis for determining
his entitlement to, and the terms of, the shares and/or cash to be
provided under the awards and any adjustment that may be made
for any variation of share capital without prior shareholder approval
in general meeting except for minor amendments to benefit the
administration of the awards, to take account of a change in
legislation or to obtain or maintain favourable tax, exchange control
or regulatory treatment.
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 10 year period) and executive share plans (5%
in any rolling 10 year period) was 7.42% and 2.02% respectively
on 3 April 2010.
Remuneration report continued