Marks and Spencer 2012 Annual Report Download - page 60

Governance Marks and Spencer Group plc Annual report and financial statements 2012 58
Remuneration report continued
What are the details of fixed remuneration?
Executive directors
Salary
In reviewing executive director salary levels for 2012, the
Committee considered current market conditions, the
Company’s performance in 2011/12 and the principles
applying to decisions on general salary increases across the
rest of the organisation (to ensure that the approach taken in
determining any increase was consistent with the principles
applied below the Board). Again, as per last year, Marc
Bolland proposed not to receive any salary increase, which
the Committee agreed. For other executive directors, the
Committee agreed specific individual increases in the range
of c.3% – 4%, based on a number of factors including
individual performance and external market data for the role.
This approach is totally in line with the wider Company policy
where individuals who achieved higher personal performance
ratings were eligible to receive increases of 3% – 4%. Current
annual salaries for 2012 for executive directors are shown in
the Contract terms table on page 62.
Benefits
Where applicable, executive directors (other than the CEO)
receive a 25% salary supplement in lieu of membership of
the Group Pension Scheme (the CEO receives a salary
supplement of 30%), 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 65.
Employee product discount is also received but no specific
value is placed on this all-employee benefit.
John Dixon was the only executive director who was a
member of the Company’s Defined Benefit Pension Scheme
during the year, but chose to opt out of the scheme in
February 2012. Until this date, he also received a 25% salary
supplement on his non-pensionable salary. Full details of his
pension benefits earned under the scheme for the year can
be found on page 67.
Chairman
The fee for the Chairman reflects the level of commitment
and responsibility of the role and is determined by the
Remuneration Committee and other members of the Board.
The fee is paid monthly in cash, inclusive of all committee
roles and is not performance related nor pensionable.
A review of existing fees in January 2012 concluded that
£450,000 remained appropriate for the role and so no
increase was awarded during the year. The Chairman
is entitled to the use of a car and driver, provided by the
Company. He may benefit from employee product discount
on the same terms as other employees.
Non-executive directors
The fees for non-executive directors are determined by the
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, the time
commitments required and are not performance related nor
pensionable. They are paid monthly in cash and there are no
other benefits other than employee product discount on the
same terms as other employees.
A full review of non-executive director fees was carried
out in 2010 which resulted in a revision to the fee structure.
This structure was again reviewed in January 2012 with the
conclusion that the fees remained appropriate for the role.
No changes were therefore made in 2011/12 to either the
basic annual fee or that for the role of committee chairman
or Senior Independent Director.
The current fee structure is as follows:
Basic annual fee £70,0001
Committee Chairman £15,0002
Senior Independent Director £100,0001
1) Inclusive of all committee memberships.
2) Audit and Remuneration Committee only and in addition to the basic annual fee.
The annual fees for non-executive directors are shown in
the Contract terms table on page 62 and the Directors’
emoluments table on page 65 shows the fees paid during
the year to each non-executive director.
What are the details of the short-term and long-term
incentive schemes (variable remuneration)?
Annual Bonus Scheme: short-term incentive
Deferred Share Bonus Plan: long-term incentive
Annual Bonus Scheme structure for 2012/13
The Annual Bonus Scheme is reviewed each year and is
structured to drive individual performance and profitability
across the whole organisation. The bonus potential for
executive directors is up to 200% of salary for ‘maximum’
performance. For all senior managers there is a compulsory
deferral into shares which vest after three years, subject to
continued employment. For executive directors, this deferral
into Company shares equates to 50% of their bonus. Further
details of the Deferred Share Bonus Plan can be found in note
13 to the financial statements on page 92 of this Annual Report.
For 2012/13 the mix of performance measures remains
unchanged. Underlying Group profit before tax (Group PBT)
remains the primary performance measure, with 60% of the
annual bonus being determined by performance against
demanding profit targets set by the Committee at the start
of the year. The balance of 40% will relate to performance
against individual objectives independent of Group PBT.
The Committee believes that this approach provides an
appropriate focus on annual profitability objectives while
ensuring that directors continue to be focused on driving
the changes in the business which underpin the Company’s
medium-term strategy.
Group PBT targets
As in previous years, the Group PBT targets have again
been set taking into consideration the Company’s own
internal operating plan, external forecasts for the retail sector
and analysts’ profit forecasts. For the highest payment levels
under this measure there will need to be very significant
outperformance of the operating plan.