Marks and Spencer 2012 Annual Report Download - page 61

Governance Marks and Spencer Group plc Annual report and financial statements 2012 59
Overview Strategic review Financial review Governance Financial statements and other information
Individual objectives
The setting of quantifiable and challenging individual
objectives and the associated performance targets are
subject to rigorous annual review by the Committee at the
time they are set for the year ahead, and at the end of the
year when assessments of performance are undertaken.
The 2012/13 individual objectives will continue to be aligned
to the Company’s strategic plan and the specific workstreams
that underpin it.
Each executive director will be assessed on the basis of
targets set in relation to four clearly defined business
objectives. Two of these will be ‘collective’, so that all
directors are focused on these common goals, encouraging
collaboration across the senior management group. Within
these, each director will have specific actions/targets. Due to
their importance, these two ‘collective’ objectives will remain
as per last year, namely:
–delivery against UK operating plan cost targets; and
–progression against Plan A goals.
The remaining two individual objectives for 2012/13 will relate
to specific workstreams relevant to each executive director’s
business area, or to key operating challenges. By way of
illustration, these may include objectives that are focused on
innovation and value, logistics and supply chain and brand
recognition, in addition to those objectives that are aligned to
building our multi-channel capabilities and becoming an
international retailer.
Quantifiable performance metrics have been established
for each objective and the Committee has agreed both
‘threshold’ and ‘stretch’ targets that must be achieved to
demonstrate value-added performance.
In keeping with the principle that has applied for a number of
years, no individual objective component of the bonus may
be earned unless a ‘threshold’ level of Group PBT has been
achieved, subject to the Committee’s overall assessment
of the performance of the business during the period. Given
the importance of the individual objectives to the long-term
success of the business, the Group PBT ‘threshold’ for this
purpose is set below the entry point for the Group PBT
performance target range. This is in line with the bonus policy
for the rest of the organisation which maintains the important
principle that below a defined level of performance, no bonus
will be earned.
Performance Share Plan (PSP) structure for 2012/13
The Performance Share Plan will continue to be the primary
long-term incentive for executive directors and senior
managers in the Company. The maximum individual award
opportunity is 300% of salary, although the Committee’s
intention continues to be that awards will be conventionally
referenced to 250% of salary.
The Committee has again reviewed the performance
measures for this plan and their alignment to the business
strategy. The Committee concluded that the balanced score
card of measures, including the weighting established last
year, continue to be appropriate as set out in the table below.
For awards to be made in 2012/13, the Committee recalibrated
the target ranges for ROCE and Revenue. For ROCE, the
Committee reduced the bottom end of the target range to
15.0% (in line with the reduction in the Company’s cost of
capital since the 2011/12 awards were made) whilst maintaining
the upper end of the target range at 18.0%, which represents a
significant level of stretch. For Revenue, in line with the
announced reallocation of capital expenditure and an ambition
to drive faster International and Multi-channel growth, while
continuing to protect the core UK market, the Committee
increased the International and Multi-channel target ranges,
with the overall Revenue target remaining unchanged.
Performance Share Plan Awards 2012/13
For awards made in 2012/13, the performance metrics and targets are as follows:
Performance metric Commercial rationale Basis of measurement
EPS Ensure focus on bottom-line performance
Based on cumulative underlying basic EPS
over the three-year performance period.
ROCE Rewards efficient use of capital
Vesting based on average ROCE (%) over the
three-year performance period against
pre-determined targets.
Revenue
Encourage top-line growth in line with
business strategy
Based on strategic growth targets:
–10% on UK
–10% on Multi-channel; and
–10% on International
% Vesting1 Cumulative EPS (p)
ROCE
(%)
Revenue (FY15 – £m)
UK2Multi-channel3 International4
Weighting (% of total award) 50% 20% 10% 10% 10%
‘Threshold’ performance 20% 110p 15.0% £8,900m £800m £1,300m
‘Maximum’ performance 100% 130p 18.5% £9,600m £1,000m £1,700m
1) % Vesting is a straight line between ‘threshold’ and ‘maximum’ performance.
2) Excluding Multi-channel.
3) Net of VAT/gross of returns.
4) Excluding Multi-channel/including Republic of Ireland.
The above targets do not take into consideration the change in the Group’s accounting treatment referred to in note 29 to the financial statements on page 106
as this event occurred after the reporting period.