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Governance Marks and Spencer Group plc Annual report and financial statements 2013 61
Overview Strategic review Financial review Governance Financial statements and other information
Performance Share Plan Awards 2013/14
For awards made in 2013/14, the performance metrics and targets are as follows:
Performance metric Commercial rationale Basis of measurement
Earnings Per Share (EPS) Rewards focus on bottom-line
performance
Based on annualised underlying basic EPS growth over
three-year performance period
Return on Capital
Employed (ROCE)
Rewards efficient use of capital Based on average ROCE % over three year performance
period against pre-determined targets
Revenue Rewards top line growth in line with
business strategy
Based on strategic growth targets:
– 10% on UK
– 10% on International
– 10% on Multi-channel
% Vesting1
Annualised EPS
growth (%) ROCE (%)
Revenue (FY16 – £)
UK2 Multi-channel3International4
Weighting (% of total award) 50% 20% 10% 10% 10%
‘Threshold’ performance 20% 5% 15.0% £8,900m £900m £1,400m
‘Maximum’ performance 100% 12% 18.5% £9,600m £1,100m £1,800m
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.
Individual objectives
2013/14 individual objectives will continue to be aligned to the
Company’s strategic plan and the specific programmes that
support it.
Challenging and quantifiable individual objectives are set which
are subject to rigorous review by the Committee, both at the
start of the year when set and the end of the year when
assessments of performance are undertaken and at any time
during the year should there be a change in director
accountabilities.
Each executive director will be assessed on targets set in
relation to four clearly defined business objectives. Two
objectives 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 or targets. The two ‘collective’ objectives will
continue to be:
–delivery against UK operating plan cost targets; and
–progress against Plan A goals.
The remaining two individual objectives will relate to specific
programmes relevant to each executive director’s business
area or to key operating challenges. These include objectives
that are focused on continuing to drive Multi-channel and
International growth, availability, innovation and brand
recognition.
The Committee has agreed quantifiable performance metrics
for each objective. ‘Threshold’ and ‘stretch’ targets must be
achieved to demonstrate value-added performance.
No individual objective element of the bonus can 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. This maintains
the important principle that below a defined level of
performance, no bonus will be earned. The Group PBT
‘threshold’ for this purpose is set below the entry point for
Group PBT performance, which is aligned to the bonus policy
for the rest of the organisation.
Performance Share Plan structure for 2013/14
The Performance Share Plan (PSP) continues to be the primary
long-term incentive for executive directors and senior
managers in the Company. The maximum award opportunity is
300% of salary, however, the Committee’s intention is that
awards will normally be referenced to 250% of salary. A malus
provision will take effect for all awards granted from 2013 as
previously described on page 60 within the Annual Bonus
Scheme structure for 2013/14.
The Committee reviewed the PSP performance measures and
their alignment to business strategy in 2013 and concluded that
the balance of EPS, Revenue and ROCE continues to
appropriately reflect the key drivers of shareholder value. For
2012 awards, the EPS measure was based on cumulative
underlying basic EPS over the three year performance period.
For 2013 awards, the EPS measure is annualised growth in
underlying basic EPS which the Committee believes is a more
appropriate method of assessing company performance over
the next three years.