Marks and Spencer 2015 Annual Report Download - page 54

52
MARKS AND SPENCER GROUP PLC
DIRECTORS’ REPORT: GOVERNANCE
REMUNERATION
REMUNERATION
OVERVIEW
On behalf of the Board, I am pleased to
present our Remuneration Report for
2014/15, my fi rst as the Chairman of the
Remuneration Committee. Following the
new reporting regulations adopted last year,
this report is split into two distinct sections.
Although we are not required to include the
policy report approved by shareholders
last year, the Committee has decided to
continue to do so in order to maintain full,
transparent reporting. For easy reference,
we have included a ‘summary’ of the
remuneration policy on pages 54 to 60.
Information on the policy since its approval
last year is shown on pages 60 and 61.
Our remuneration framework is designed to
support and drive our strategy, and ensure
our business is run by high-quality leaders
with the skills and expertise necessary to
deliver our long-term business priorities.
The Committee made good progress
against the action plan it set itself last year.
As planned, the Committee reviewed and
retendered the independent external
advisers to the Committee following the
appointment of Deloitte as the Company’s
auditor. After an extensive process, PwC
was appointed to advise the Committee.
REMUNERATION REVIEW AND
PROPOSED AMENDMENTS
This year, and with PwC’s support, we
undertook a thorough review of the current
executive remuneration framework and
targets to ensure they remained aligned
with the strategic business priorities and
were balanced against the Company-wide
remuneration o ering. The Committee
was particularly keen to ensure that the
incentive arrangements remained
su ciently motivating for management to
deliver while encouraging the behaviours,
values and ethics which underpin Fit for the
Future and the way we do business at M&S.
The timing of this review was also linked to
our requirement to renew our existing share
pl ans, as outlined last year. The Committee
has reviewed the Plan rules and framework,
along with changes in market practice and
feedback from stakeholders. Overall, the
Committee concluded that while the
structure of the framework remains
appropriate, it is time to refresh some
elements within the Performance Share
Plan in order to provide an even clearer fi t
with the business’s current strategic
priorities, following four years of intensive
investment and transformation. The Plan
will continue to retain the metrics of EPS
and ROCE and their associated weightings
of 50% and 20% respectively.
The fi nancial strategic scorecard element
will retain targets for International and
M&S.com sales as before as we continue to
grow these areas of the business, but will
now include targets for two key business
priorities of GM gross margin grow th and
the delivery of free cash fl ow, as set out in
the Company’s key performance indicators.
While these amendments are within the
parameters of the remuneration policy
approved by shareholders at l ast year’s
AGM, we value the views of, and input from,
our shareholders and therefore consulted
with them on the proposed amendments
and associated targets for the 2015/16
awards. As a result, we believe the proposed
changes and targets are timely and
appropriate and will ensure the awards
remain stretching but motivating for the
senior management team.
CLAWBACK
In updating the associated plan rules, the
Committee has also taken the opportunity
to introduce clawback in line with updated
UK corporate governance guidance.
Clawback provisions will apply to any
bonus awards in 2016 and beyond and
under any of the Company’s executive share
schemes from 2015 onwards. Details of this
are provided on page 60.
KEY POINTS FOR THE YEAR
Salary review
Executive director salaries were reviewed
and discussed by the Committee during
the year. The Committee took into account
the salary review applicable for the rest of
the organisation and directors’ individual
performance when assessing the
appropriateness of any increase. The
Committee was also mindful that the
executive directors had requested not to
receive an increase last year, despite a 2%
average pay review for the business. Further,
the annual salary review date has been
moved from January to July to fi t better
with the annual performance cycle. In line
with previous years, Marc Bolland has again,
at his own request, not received an increase.
He has not received a salary increase since
his appointment in 2010. The highest
increase has been awarded to Steve Rowe
in recognition of his strong performance
over the period. However, while there is
some variation in sal ary increase across the
executive directors, the resulting average
salary increase awarded to the executive
directors as a group is in line with the rest
of the organisation and the market median
for the same period since the last review.
Further details of the directors’ salary
increases are shown on page 63.
Our new Chief Finance O cer, Helen Weir
joined the Board on 1 April, after our year
end on 28March, and was not eligible for
this salary review. We provide full details
of her recruitment arrangement and future
pay on page73.
Our remuneration framework is designed
to ensure M&S is run with the skills and
expertise necessary to deliver our
long-term priorities.
VINDI BANGA CHAIRMAN OF THE REMUNERATION COMMITTEE