Peachtree 2015 Annual Report Download - page 77

Our remuneration principles for executive directors and the Executive Commiee
Our key remuneration principles are as follows:
Motivate and reward Remuneration at Sage is designed to create a strong performance-oriented environment and reward achievement
of our Company strategy and business objectives
Aract and retain We offer competitive rates of pay and benefits to aract and retain the best people in a competitive international
market which includes private-equity backed organisations as well as listed companies
Alignment with the
wider Group
Pay and employment conditions elsewhere in the Group are considered when determining executive base salary
and bonus reviews
Alignment with
shareholders
The interests of our senior management team are aligned with those of shareholders by having a significant
proportion of remuneration performance-based and delivered through shares
Delivering our remuneration principles in 2016
A detailed remuneration policy, approved by shareholdersat the 2014 AGM, underpins the delivery of these four key remuneration principles.
At the heart of this policy is a relatively straightforward remuneration arrangement for our most senior executives comprising base salary and
benefits, an annual bonus plan and a long-term incentive plan (the Performance Share Plan (PSP)).
At our Capital Markets Day (CMD) in June 2015, we outlined our future strategy and operational implementation plans. In parallel, the Remuneration
Commiee undertook a review of the pay arrangements for the executive directors and Executive Commiee membersto ensure they were
consistent both with our future strategy and with our remuneration principles more generally. Following that review, the Remuneration Commiee
is proposing a number of changes to the pay arrangements of the executive directors for 2016 as summarised below. Where appropriate, these
changes will also apply to Executive Commiee members.
Our remuneration
principles Proposed changes to pay arrangements for 2016
Motivate and reward The existing performance measures that apply to executive directors’ performance-related pay were put in place following the
last major strategic review in 2012. In order to ensure consistency with our revised strategy, the following changes are proposed
to performance measures in 2016.
2016 annual bonus
For the past three years, executive directors’ annual bonuses have been determined by a mixture of underlying profit before tax,
organic revenue growth and individual objectives. Following the Remuneration Commiee’s review, the annual bonus measures
for 2016 are Group recurring revenue growth (80% of overall bonus) and strategic measures (20% of overall bonus). Payout under
the recurring revenue measure will be dependent upon the satisfaction of underpin conditions based on organic revenue growth,
operating margin and subscription growth.
2016 PSP awards
Most PSP awards granted in the past three years are subject to a combination of three equally weighted performance measures–
relative Total Shareholder Return (TSR), earnings per share (EPS) growth and organic revenue growth.
Following the Remuneration Commiee’s review, it is proposed that:
– half of the 2016 PSP award will be subject to a performance measure based on relative TSR performance. This measure will help
to ensure management’s continued focus on overall Group growth and delivery of shareholder value
– half of the 2016 PSP award will be subject to a performance measure based on recurring revenue growth. The introduction of
recurring revenue growth as a medium-term performance condition provides close alignment with the medium-term strategic
priorities outlined at the CMD to grow our subscription-based services and acquire new customers
– for any of the recurring revenue growth element of the 2016 PSP award to vest, two “underpin” performance conditions based
on EPS growth and organic revenue growth will also need to be achieved
Proposed targets for these performance measures are set out in the Directors’ annual remuneration report on page 88.
Aract and retain An independent market benchmark exercise commissioned by the Remuneration Commiee indicated that Sage offers
market-competitive levels of pay for our most senior executives.Accordingly:
– no changes are proposed in 2016 to our maximum level of performance-related pay under either the annual bonus plan or the PSP
– the CFO will receive asalary increase of 3% effective 1 January 2016, consistent with increases for employees based in the UK.
The CEO’s salary will remain at its current level until the next review, with any changes effective 1 January 2017
The Sage Group plc | Annual Report & Accounts 2015 75
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