References to ‘the Committee’ shall mean the Remuneration Committee.
References to ‘the Board’ shall mean the Board of Directors.
Reference to ‘the Code’ shall mean The UK Corporate Governance Code - See Appendix for the relevant section of the Code
1.1 The Committee will comprise a minimum of three independent non-Executive Directors. A quorum shall be two members. The Chairman of the Board may also serve on the Committee as an additional member if he or she was considered independent on appointment as Chairman.
1.2 Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chief Executive, the Human Resources Director and external advisers may be invited to attend for all or part of any meeting as and when appropriate.
1.3 The Board shall appoint the Committee Chairman who shall be an independent non-Executive Director. In the absence of the Committee Chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting who would qualify under these terms of reference to be appointed to that position by the Board. The Chairman of the Board shall not be Chairman of the Committee.
1.4 Appointments to the Committee are made by the Board and shall be for such period as the Board determines, provided the Director still meets the criteria for membership of the Committee.
The Company Secretary or his/her nominee shall be Secretary for the Committee and shall keep appropriate minutes of its proceedings and will ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration be given to the issues.
The Committee shall meet at least twice a year and at such other times as the Chairman of the Committee shall require.
4. Notice of Meetings
4.1 Meetings of the Committee shall be called by the Secretary of the Committee at the request of any of its members.
4.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the Committee and as relevant to any other person required to attend no later than five working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees as deemed appropriate, at the same time.
5. Minutes of Meetings
5.1 The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance.
5.2 Minutes of Committee meetings shall be circulated promptly to all members of the Committee.
6. Annual General Meeting
The Chairman of the Committee shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee’s activities.
The Committee should carry out the duties below for the parent company, any major subsidiary undertaking and the group as a whole, as appropriate.
The Committee shall:
7.1 Determine and agree with the Board the framework or broad policy for the remuneration of the Company’s Executive Directors and such other senior employees as the Board may require as indicated by their contracts of employment;
7.2 In determining such policy, take into account all factors which it deems necessary. Those elements may include, but are not restricted to, the following:
7.2.1 Basic salary, bonus arrangements (including setting performance targets and approval of bonus payments), all share option and incentive schemes, pension arrangements, life insurance, prolonged disability cover, medical insurance, company car policy, notice periods, employment contracts, any loan arrangements, termination payments and compensation awards.
7.2.2 The objective of such policy shall be to ensure that members of the executive management of the Company are provided with appropriate incentives to encourage enhanced performance whilst managing risks accordingly, and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company;
7.3 In determining and setting remuneration and incentive packages, consider such factors as the performance of the Company, the labour markets in which the Company competes for staff, the risks to the Company arising from loss of key staff and the potential impact on Company and services, executive remuneration data from comparable companies, the prevailing rate of inflation and cost of living and shareholder/ Company interests.
The Committee shall determine which comparable companies to review. The Committee is aware that it should use comparisons with caution to avoid increasing remuneration level without a corresponding improvement in performance;
7.4 Will seek to provide packages which will attract, retain and motivate Executive Directors and senior executives;
7.5 Review the ongoing appropriateness and relevance of the remuneration policy;
7.6 Approve the design of, and determine targets for, any performance related pay schemes operated by the Company and approve the total annual payments made under such schemes;
7.7 Review the design of any share incentive plans for approval by the Board and shareholders. For any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to Executive Directors and measures of performance to be used;
7.8 Determine the policy for, and scope of, pension arrangements for each Executive Director and other senior executives;
7.9 Ensure that contractual terms on termination, and any payments made, are fair to the individual, and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised;
7.10 Within the terms of the agreed policy, determine the total individual remuneration package of each Executive Director and such other senior employees as the Board may determine as indicated by their contracts of employment, including bonuses, incentive payments and share options or other share awards;
7.11 In determining such packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the Code and the UK Listing Authority’s Listing Rules and associated guidance;
7.13 Agree the policy for authorising claims for expenses from the Chief Executive and Chairman;
7.14 Ensure that all provisions regarding disclosure of remuneration including pensions, as set out in the Code are fulfilled; and
7.15 Be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee: and to obtain reliable, up-to-date information about remuneration in other companies. The Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations. The Code requires that any remuneration consultants used in this context are named in the Company’s annual report.
7.16 The remuneration of the non-Executive Directors shall be considered by the Executive Directors and, upon their recommendation, approved by the Board.
7.17 No director or manager shall be involved in any decisions as to their own remuneration.
8.1 The Committee Chairman shall report formally to the Board on its proceedings on all matters within its duties and responsibilities.
8.2 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
8.3 The Committee shall produce an annual report of the Company’s remuneration policy and practices which will form part of the Company’s annual report.
The Committee shall:
9.1 periodically review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval;
9.2 have sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
9.3 be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members; and
9.4 give consideration to laws and regulations, the provisions of the Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable Rules, as appropriate.
10.1 The Committee is authorised by the Board to seek any information it requires from any employee of the Company in order to perform its duties.
10.2 In connection with its duties the Committee is authorised by the Board to obtain, at the Company’s expense, any outside legal or other professional advice.
UK Corporate Governance Code
Section D: Remuneration
D.1: The Level and Components of Remuneration
Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied.
The Remuneration Committee should judge where to position their company relative to other companies. But they should use such comparisons with caution, in view of the risk if an upward ratchet of remuneration levels with no corresponding improvement in corporate and individual performance, and should avoid paying more than is necessary. They should also be sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases.
D.1.1. In designing schemes of performance-related remuneration for Executive Directors, the Remuneration Committee should follow the provisions in Schedule A to this Code. Schemes should include provisions that would enable the company to recover sums paid or withhold the payment of any sum, and specify the circumstances in which it would be appropriate to do so.
D.1.2. Where a company releases an Executive Director to serve as a non-Executive Director elsewhere, the remuneration report should include a statement as to whether or not the Director will retain such earnings and, if so, what the remuneration is.
D.1.3. Levels of remuneration for non-Executive Directors should reflect the time commitment and responsibilities of the role. Remuneration for non-Executive Directors should not include share options or other performance-related elements. If, exceptionally, options are granted, shareholder approval should be sought in advance and any shares acquired by exercise of the options should be held until at least one year after the non-Executive Director leaves the Board. Holding of share options could be relevant to the determination of a non-Executive Director’s independence (as set out in provision B.1.1).
D.1.4. The Remuneration Committee should carefully consider what compensation commitments (including pension contributions and all other elements) their directors’ terms of appointment would entail in the event of early termination. The aim should be to avoid rewarding poor performance. They should take a robust line on reducing compensation to reflect departing directors’ obligations to mitigate loss.
D.1.5. Notice or contract periods should be set at one year or less. If it is necessary to offer longer notice or contract periods to new directors recruited from outside, such periods should reduce to one year or less after the initial period.
There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.
The Remuneration Committee should take care to recognise and manage conflicts of interest when receiving views from Executive Directors or senior management, or consulting the Chief Executive about its proposals. The Remuneration Committee should also be responsible for appointing any consultants in respect of Executive Director remuneration. The Chairman of the Board should ensure that the committee chairman maintains contact as required with its principal shareholders about remuneration.
D.2.1. The Board should establish a Remuneration Committee of at least three, or in the case of smaller companies two, independent non-Executive Directors. In addition the company Chairman may also be a member of, but not chair, the committee if he or she was considered independent on appointment as Chairman. The Remuneration Committee should make available its terms of reference, explaining its role and the authority delegated to it by the Board. Where remuneration consultants are appointed, they should be identified in the annual report and a statement made as to whether they have any other connection with the company.
D.2.2. The Remuneration Committee should have delegated responsibility for setting remuneration for all Executive Directors and the Chairman, including pension rights and any compensation payments. The Committee should also recommend and monitor the level and structure of remuneration for senior management. The definition of ‘senior management’ for this purpose should be determined by the Board but should normally include the first layer of management below Board level.
D.2.3. The Board itself or, where required by the Articles of Association, the shareholders
should determine the remuneration of the non-executive directors within the limits set in the Articles of Association. Where permitted by the Articles, the board may however delegate this responsibility to a committee, which might include the Chief Executive.
D.2.4. Shareholders should be invited specifically to approve all new long-term incentive schemes (as defined in the Listing Rules) and significant changes to existing schemes, save in the circumstances permitted by the Listing Rules.