Remuneration report

Dear Shareholder,

I am pleased to present the remuneration committee’s report on directors’ remuneration for 2008/09, as well as for the forthcoming financial year and, subject to ongoing review, subsequent years.

This has been a year of unprecedented economic turmoil. However, the committee believes that it has appropriate pay practices in place and, during this time, the decisions made by the committee have been made with the objective of maintaining a coherent remuneration policy.

At the 2009 review, the committee awarded salary increases to executive directors that are consistent with general salary awards for the rest of the Company’s workforce.

The bonus targets set at the start of the year were applied, resulting in no bonus payout for the financial element of the bonus, despite a good financial result in the circumstances, and a modest payout on the personal element of bonus.

The 2008 awards under the Performance share plan (PSP) were made as contemplated in last year’s Annual report and accounts, except that the grants had to be delayed until early July because the Company was in a prohibited period at the beginning of the financial year. The TSR target for these awards was based on the Company’s share price in the month prior to grant.

Finally, in order to manage effectively the costs and risks of future pension provision, the Company decided to move from defined benefit to defined contribution provision for senior employees. The maximum Company contribution under the new defined contribution arrangement is 10% of salary and is intentionally below market norms for the executive population.

A resolution to vote for the Directors’ remuneration report will be put to the Annual general meeting. I hope that you will support this resolution.

Orna Ni-Chionna
Chair of the Remuneration committee

1 Introduction

The Board has prepared this report in accordance with the requirements of Schedule 7A to the Companies Act 1985. The report also meets the relevant requirements of the revised Combined Code on Corporate Governance issued by the Financial Reporting Council (‘the Combined Code’) and is prepared for the 52 weeks ended 28 March 2009.

This report to shareholders sets out the remuneration policy and explains the policy under which the executive and non-executive directors and management team were remunerated for the 52 weeks ended 28 March 2009. It also provides details of the salary, incentives, share and pension interests of all the directors for the year and, subject to ongoing review by the remuneration committee, outlines remuneration policy for the forthcoming and subsequent years.

The auditors are required to report to the Company’s members on the audited element of the Directors’ remuneration report and to state whether, in their opinion, that part of the report has been properly prepared in accordance with the Companies Act 1985.

Unaudited information

The information in this following section of the remuneration report has not been audited by the Company’s external auditors.

2 Remuneration committee

The remuneration committee is a committee of the Board and the members, all of whom are independent, during the year were O G Ni-Chionna (Chair), R J S Bell, D T Nish, and A K Illsley. Details of attendance for the committee are provided in the Corporate governance review. At the invitation of the chair of the committee, the chief executive, the group finance director and group HR director attend committee meetings to provide background and context on matters relating to executive remuneration. A J Hobson is not a member but attends the committee by invitation. The secretary to the committee is C Williams, Company Secretary.

The role of the remuneration committee is to approve, implement and keep under review the remuneration policy and practice of the Group, and specifically to:

  • agree with the Board the framework and the value of the remuneration of the chairman, executive directors and senior managers;
  • agree the terms of the executive directors’ and company secretary’s service contracts and remuneration;
  • determine the nature and scale of short and long term performance incentive arrangements that drive high performance whilst rewarding individuals in a fair and reasonable manner for their contribution to the success of the Group.

In undertaking this role, the committee considers remuneration policy and rewards across the Company and not just at Board level.

The committee has been formally delegated the authority, by the Board, to establish policy in respect of all terms of employment for executive directors. No individual plays a part in any discussion about his or her remuneration.

It is the role of the committee to ensure that the Group’s remuneration policy and framework provides competitive reward for its executive directors and other senior managers, taking into account the Company’s performance, the markets in which it operates and pay and conditions elsewhere in the Group.

The Board believes that a properly constituted remuneration committee is essential in establishing a system of remuneration which clearly aligns the interests of executive directors and senior managers with those of shareholders, and links incentives to improvements in the absolute performance and relative competitiveness of the Company. The committee’s terms of reference are published on the Company’s website.