DIRECTORS REMUNERATION REPORT OVERVIEW DAVID THORPE CHAIRMAN OF - PDF document

INTERSERVE ANNUAL REPORT 2013 GOVERNANCE DIRECTORS’ REMUNERATION REPORT 77 GOVERNANCE DIRECTORS’ REMUNERATION REPORT OVERVIEW DAVID THORPE CHAIRMAN OF THE REMUNERATION COMMITTEE CHAIRMAN’S SUMMARY STATEMENT STRATEGIC REPORT Dear Shareholder I am pleased to present the Remuneration Committee’s annual report on directors’ remuneration. The Directors’ Remuneration Report has been prepared in accordance with the requirements of the revised remuneration regulations and, as such, has been split into two parts: • our Policy on Directors’ Remuneration, which sets out our future remuneration policy (pages 78 to 85); it will be put to a binding shareholder resolution at the forthcoming AGM; and • our Annual Report on Remuneration, which describes how the policy was implemented in 2013 and how it will be applied in 2014 (pages 85 to 97); it will be put to an advisory shareholder resolution. This was another important year for the Company during which we strengthened the balance sheet by completing the transfer of a signifjcant proportion of our remaining PFI assets to the pension fund and made three acquisitions, including two in the oil and gas sector in the Middle East. GOVERNANCE Despite continuing mixed market conditions the business performed strongly, delivering growth by expanding into new markets and through continued investment in the existing business and increasing headline EPS by 5.3 per cent. Our strategy remains to develop the strength of our three main business streams and grow these businesses where we are able to gain competitive advantage by applying our core skills in adjacent markets and geographies leading to sustainable growth in shareholder value. Our share price increased during the year by 60.2 per cent on top of 21.2 per cent in the previous year. This was refmected in our TSR growth of 267.3 per cent over the three-year performance period, placing us well ahead of our comparator group. The TSR element of the 2011 Performance Share Plan awards will therefore vest in full. We were again mindful of the continued restraint on pay across the Group, with the result that the salaries of the executive directors were increased by 3 per cent, which was broadly in line with the increase awarded to salaried employees generally. The performance conditions for Annual Variable Pay have been set such that an on-target performance will result in a payout of 50 per cent of annual salary and, in order to achieve the maximum payout of 100 per cent, normalised EPS will need to FINANCIAL STATEMENTS achieve a level that is on track to achieve a doubling of normalised EPS over a fjve-year period from a 2010 base. We have again set exacting targets for the Performance Share Plan in order to provide a strong incentive to management to deliver sustained EPS growth and linked to the Board’s aspiration to double normalised EPS over the fjve-year period from 2010. Growth in normalised EPS over the three-year performance period of the 2011 Performance Share Plan awards was 19 per cent which, when adjusted for the PFI transaction mentioned above, increased to 77.5 per cent and will result in a full vesting of the EPS element of those awards. We will continue to strike an appropriate balance between incentivising the executives, setting stretching targets which support our strategic ambition and our increasing shareholder value whilst not encouraging excessive risk taking. We believe our Remuneration Policy achieves this aim and trust that you will endorse it with a vote in favour at the AGM, as the directors intend to do in respect of their own benefjcial holdings. David Thorpe Chairman of the Remuneration Committee

78 INTERSERVE ANNUAL REPORT 2013 GOVERNANCE DIRECTORS’ REMUNERATION REPORT GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED REMUNERATION POLICY This part of the Directors’ Remuneration Report sets out the remuneration policy for the Company with effect from 13 May 2014, subject to shareholder approval at the AGM to be held on that day. SUMMARY OF REMUNERATION POLICY FOR 2014 ONWARDS The following table summarises the main elements of the executive directors’ remuneration policy for 2014 onwards, the key features of each element, their purpose and linkage to our strategy. Details of the remuneration arrangements for the non- executive directors are set out on page 84. Purpose and Element of pay link to strategy How operated in practice (including framework for assessing performance) Maximum opportunity Base salary To recruit and retain Reviewed annually with any changes generally taking effect from 1 July. There is no prescribed executives of a maximum annual increase. Salaries are determined taking into account: suitable calibre for The Committee is guided • the experience, responsibility, effectiveness and market value of the the role and duties by the general increase executive; required. for the broader workforce but recognises that • the pay and conditions in the workforce; Refmects the market higher increases may be rate for the individual • pay relativities within the Group; appropriate where an and their role. individual is promoted, • broadly the median position in light of remuneration within other changes role, where the similar companies and the Company; and size, composition and/ • affordability, given the profjts of the Company. or complexity of the Group changes or where Normally paid monthly in cash. an individual is materially below market comparators or is appointed on a below market salary with the expectation that his/ her salary will increase with experience and performance. Benefjts To provide benefjts Car (cash allowance and/or company car) and fuel (or fuel allowance). The value of benefjts may commensurate vary from year to year Private medical insurance. to the market in depending on the cost to Permanent health insurance. which the Company the Company. operates and/or the Life assurance. Additional benefjts may market in which the be provided and the range Relocation expenses, allowance for disruption and ongoing expatriate director is based of those benefjts may benefjts. and in line with vary taking into account policies applicable Directors’ and offjcers’ liability insurance. market practice, the to all other senior relevant circumstances Reasonable personal use of mobile telephone. salaried employees. and the requirements of the executive. Pension To provide benefjts A Company contribution calculated at up to 15% of base salary Employer’s defjned commensurate to the for executive directors provided they are making the maximum contribution and/or pension market in which the 8% employee contribution. cash supplement up to a Company operates. total maximum of 15% of Employees whose pension provision exceeds HMRC limits are permitted base salary. to opt out of making pension contributions and instead receive the Company contribution as a non-bonusable salary supplement. Employees who elect to take the cash allowance still benefjt from the life cover of four times base salary provided to members of the pension scheme and death-in-service cover. Employees who have not chosen to opt out of making pension contributions are eligible to participate in the Company’s “SMART Pensions” arrangement. SMART Pensions is a salary sacrifjce arrangement set up by the Company providing an option for employee pension contributions to be met by their employer following a corresponding sacrifjce in their contractual pay. This scheme affords the Company a saving in employer’s National Insurance contributions.