UNBOUNCE - EXAMPLE PAGE-REPORT-ENTERPRISE DOCUMENT-KINGSPAN - Flipbook - Page 86
In terms of long-term incentives, the underlying health of
the Group has been reflected in the achievement of top
quartile TSR performance among the peer group for the
eleventh cycle in a row, together with the achievement of
stretching EPS targets over the three-year vesting period,
resulting in full vesting.
Review of the remuneration policy
During the second half of 2021, the committee reviewed
the existing remuneration policy to ensure it remained
fit for purpose, whilst reflecting the change in scale
of our business. Since our current remuneration policy
was approved there has been substantial growth in the
business in terms of market cap (up 182%), financial
performance (trading profit €755m, up 70%), average
headcount (17,880 employees, up 33%) and operations
(198 sites, up 53%).
While the committee does not seek to respond to shortterm market-based fluctuations, the structural changes at
Kingspan over the past decade have been significant, as a
result of which the Company’s size is now commensurate
with the top half of the FTSE 100. The committee believes
that it is important to ensure arrangements continue to
evolve with the scale and strategy of the Company, a part
of which is ensuring different elements of remuneration
for an exceptionally strong management team remain
competitive against similarly sized companies.
The committee has determined that any adjustments
should be gradual and focused on long-term shareholder
alignment, rather than taking a short-term approach and
making significant adjustments to base remuneration on
the back of sizeable growth. Consequently, the following
changes are being proposed:
Post-employment shareholding policy: While the current
executives have strong alignment with shareholders
through their existing holdings, in order to further augment
that alignment with shareholders, it is proposed that the
current post-cessation shareholding guidelines, which
require newly appointed executive directors to retain the
lower of shares or equity interests held on cessation and
200% of salary, for two years post-employment, will be
extended to the incumbent executive directors.
LTIP award levels: As part of the policy review, the
committee considered how to continue to appropriately
incentivise the executive directors, acknowledging their
increased roles, and driving continued focus on long-term
sustainable growth and shareholder alignment. As a result,
the committee proposes that the maximum potential LTIP
award levels should be increased to 300% of salary (up
from 200%) under the current policy. Recognising that
the policy may run for four years, the amendment will
provide some additional headroom to adjust remuneration
if the scale and complexity of the business continues to
grow. The committee considers 300% of base salary as
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an appropriate market ceiling for the Kingspan executive
directors over the coming four years, particularly noting
the exceptional growth of the business over the period
since the last policy review. However, there is no current
intention to grant awards at the maximum level. For 2022,
subject to shareholder approval of the new remuneration
policy, the committee intends to grant awards at up to
225% of salary to the CEO with corresponding increases to
the other executive directors.
Non-executive directors’ remuneration policy: Finally,
we are proposing two small changes to non-executive
directors’ remuneration. We propose firstly to update
the policy to enable a fee to be paid to the Senior
Independent Director (“SID”) reflecting the increasing
time commitment for this role specifically where the SID
holds another committee chair role (currently only one
fee can be paid if a non-executive director holds both
SID and another committee chair role). Secondly, we are
proposing a modest increase in the SID and committee
chair fees, as set out later in this report.
Shareholder consultation: Following the finalisation of our
proposals, I wrote to shareholders representing 70% of the
register. The committee was very pleased to virtually meet
with 6 of our top shareholders and receive feedback from
several others (representing in total 47% of the register),
which provided a rounded picture of shareholder views on
the proposals outlined above.
While feedback varied in terms of the specifics, there was
general support from shareholders for the changes, in
particular to reflect the growth of the business, to continue
to drive superior performance and to protect against
any potential retention issues. One area discussed with
shareholders was the committee’s initial proposal to extend
the recruitment policy to give flexibility to award Restricted
Share Units (“RSUs”) in exceptional circumstances when
recruiting. While there was an acceptance that there are
significant differences in pay structures in a number of
regions where we operate, there was also a consistent view
that awards should be performance-based. As a result of
this shareholder feedback, we have removed the mooted
proposal relating to RSUs.
As a committee, we are fully aware of the sensitivities
around any increase in remuneration potential. In crafting
the current proposals, which the committee believes
affords the business sufficient headroom to ensure the
retention of some of the highest performing executives
globally, benchmarking data was referenced, which looked
primarily at similarly sized UK and Irish companies (in
terms of market cap and revenue). While that exercise
identified that the executive directors’ remuneration is
well below median under each of the fixed, short and
long-term elements of pay, the committee has decided
to focus any changes on long-term remuneration, as
opposed to addressing the shortfall on each.
