Annual report and accounts 2023 - Flipbook - Page 117
Strategic Report
Corporate Governance
Accounts
Remuneration principles
The Remuneration Committees approach to executive director Policy and practices is aligned to the Company’s strategic objectives, shareholders’ interests and the factors
set out in Provision 40 of the 2018 UK Corporate Governance Code (the “Code”), with the aim of supporting the Company’s strategy and promoting the long term sustainable
success of the business.
The table below describes how the Remuneration Committee has addressed each of the factors set out in Provision 40 of the Code.
Factor
How this has been addressed
Clarity and simplicity
The reward framework aims to embed transparency and simplicity in the Policy and remuneration practices. The
Remuneration Committee consults with major shareholders in advance of key proposed changes to executive
remuneration, for example when reviewing the Policy ahead of the 2023 AGM. Feedback from internal stakeholders
and comments from the proxy voting agencies were also sought. The Remuneration Committee also engaged
with independent external advisers to minimise the risk of any conflicts of interest. The Remuneration Committee
strived to create a refreshed Policy which is clear and simple, aligned to Company culture, values and strategy and
demonstrates strong corporate governance. It wants participants to be able to understand the Policy and have
a clear line of sight between their decisions and behaviours and the effect that these decisions will have on the
variable reward outcomes. Equally, it wants to ensure that reward for executive directors is straightforward for both
shareholders and the wider workforce to understand.
The Company engages directly with the wider workforce on their remuneration through a variety of methods,
including workforce engagement sessions, regular briefing sessions and the annual employee engagement survey.
Risk
The Remuneration Committee aims to ensure that there is an appropriate balance between risk and reward. The
remuneration framework includes various features designed to mitigate reputational, behavioural and other risks,
including:
– The Policy encourages directors to continue to take a long-term view when making decisions by increasing the
level of share deferral for the annual bonus and applying a default holding period for vesting LTIP awards, increasing
the shareholding guideline for new executive directors, and extending the post-employment shareholding
requirement for new executive directors to ensure that their interests continue to be aligned to shareholders after
they have left the business for longer.
– The Policy contains extended malus and clawback provisions which the Remuneration Committee can use in
certain prescribed circumstances to recover amounts paid to directors or to cancel any unreleased share awards.
– The Remuneration Committee has broad discretion to override the formulaic outcomes of the variable rewards
to ensure that payments to directors reflect the Company’s performance in the round.
Predictability
The Policy sets out the potential award levels and vesting outcomes applicable to the annual bonus and long term
incentive arrangements. Incentive awards are capped as a percentage of salary, which reduces the risk of any
unanticipated pay outcomes. As set out above, the Remuneration Committee may apply malus, clawback and
reasonableness discretion where appropriate.
Proportionality
The Policy was benchmarked against market practice by independent external advisers. Performance conditions for
the annual bonus and long-term incentive arrangements require a threshold level of performance to be achieved
before any pay-out is made. These performance conditions are set with the aim of ensuring that there is a clear link
between individual awards and the delivery of the Company’s long-term strategy and success of the business.
Alignment to culture
The Remuneration Committee is satisfied that the Company’s incentive schemes are fit for purpose and continue
to be aligned with Company strategy, through choosing performance metrics which reflect the Company’s most
important KPIs and are aligned with Company purpose, culture and values.
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