Remuneration report – Governance

Responsibilities of the Committee

The responsibilities of the Committee include:

  • Reviewing the Group’s remuneration strategy and recommending the Directors’ remuneration policy to the Board
  • Determining the remuneration of executive Directors within the policy approved by shareholders
  • Determining the remuneration of the Company Secretary, reviewing the remuneration of the Heads of Compliance, Risk, Internal Audit and the General Counsel, monitoring the level and structure of remuneration for other senior employees and material risk takers and overseeing remuneration more broadly across the Group
  • Recommending to the Board the annual spend on fixed and variable remuneration
  • Reviewing the design and operation of share-based remuneration and other deferred remuneration plans
  • Overseeing any major change in the employee benefits structure throughout the Group
  • Reviewing the remuneration disclosures required and ensuring compliance with those requirements
  • Receiving and considering feedback from shareholders and representative shareholder bodies.

The Committee carried out a fundamental review of its terms of reference during 2016. The Board approved amendments clarifying the Committee’s responsibilities to align better with applicable regulations and guidance. The terms of reference are available on our website.

All members of the Committee are independent non-executive Directors. Biographical details and the experience of Committee members are set out in chapter Group Management Committee.

At the invitation of the Committee Chairman, Michael Dobson attended six meetings, two as Chief Executive and four as Chairman. Following his appointment as Group Chief Executive, Peter Harrison attended three meetings. The Chief Financial Officer attended four meetings and Bruno Schroder attended six. No Director or employee was present during discussions relating to their own remuneration.

The Group Head of Risk, the General Counsel and the Global Head of Compliance also advised the Committee on matters that could influence remuneration decisions and attended meetings if required. The Global Head of Human Resources and the Head of Compensation and Benefits attended meetings to provide advice and support the Committee with secretarial services.

Key areas of focus during the year

The table below summarises the key issues that the Committee considered at each of its meetings during 2016. Remuneration packages for new hires or severance arrangements for roles subject to the Committee’s oversight were reviewed at each meeting as required. In addition, the Board as a whole reviewed the remuneration strategy in July.

Meeting date

Key issues considered

 

January

  • Succession plans for executive Directors
  • Compensation review 2015
  • Remuneration disclosures
  • Forecast vesting of LTIP awards granted in 2012
  • Performance conditions for LTIP awards to be granted in 2016
  • Regulatory developments pertaining to remuneration

February

  • Succession plans for executive Directors
  • Performance conditions for LTIP awards to be granted in 2016

May

  • Shareholder and voting agency feedback on remuneration
  • Advisers to the Committee
  • Alignment of remuneration to client and shareholder interests
  • Remuneration Committee Terms of Reference
  • Regulatory developments pertaining to remuneration

July (Board meeting)

  • Board review of remuneration strategy
  • Directors’ remuneration policy
  • Potential impact of a future Brexit on remuneration regulations

October

  • Directors’ remuneration policy
  • Approval of proposed Equity Incentive Plan awards
  • Compensation review 2016
  • Material risk taker population
  • Remuneration disclosures
  • Regulatory and corporate governance developments
  • Remuneration Committee Terms of Reference

November

  • Directors’ remuneration policy
  • Shareholder and market practice considerations

December

  • Directors’ remuneration policy
  • Compensation review 2016
  • Sustainability of earnings
  • Risk, legal and compliance matters
  • Forecast vesting of LTIP awards granted in 2013
  • Remuneration disclosures
  • Total compensation ratio target range
  • Remuneration benchmarking for key leadership roles
  • Termination arrangements for Massimo Tosato
  • Regulatory and corporate governance developments

Shareholder voting on remuneration

At the 2014 AGM, shareholders approved the Directors’ remuneration policy, to apply for three years from the date of the AGM. At the 2016 AGM, shareholders approved the Remuneration report that was published in the 2015 Annual Report and Accounts. The results of these votes are shown below:

To approve the Directors’ remuneration policy at the 2014 AGM

To approve the Directors’ remuneration policy at the 2014 AGM (pie chart)

To approve the remuneration report at the 2016 AGM

To approve the remuneration report at the 2016 AGM (pie chart)

To approve the relevant remuneration report

Votes for

Votes against

2014 AGM

94%

6%

2015 AGM

97%

3%

2016 AGM

96%

4%

External advisers

The Committee appointed or received advice from the advisers shown in the table below. Advisers were selected on the recommendation of the Global Head of Human Resources and the Head of Compensation and Benefits.

 

Appointed by

Services provided to the Committee

Other services provided to the Group

Fees paid for services to the Committee during 2016 (£’000)

McLagan International Inc (McLagan)

The Committee

Information on market conditions and competitive rates of pay.

Information on market conditions and competitive rates of pay.

15

PwC

The Company

The Remuneration Committee did not independently engage PwC to provide any services. However, advice to management on market practice and conditions for directors’ remuneration and compliance with remuneration regulations was discussed at Committee meetings.

Advice to management on market practice and conditions for directors’ remuneration and on compliance with remuneration regulations.

109

The Committee is satisfied that the advice received from McLagan was independent and objective as it was factual and not judgemental. McLagan is part of Aon Hewitt, which also provides advice and services to the Company in relation to pension administration, pension benefit valuations and pension actuarial advice. McLagan’s fees were charged on the basis of a fixed fee for the preparation of reports setting out the information requested.

PwC is the Group’s external auditor. Any non-audit services provided by PwC are subject to review in accordance with arrangements for the provision of such services, as described in the Audit and Risk Committee report in chapter External audit. The Committee did not independently engage PwC to provide any services but is satisfied that the advice received from PwC was independent and objective as it was factual and not judgemental. PwC’s fees for services provided to the Company were charged on the basis of time spent. The increase in PwC fees reported, compared to the £8,000 reported for 2015, reflects the use of data and advice provided by PwC to support discussions during 2016 at the Remuneration Committee and the Board on the remuneration philosophy and Directors’ remuneration policy, as outlined in the table.

Evaluating the performance of the Committee

The annual evaluation of the Committee’s effectiveness was undertaken as part of the overall Board evaluation process. The findings relating to the Committee were discussed with the Committee Chairman, with the Committee found to be thorough and effective. Further information can be found in the Corporate governance report.