Tullett Prebon plc Annual Report 2010
Report on Directors’ Remuneration
The Company’s remuneration policy for employees engaged in functions such as Compliance, Legal, HR, Finance and Risk Control, is that remuneration is adequate to attract qualiﬁed and experienced staff, is in accordance with the achievement of objectives linked to their functions, and is independent of the performance of the business areas they support. Employees in such functions report through an organisation structure that is separate and independent from the business units. The heads of such functions report to members of the Executive Committee and as Senior Management their remuneration is reviewed and approved by the Remuneration Committee. The Company’s policy is to ensure that variable remuneration is not paid through vehicles or methods that facilitate avoidance of the Remuneration Code. The implementation of the remuneration policies set out above is subject to annual independent review.
The determination of the total bonus pool within the range will take account of additional factors, such as the achievement of the Company’s and individuals’ objectives and corporate performance relative to market circumstances. The Remuneration Committee will report on its assessment of these factors in the Report on Directors’ Remuneration. In exceptional circumstances, the Remuneration Committee may decrease or increase the amounts resulting from the formula to take account of, for example, the impact of strategic investments that depress short term results if it concludes that doing so would be in the interests of shareholders. The Remuneration Committee will record and explain any such variation in the Report on Directors’ Remuneration. In addition, the Remuneration Committee may change the formula in the future to take account of factors such as changes in the number of Executive Directors participating in the bonus pool. The Remuneration Committee will record and explain any such change in the Report on Directors’ Remuneration. Bonus for 2010 The annual performance bonus pool for 2010 for the Executive Directors, determined using the formula above and a WACC of 11.5%, is a range of £4.34m-£4.89m. In determining the total annual bonuses for the Executive Directors within this range, the Remuneration Committee assessed that the Executive Directors had met their individual objectives, and that the Company had performed well relative to market circumstances. However, the operating proﬁt of the Company in 2010 was lower than in 2009, and it was considered that the annual bonuses should be lower than 2009 in a similar proportion. As a result, the total annual bonuses for Executive Directors for 2010 were determined to be £4.615m (2009 bonuses: £5.0m). The allocation of the bonuses to each of the Executive Directors is shown below. Consistent with the approach taken for the 2008 and 2009 annual bonuses, one-half of the 2010 annual bonuses for each of the Executive Directors is awarded on condition that the net of tax amount will be invested in the Company’s shares, to be held for a minimum of two years. Bonus for 2011 The Remuneration Committee intends to apply the formula set out above to determine the bonus pool for the Executive Directors for 2011. Long term and share incentive schemes The participation of Executive Directors in long term and share incentive schemes is determined by the Remuneration Committee which agrees each year performance conditions to attach to the awards that are consistent with the Company’s strategic objectives at that time. Assessment of the achievement of non-market based performance targets is calculated by the Finance Director and reviewed by the auditor. Assessment of market-based performance conditions is undertaken by the Remuneration Committee’s independent remuneration consultant.
Application of policies to Executive Directors
The Company currently has two Executive Directors who are Terry Smith (Chief Executive) and Paul Mainwaring (Finance Director). The above policies are applied to the Executive Directors as follows. Salaries Salaries are reviewed and determined by the Remuneration Committee. In accordance with the Company’s policies, salaries are not routinely increased annually. In determining salaries the Remuneration Committee takes into account salary levels for equivalent positions in comparable sector businesses, most of which are not UK listed companies. Discretionary performance bonuses Executive Directors’ bonuses are discretionary and no director has an entitlement to a bonus. In determining the annual performance bonus, the Remuneration Committee establishes a bonus pool for the Executive Directors. The pool is then allocated between Executive Directors taking into consideration their personal contribution and internal relativities. It is the policy of the Remuneration Committee not to pay bonuses to a director if it is not satisﬁed with personal performance. If, following this process, not all of the bonus pool has been allocated, the unallocated proportion is retained by the Company. As set out in the Report on Directors’ Remuneration in last year’s Annual Report, in determining the annual performance bonus for 2010 and subsequent years, the Remuneration Committee will establish a bonus pool for all Executive Directors using the formula of 4.0%-4.5% of the surplus of operating proﬁt over a threshold calculated as the weighted average cost of capital multiplied by capital employed. The weighted average cost of capital (‘WACC’) is currently approximately 11.5%.