Remuneration Policy 2014
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BERKELEY ANNUAL REPORT 2014 / GOVERNANCE GOVERNANCE DIRECTORS’ REMUNERATION POLICY This section of the Remuneration Report contains details of the Company’s Directors’ Remuneration Policy that will govern the Company’s future remuneration payments. The policy described in this part is intended to apply for three years and will be applicable from the Company’s AGM in September 2014 subject to approval by shareholders at the AGM. The policy part will be displayed on the Company’s website, in the investor relations area, immediately after the 2014 AGM. The Committee has established the policy on the remuneration of the Executive Directors; the Board has established a policy on the remuneration of the Non-executive Directors. REMUNERATION POLICY The objective of Berkeley’s remuneration policy is to encourage, reward and retain the current Executives and ensure their actions are aligned with the Company’s strategy. The core philosophies of the policy are: • Fixed remuneration: The Committee sets salaries for the Executive Directors based on their experience, role, individual and corporate performance. Salaries on appointment to the Board are set at a lower quartile level of the comparator group which, based on appropriate levels of individual and corporate performance, will be increased with experience gained over time. • Annual performance related pay: The Committee believes that shareholders’ interests are best served by remuneration packages that have a large emphasis on performance-related pay which encourage the Executive Directors to focus on delivering the business strategy. • Long-term sustainable performance: The long-term incentives which extend to 2021 have been designed to lock in the Executive team for a far longer period than is typical in most publicly listed companies. This helps to ensure that the Executive team are focused on generating long-term sustainable value for shareholders, not just on meeting short term performance targets. • Substantial equity holdings: In order to align the interests of Executive Directors and shareholders, the reward strategy is designed so that, provided performance is delivered, the Executive team become material (in relation to their overall compensation) shareholders in the Company. REMUNERATION POSITIONING The policy is to set the main elements of the Executive Directors’ remuneration package against the following quartiles in the Company’s comparator group: Base salary Benefits Pension Annual Bonus Long-term Incentives Experience & Role Market practice Lower quartile Upper decile Upper decile For the purposes of benchmarking remuneration the Committee used the following comparator group of companies for the 2014/15 financial year. Amec PLC Bellway PLC Marshalls PLC Taylor Wimpey PLC Balfour Beatty PLC Bovis Homes Group PLC Persimmon PLC Travis Perkins PLC Barratt Developments PLC Carillion PLC Redrow PLC The Committee also considers the remuneration in the FTSE 250 as an additional benchmark to the main comparator group set out above due to its relatively small number of constituent companies. On an annual basis the Committee will review the comparator groups to ensure that they remain appropriate. REMUNERATION POLICY DISCRETION The Committee has discretion in several areas of policy as set out in this report. The Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders. In addition, the Committee has the discretion to amend policy with regard to minor or administrative matters where it would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval. 57 BERKELEY ANNUAL REPORT 2014 / GOVERNANCE DIRECTORS’ REMUNERATION REPORT continued FUTURE pOLICy – ExECUTIvE DIRECTORS The table below sets out the key elements of the policy for Executive Directors: Objective and link Operation Maximum opportunity Performance condition and assessment to strategy Base salary Core element of Salaries are reviewed annually and The annual salary for each There are no performance conditions on remuneration, set any changes are effective from Executive Director is set out in the salary. However, the performance of the at a level which 1 May each year. statement of implementation of individual and the Company are reflected is sufficiently remuneration policy for 2014/15 on in the salary they are paid. In setting levels of base salary, the competitive page 77. Committee takes into account to recruit and the following factors in setting The Committee has a policy on retain Executive individual salary levels: appointment of bringing Executive Directors of the Directors on to the Board at appropriate calibre • the individual Executive lower quartile levels of salary and and experience Director’s experience and increasing salaries as experience to achieve the responsibilities; is gained and performance in the Company’s business • the levels of base salary role can be evaluated. strategy. for similar positions Where an Executive is extremely with comparable status, Policy: Experience experienced and has a long track responsibility and skills in and role record of proven performance organisations of broadly similar salaries may be in the upper decile. size and complexity; In setting salaries, the Committee • the performance of the looks at companies of broadly individual Executive Director similar size and complexity, in and the Group; particular those companies within • pay and conditions throughout the comparator group and those in the Group. the FTSE 250. In general salary rises will be limited to the level provided to employees of the Company as a whole. Benefits To provide In line with market practice, the Benefit values vary year on year None. competitive levels Company’s policy is to provide depending on premiums and the of employment Executive Directors with the maximum value is the cost of the benefits. following additional benefits: provision of these benefits. Policy: Market • a fully expensed company car or practice cash allowance alternative; • medical insurance; • other benefits may be provided from time to time. Benefits are reviewed periodically to ensure they remain market competitive. The payments are not included in salary for the purposes of calculating any benefit or level of participation in incentive arrangements. 58 BERKELEY ANNUAL REPORT 2014 / GOVERNANCE GOVERNANCE Objective and link Operation Maximum opportunity Performance condition and assessment to strategy Annual Bonus The Bonus Plan At the beginning of the plan The maximum bonus potential for There are two types of performance aligns rewards to period of five financial years (first all Executive Directors is 300% of condition; Group and Divisional. Both the key objectives bonus year started in FY 2010/11), salary for any plan year. are measured at the end of each financial linked to short participants had a plan account to year. At threshold performance no to medium term which Company contributions were bonus can be earned. The bonus payable to each of the Group performance made. Chairman, Group Managing Director and whilst ensuring At target performance 50% of the No Company contribution is made Group Finance Director is determined by that there is a maximum bonus can be earned. to a participant’s plan account reference to Group performance. balance between unless the annual performance Bonus is earned on a straight line incentivising the For the Divisional Directors, 50% of the criteria are met. basis between points. Executive Directors, potential bonus payable is determined providing a The Company contribution will be by reference to Group performance sustainable ongoing set annually as a percentage of and 50% by reference to Divisional level of return to salary for each Executive Director. PBT performance for which they have shareholders and responsibility. Having regard to the strategy of ensuring the long- the Company, the Committee will The Group performance condition is a term sustainability set: matrix of Return on Equity (ROE) and of the Company. Land Bank Growth. • The performance levels The Notice of AGM (including minimum The Divisional performance condition is sets out details performance thresholds) for based upon Divisional Profit before Tax of the proposed the performance conditions for (PBT). replacement for the each plan year; Bonus Plan which There is a risk adjustment mechanism will form part of • The maximum annual Company built into the operation of the Bonus the policy, subject contribution for each participant Plan. If the threshold levels of ROE, Land to shareholder for the plan year. Bank Growth or Divisional PBT are not approval, for the met for any financial year during the five Participants will be entitled to an financial year years of operation of the Bonus Plan part annual payment of 50% of their 2015/16 and of a participant’s plan account will be plan account at the end of each subsequent years. forfeited. This adjustment mechanism financial year. All balances will ensures: Policy: Upper be deferred in shares or notional • Performance must be maintained decile shares. At the end of the five year over the five years of operation of plan period 100% of the balance of the Bonus Plan or the value in the participants’ accounts will be paid. participant’s plan account will not Dividends paid during a increase; financial year will be added to a • If there is a material deterioration participant’s plan account on an in performance, 50% of the balance annual basis. of the participant’s account will