Governance continued Directors’ remuneration report Remuneration policy at a glance Summary of policy and operation for year ending 31 March 2021 2020/ 2021/ 2022/ 2023/ 2024/ 2025/ Key Features of Implementation Purpose and link to strategy 2021 2022 2023 2024 2025 2026 the policy for 2020 Fixed Pay Salary increases (in percentage ■■ Matthew Gregory’s base To attract and maintain terms) will normally be within salary from 1 April 2020 high-calibre executives with the range for those of will remain at £635,000 the attributes, skills and Group employees. ■■ Ryan Mangold’s base experience required to Salary Pension allowances for salary from 1 April will deliver the Group’s strategy and Executive Directors are in line remain at £450,000 benefits with the average company ■■ Pension allowance for contribution to employee both Executive Directors pensions in the UK. of 15% of salary which is in line with the wider workforce. Executive Annual Maximum bonus opportunity ■■ Maximum annual bonus Bonus Plan (EABP) EABP is 150% of base salary for opportunity unchanged at To focus on the delivery of – Cash Executive Directors. 150% of salary for 2020/21 annual goals, to strive for Element At least half of the bonus with 50% of the payout superior performance and award will be deferred subject to deferral into to achieve specific targets into shares, normally for shares for three years. which support the strategy. a period of three years. ■■ Performance measures The deferred share element EABP Awards are subject to malus and targets for 2020/21 of our EABP encourages – Deferred and clawback provisions to will be fully disclosed in retention and provides a link Share take account of exceptional next year’s Report. between the bonus and Element and adverse circumstances. share price growth. Long-Term Incentive Normal award policy is for a ■■ Maximum LTIP Plan (LTIP) maximum award opportunity opportunity unchanged Incentivises the execution of of 200% of base salary for the at 200% and 175% of strategy and drives long-term Chief Executive and 175% for salary for the CEO and value creation and alignment other Executive Directors. CFO respectively. with longer term returns Measured over three financial ■■ We expect performance to shareholders. years from the year of award. conditions for the three-year period from LTIP Shares which vest under the LTIP are subject to an additional 1st April 2020 will be holding period of two years. announced at the time of Awards are subject to malus grant and fully disclosed and clawback provisions to in next year’s Report. take account of exceptional ■■ Malus and clawback apply and adverse circumstances. to all incentive awards. More detail can be found on page 121. Shareholding The Chief Executive is expected ■■ No change to the Guidelines to hold shares equivalent to shareholding guidelines. To ensure that Executive 200% of base salary and other Shareholding Executive Directors 150% of Directors’ interests are Guidelines aligned with those of base salary, within a five year shareholders over a period from their date longer term time period of appointment. The Company’s Remuneration Policy was approved by shareholders at the AGM on 17 July 2018 and will apply at the latest until the 2021 AGM. The Remuneration Policy can be found on our website at www.firstgroupplc.com/investors/corporate-governance 114 FirstGroup Annual Report and Accounts 2020 Remuneration outturns for 2019/20 at a glance Adjusted Revenue Adjusted Operating Profit Adjusted Cash flow Adjusted EPS Governance (pre-IFRS 16) (pre-IFRS 16) £7,712.8m £250.4m £0.1m 9.0p 2018/19: £7,126.9m 2018/19: £332.9m 2018/19: £75.9m 2018/19: 14.4p Fixed pay Chief Executive – Matthew Gregory Chief Financial Officer – Ryan Mangold Salary Pension Benefits Total Salary Pension Benefits Total ■■ £635,000 ■■ £94,000 ■■ £14,000 including ■■ £743,000 ■■ £377,000 ■■ £56,000 ■■ £12,000 including ■■ £445,000 ■■ 15% of salary car allowance, (appointed to the ■■ 15% of salary car allowance, in line with the private medical Board as CFO in line with the private medical wider workforce insurance and on 31 May 2019) wider workforce insurance and life assurance life assurance Variable pay More detail can be found on pages 118 to 121. Total remuneration Total single figure of remuneration for 2019/20 2019/20 EABP Matthew Gregory Chief Executive ■■ The performance of the Group was impacted by coronavirus for the 2019 £788k final few weeks of the 2019/20 financial year, and a number of swift and decisive actions were taken to ensure vital services can continue to be provided both through, and after, the pandemic. The Committee recognised the strong contribution of the Executive Directors during Ryan Mangold Chief Financial Officer 2019/20, and the actions taken to mitigate the impact of the global pandemic and protect the Group for the long term. Notwithstanding 2019 £445k this, the Committee and the Executive Directors were in full agreement that it would not be appropriate to pay a bonus at this Salary and benefits Retirement benefits LTIP Vesting time, in recognition of the impact of coronavirus on the Group’s wider stakeholders. As such no bonuses will be paid to the Executive Directors in respect of 2019/20. 2017 LTIP Threshold Maximum CEO actual Metrics (0% payable) (100% payable) (% of max / £) EPS 13.9p 17p 0% / £0 (40%) Achieved: 9.0p Road ROCE 5.3% 6.7%% 0% / £0 (20%) Achieved: 4.3% Relative TSR Median Upper quartile 30% / £45k (40%) Achieved: 53rd percentile Total 0% 100% 12% / £45k Achieved: 12% Note: the CFO was appointed on 31 May 2019 therefore did not participate in the 2017 LTIP. Full details on performance measures and targets are disclosed in the Annual Report on Remuneration on page 121. FirstGroup Annual Report and Accounts 2020 115 Governance continued Directors’ remuneration report continued Our remuneration in context percentiles, consistent with the methodology Employee engagement In setting the remuneration policy for Executive of reporting the gender pay gap. The UK While the Committee does not formally Directors, the Committee takes into account employees at the lower quartile, median and consult with employees on Executive Director the overall approach to rewarding other upper quartiles were identified as at 5 April remuneration, a number of different mechanisms employees in the Group. FirstGroup operates 2019 and their salary and total remuneration are in place to gather feedback from employees in a number of markets and its employees were calculated in respect of the twelve across a range of issues. More information carry out a diverse range of roles across the months ended 31 March 2020. The on our ‘Your Voice’ survey is set out on UK and North America. Due to the varied Committee is satisfied that these colleagues page 49. nature of the operations of our divisions and are representative of the relevant percentiles The Group engages with its UK workforce the respective employment markets, we have across the organisation, as they represent through our Employee Directors and the a range of remuneration practices across the frontline workers in our UK Bus and Rail Group Employee Director is invited to attend all organisation. These are designed to be relevant divisions (i.e. the large majority of our UK of the Committee’s meetings. Our Committee to each individual market. Approximately workforce) receiving basic pay, overtime, Chair, Sally Cabrini, will also periodically attend 90% of our UK employees and 55% of our holiday pay and employers pension meetings of the Employee Directors’ Forum. US employees are covered by collective contributions. The figures also include sick More information on the role of our Group bargaining arrangements. pay (where relevant). Employee Director is set out on page 84. As a Remuneration Committee we take our In line with the regulations, the below table sets The Committee believes that it is important responsibility to consider the pay of the senior out the total pay and benefits for the Chief for our employees to understand how the team in the context of wider workforce policies Executive, and colleagues at each percentile. and practices seriously and a number of items remuneration of our Executive Directors are tabled at Committee meetings each year Total pay is determined and will utilise the different to ensure the approach throughout the Salary and benefits communication channels operating across organisation is fair: the Group to ensure our employees are aware Chief Executive £635,000 £788,400 of the information available in the Directors’ ■■ Report summarising wider workforce pay 25th percentile remuneration report. policies and practices with updates provided colleague £23,300 £24,600 on a regular basis Performance-related pay 50th percentile The table below sets out how each of the ■■ Gender Pay Gap report including statistics colleague £29,700 £32,000 performance measures used in our incentive from each UK reporting entity plans is aligned to the Company’s strategy ■■ Actions management are taking to improve 75th percentile and business objectives, as outlined in the diversity in the workforce and close gender colleague £40,900 £45,400 Strategic report: gaps where they exist It should be noted that the pay ratio may vary FirstGroup’s strategic drivers ■■ CEO pay ratio and underlying statistics year-on-year and the incentive outcomes for The diagram on page 117 (‘Wider workforce the Chief Executive can impact the results 1 2 3 4 5 remuneration’) summarises the approach to significantly. We will provide an explanation in EABP pay across FirstGroup. The main difference each year’s Report around the change in the between the remuneration of the most senior ratio as well as any additional context where Revenue helpful to understand variance. employees (including Executive Directors) Adjusted and that of the wider workforce is that The Committee is satisfied that the data operating profit remuneration for senior employees is more included in the CEO Pay Ratio, and above total Adjusted Cash flow heavily weighted towards variable pay, which pay and benefits tables, reflect the goals of Safety is linked to business performance.