Directors’ remuneration report
2 out of 10
In addition, in relation to all employees, we launched our first Save as You Earn (SAYE) plan in 2007 and approved the operation of a subsequent SAYE plan in 2008.
We are confident that Home Retail Group has in place the right remuneration structure and balance of measures to incentivise and reward both long–term and short-term performance.
In this report reference is made to share plans that are legacy rollover arrangements from the time prior to the demerger from GUS plc in October 2006. Whilst these plans do not form part of our ongoing remuneration policy or strategy, until all of the plans have reached vesting, we will continue, for completeness, to report on these arrangements in the relevant tables.
Our remuneration policy
Home Retail Group’s corporate objective is to perform consistently in the upper quartile of the general retail sector and our incentive structure is designed to support this goal. The policy is summarised in this report and it will continue to apply during the current financial year. We review our policy on an ongoing basis to ensure that it continues to be effective and appropriate.
The current incentive structure for the executive directors and members of the Operating Board comprises:
- Median level base salary
- Annual bonus, subject to achievement of financial targets
- Opportunity to participate in a co-investment plan through the deferral of annual bonus
- Annual participation in the performance share plan.
Notice periods for executive directors provide for six months’ notice from the director and 12 months from the Company. Service contracts do not provide for additional payments in the event of termination or change of control.
Executive remuneration
The elements of remuneration for executive directors are detailed below. More than 50% of total potential remuneration (excluding pensions and benefits) is performance-related. There is no payment of bonus or long-term incentives if performance targets are not achieved.
| Element | Purpose | Performance measure |
|---|---|---|
| Base pay | Reflect competitive market level, the economic environment and individual performance | Performance against agreed objectives for annual pay award |
| Annual bonus | Achievement of annual financial targets | Benchmark profit before tax over a one-year period |
| Co-investment plan | Encourage re-investment of bonus in shares | 50% based on earnings per share and 50% based on return on invested capital over a three-year period |
| Performance share plan | Reward outperformance relative to peer group | Relative total shareholder return over a three-year period and satisfactory financial performance |
This set of measures achieves an appropriate balance between competitive fixed elements, set in line with Home Retail Group’s peers, and short-term and long-term incentives that motivate and reward sustained levels of performance. Where appropriate, independent consultants confirm and calculate the extent to which performance conditions have been met.
The chart below shows the percentage split of total remuneration (excluding pensions and benefits) based on the achievement of 50% of all performance measures.
To assess the competitiveness of Home Retail Group’s remuneration, the remuneration committee completed a comprehensive benchmarking exercise, comparing the reward profiles of executive director and Operating Board roles to those of UK peers.
As outlined in the directors’ report, the executive directors have significant interests in Home Retail Group with both having a shareholding, including those held in trust from share plans, in excess of one times their salary.
Share awards granted by Home Retail Group may be satisfied with newly issued shares, treasury shares or shares purchased in the market. Currently, share awards are satisfied with shares held in an employee benefits trust. We will keep our policy for funding share awards under review.
2 out of 10
