Remuneration Committee

Remuneration Committee

Role: The role of the Remuneration Committee is to determine and recommend to the Board the remuneration policy for the Chairman of the Board, the Executive Directors and the Company Secretary. This includes base salary, annual and long-term incentive entitlements and awards and pension arrangements. In determining the remuneration policy, the Remuneration Committee takes into account many factors including the need for a significant proportion of the Executive Directors' remuneration to be structured so as to link rewards to business and individual performance, as required by the 2010 Code.

Members and chairman: As at the date of this annual report, the Remuneration Committee is chaired by David Young and its other members are Ruth Anderson, Robert Gorrie, Jörn Rausing and Douglas McCallum. The composition of the Remuneration Committee changed during the period with the appointment of Douglas McCallum to the Remuneration Committee effective on 3 October 2011 and will change subsequent to period end with the appointment of Wendy Becker to the Remuneration Committee effective 31 March 2012. Effective immediately following the Company's AGM, Wendy Becker will assume the role of Remuneration Committee chairman when the current chairman, David Young, retires from the Board.

The Director of Human Resources, the Chief Executive Officer and company secretariat attended some or all of the Remuneration Committee meetings during the period.

Independence: The 2010 Code requires a board to establish a remuneration committee of at least three members, all of whom must be independent non-executive directors.

The Remuneration Committee, as at the date of this annual report, comprises five members. The Directors expect that at the time that the various Board appointments and resignations (outlined above) take effect the Remuneration Committee will be re-composed and include three independent Non-Executive Directors (Ruth Anderson, Douglas McCallum and Wendy Becker), and two Non-Executive Directors who are not deemed to be independent for the purposes of the 2010 Code. Accordingly, the Company does not comply with the relevant requirements of the 2010 Code in relation to the membership of the Remuneration Committee.

Meetings: The Remuneration Committee will normally meet no fewer than two times a year. During the period, the Remuneration Committee met on three occasions.

Duties: The Remuneration Committee's key duties, as set out in its terms of reference, are as follows:

  • determine and agree with the Board the framework or broad policy for the remuneration (including pension) of the Company's Chief Executive Officer, the Chairman, the Executive Directors and the Company Secretary, including the need for a significant proportion of Executive Directors' remuneration to be structured so as to link rewards to corporate and individual performance;
  • review the ongoing appropriateness and relevance of the remuneration policy;
  • approve the design of, and determine targets for any performance related schemes for Executive Directors operated by the Group (ensuring that the performance related elements of Executive Directors' remuneration are stretching and designed to promote the long-term success of the Company and the Group) and annual payments made under such schemes. In designing such schemes, the Remuneration Committee should follow the provisions in Schedule A to the 2010 Code;
  • review the design of all new long-term schemes (as defined in Listing Rule LR 9.4) and significant changes to such schemes for approval, in each case, by the Board and shareholders (save in the circumstances permitted by the Listing Rules). For any such schemes, determine each year whether awards will be made, and if so, the overall amount of such awards and the individual awards to the Executive Directors and the Company Secretary;
  • ensure that contractual terms on termination, and any payments made, are fair to the individual, and the Company or the relevant member of the Group (as applicable), that failure is not rewarded and that the duty to mitigate loss is fully recognised;
  • within the terms of the agreed policy and in consultation with the Chairman and/or the Chief Executive Officer as appropriate, determine the total individual remuneration package of each Executive Director, the Company Secretary and the Chairman including bonuses, incentive payments, share options or other share awards and any compensation payments;
  • in determining such packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the 2010 Code and the Listing Rules and associated guidance;
  • review and note annually the remuneration trends across the Group. The Remuneration Committee should also monitor the level and structure of remuneration for senior management;
  • oversee any major changes in employee benefits structures throughout the Company or the Group;
  • review the policy for authorising claims for expenses from the Chief Executive Officer and the Chairman;
  • ensure that all provisions regarding disclosure of remuneration, including pensions, are fulfilled;
  • be responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Remuneration Committee; and
  • obtain reliable, up-to-date information about remuneration in other companies, with a view to judging where to position the Company relative to other companies. The Remuneration Committee shall have full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations.

Principal activities of the Remuneration Committee: In line with its terms of reference, the following key matters were considered by the Remuneration Committee during the period (and in some cases shortly after period end):

  • approval of the 2010 Directors' remuneration report;
  • appointing and receiving a report from remuneration consultants concerning the Executive Director remuneration and advice on the 2011 annual incentive plan;
  • implementation of the 2011 annual incentive plan including consideration of the design, selection of performance targets and finalising the plan rules;
  • review of performance under the 2011 annual incentive plan and consideration of any bonuses payable;
  • consideration of the 2012 annual incentive plan;
  • review of the design and scope of proposed new share schemes for all employees including a share incentive plan and the second share issue under the JSOS scheme;
  • receiving a report from management on Executive Director remuneration benchmarking;
  • consulting the Chief Executive Officer on performance and remuneration of the Executive Directors;
  • receiving a report on Group-wide and management remuneration for 2011 and 2012;
  • undertaking a tender process for the appointment of a new remuneration consultant to advise in respect of 2012 onwards;
  • oversight of the proposed new Management Committee contracts;
  • review of the Remuneration Committee's performance; and
  • review of and proposed amendment to the terms of reference.

Directors' remuneration report: The Remuneration Committee has produced the Directors' remuneration report and will put it to the Company's shareholders for consideration at the AGM on 23 May 2012.

External Advice: The Remuneration Committee appointed and received advice during the period from remuneration consultants, Towers Perrin (now Towers Watson), on certain remuneration issues. The Remuneration Committee is satisfied that there is no connection between the Company and Towers Watson.

In addition, the Company received advice from BDO LLP (who provided tax advice), Slaughter and May (who provided tax and schemes advice) and Appleby Trust (Jersey) Limited (who advised on the employee benefit trust) in connection with the implementation of the Group's second issue of shares under the JSOS scheme.

Since the period end, the Remuneration Committee had undertaken a competitive tender process for the appointment of new remuneration consultants to advise the Remuneration Committee. This process, which had involved the input from the Chief Executive Officer, resulted in the appointment of the remuneration advisers, Deloitte LLP. Deloitte LLP have been appointed by the Remuneration Committee as its independent adviser, such appointment to commence after the date of this annual report. The Remuneration Committee is satisfied that there is no connection between the Company and Deloitte LLP. Deloitte LLP confirmed to the Company that it is a member of the Remuneration Consultants Group and as such operates under the Code of Conduct in relation to Executive Remuneration Consulting in the UK.

In addition to the external advice received, the Remuneration Committee consulted and received reports from the Company's Chief Executive Officer, the Director of Human Resources and the Deputy Company Secretary.

Terms of reference: As described earlier in the Statement of corporate governance, the Remuneration Committee has reviewed its own performance and terms of reference to ensure it is operating effectively and has recommended any changes it considers necessary to the Board for approval. As a result, amendments to the Remuneration Committee's terms of reference were made and approved by the Board.

The Remuneration Committee's revised terms of reference are available on the website (www.ocadogroup.com/corporate-responsibility/corporate-governance.aspx) and set out the Remuneration Committee's responsibilities.

David Young
Chairman of the Remuneration Committee