Remuneration

Question 1

According to Principle P. remuneration policies and practices should..

Answer 1

Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success.

Question 2

Who should not be involved in deciding remuneration?

Answer 2

No director should be involved in deciding their own remuneration.

Question 3

What does principle R say about remuneration outcomes?

Answer 3

Directors should exercise independent judgement and discretion when authorising remuneration outcomes

Question 4

What is the composition of a remuenration committee?

Answer 4

Establish a rem comm of independent NEDs, with a minimum membership of 3 (2 in smaller companies). Chair can only be a member if they are independent and cannot chair the committee.
Appointee of chair of rem comm must have served on rem comm for at least 12 months

Question 5

What does the code say about remuneration of NEDs?

Answer 5

Remuneration of NEDs should be determined in accordance with AoA or by board. Levels of remuneration for the chair and NEDs should reflect the time commitment and responsibilities of the role. Remuneration of NEDs should not include share options or other performance-related elements

Question 6

What does the code say about remuneration consultants?

Answer 6

Where a rem consultant is appointed, this should be the responsibility of the rem comm. The consultant should be identified in the AR alongside a statement about any other connection it has with the company or individual directors. Independent judgement should be exercised.

Question 7

What does the code say about remuneration schemes?

Answer 7

Remuneration schemes should promote long-term shareholdings by executive directors that support alignment with long-term shareholder interests. Share awards should be released on a phased basis and subject to a holding period of 5 years or more. Rem Com should develop a formal policy for post-employment shareholding.

Rem schemes and policies should enable the use of discretion to override formulaic outcomes. They should also include provisions that would enable the company to recover and/or withhold sums or share awards and specify circumstances where this would be appropriate

Question 8

What should the notice period be?

Answer 8

Notice of contract periods should be one year or less. If it is necessary to offer longer periods to new directors, such periods should reduce to one year or less after the initial period. The rem comm should ensure compensation commitments for poor performance.

Question 9

When determining the remuneration policy, the remuneration committee should address the following… CRAPPS

Answer 9

C - Clarity - remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce
R - Risk - should be identified and mitigated
A - Alignment to culture - incentive schemes should drive behaviours consistent with company purpose, values and strategy
P - Proportionality - link between awards and long-term performance should be clear - no reward for poor perofmrnace
P - Predictability - range of rewards and dsicretions - identified and explained at time of approving the policy
S - Simplicity