The members of the Remuneration Committee shall be appointed by the Board from amongst the Directors of the Company and shall consist of not less than two members. The members shall be independent, Non-Executive Directors of the Company who are independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. The members of the Remuneration Committee should be listed each year in the Board's Remuneration Report to shareholders. The Chief Executive attends by invitation only.
The quorum for decisions of the Remuneration Committee shall be any two members.
The Chief Executive, when in attendance, acts as the secretary of the Committee.
4. Frequency of Meetings
Meetings of the Remuneration Committee shall be held as and when appropriate. The Chief Executive of the Company may request a meeting if he considers one is necessary.
The purpose of the Remuneration Committee is to:
5.1 Ensure that the Executive Directors and other Senior Executives are fairly rewarded for their individual contribution to the overall performance of the Company; and
5.2 Demonstrate to the shareholders that the remuneration of the Executive Directors of the Company is set by a Committee of the Board whose members will have due regard to the interests of the shareholders; and
5.3 Assist the Board in drafting the explanation of how it applies the principles of Section B of the Combined Code in the Remuneration Report section of the Annual Report. The necessary principles are:
- to attract and retain the Directors needed to run the Company successfully by sufficient levels of remuneration, but avoid paying more than is necessary for this purpose;
- to judge where to position their Company relative to other companies. They should be aware of what comparable companies are paying and should take account of relative performance. Caution should be exercised when using such comparisons, in view of the risk that they can result in an upward ratchet of remuneration levels with no corresponding improvement in performance;
- to be sensitive to the wider scene, including pay and employment conditions elsewhere in the Group, especially when determining annual salary increases;
- to not offer Executives share options at a discount save as permitted by paragraphs 13.30 and 13.31 of the Listing Rules; and
- to include performance-related elements of remuneration as set out in Schedule A to the Combined Code;
5.4 To make recommendations to the Board on the Company's framework of Executive remuneration and its costs;
5.5 To ensure that the Company complies with Listing Rule 12.43A(c); and
5.6 To assist the Board in drafting the Remuneration Report in accordance with Schedule B of the Combined Code.
Without prejudice to the generality of the terms of the Remuneration Committee set out above, the Remuneration Committee will:
- operate the Company's share option schemes, administering the following:
- the selection of those eligible Directors, employees and others providing similar services to the Company to whom options should be granted;
- the timing of any grant;
- the numbers of shares over which options are to be granted;
- the exercise price at which options are to be granted;
- the imposition of any market vesting conditions which must be complied with before any option may be exercised;
- review the terms of Executive Directors' service agreements;
- in reviewing specific remuneration packages for Executive Directors consider basic salary, any benefits in kind, any annual bonuses, participation in any long-term incentive plans and any pension entitlements;
- have regard to Schedule A of the Combined Code, to advise on and determine all performance-related formulae to the remuneration of the Directors of the Company and to consider the eligibility of Directors for annual bonuses and benefits under long-term incentive schemes;
- liaise with the Board in relation to disclosure of detail of remuneration to packages and structures in addition to those required by law;
- consider what compensation commitments (including pension contributions), would entail in the event of termination. The Combined Code specifies that consideration should be given to providing explicitly in the initial contract for such compensation commitments except in the case of removal for misconduct.
- consider other benefits granted to Executives and any recommendations of the Chair for changes in those benefits;
- consider the pension arrangements applicable to the Executive Directors;
- consider and make recommendations in respect of any other terms of the service contracts of the Executive Directors and any proposed changes in these contracts;
- have regard to any published guidelines or recommendations regarding the remuneration of Directors (in particular those published by the Association of British Insurers and National Association of Pension Funds) which the Committee considers appropriate;
- consider other matters referred to the Remuneration Committee by the Board.
7. Reporting Procedures
The Secretary shall circulate the Minutes of the Meetings of the Remuneration Committee to all Board members.
The Board authorises the Remuneration Committee:
8.1 To investigate any matter within its terms of reference and seek any information it requires from any employee (all employees being directed to co-operate with any such request by the Committee); and
8.2 To obtain outside legal or other independent professional advice at the cost of the Company, in accordance with the guidelines set out in Schedule 1 of this Memorandum, and to secure the attendance of outsiders with relevant experience and expertise if the Remuneration Committee considers this necessary.
Guidelines When Seeking Independent Professional Advice
1. A Director shall give prior notice to the Chairman and the Company Secretary of his intention to seek independent professional advice under this procedure and shall provide the name(s) of any professional advisers he proposes to instruct, together with a brief summary of the subject matter.
2. The Company Secretary shall provide a written acknowledgement of receipt of the notification which shall state whether the fees for the professional advice sought are payable by the Company under these procedures. A Director shall obtain the prior approval of the Chairman where the fees of independent professional advisers are likely to exceed £1,000.
3. "Independent professional advice" for the purpose of these guidelines shall include legal advice and advice of accountants and other professional financial advisors.
4. Any advice received shall be made available to other members of the Board, if the Board so requests.