REMUNERATION COMMITTEE
REMUNERATION POLICY
BASIC SALARY
FLEXIBLE BENEFITS (INCLUDING PENSION ARRANGEMENTS)
ANNUAL BONUS PAYMENTS
SHARE OPTIONS
DIRECTORS’ CONTRACTS
NON-EXECUTIVE DIRECTORS
The Remuneration Committee, which meets at least twice a year, has responsibility for making recommendations to the Board on the Company’s policy on staff remuneration and for the determination, within agreed terms of reference, of specific remuneration packages for each of the Executive Directors and senior management (including pension rights and any compensation payments). The Committee is guided in its operation and decision making by the Code of Best Practice provisions on remuneration in the Combined Code of the UKLA. The Committee is chaired by Edward Astle and its other members are Roger McDowell (from 5 September 2002, replacing Dr Ceri James) and Gordon Crawford. None of the Committee has any personal financial interests (other than as shareholders), conflicts of interests arising from cross-directorships or day-to-day involvement in running the business.
The Committee consults the Chairman and the Chief Executive about its proposals and has access to professional advice from inside and outside the Company. No Director plays a part in any discussion about his or her own remuneration. The primary responsibilities of the Committee are:
- making recommendations to the Board on the Company’s policy on Directors’ and senior staff remuneration, and to oversee share option schemes;
- to set remuneration at a level appropriate to the responsibility and experience of the Directors;
- to ensure that such remuneration is adequate to attract and retain Directors and staff of the required calibre; and
- that remuneration is in line with current industry practice, and set in light of pay and conditions of other staff within the group.
Executive remuneration packages are:
- designed to attract, motivate and retain Directors of the calibre needed to maintain the Company’s position as a market leader within the IT and telecoms industry;
- designed to align the interests of executives with shareholders; and
- constructed with a substantial performance-related element set against appropriately demanding targets.
The performance measurement of the Executive Directors and key members of senior management, and the determination of their annual remuneration packages, are undertaken by the Committee. The remuneration of the non-Executive Directors is determined by the Board.There are four main elements of the remuneration package for Executive Directors and senior management: a - basic salary;
b - flexible benefits (including pension arrangements);
c - annual bonus payments; and
d - share option incentives.
An Executive Director’s basic salary is reviewed annually, and paid as a fixed cash sum monthly. The Remuneration Committee, in determining salary adjustments, considers increased responsibilities such as the size of the group, individual performance and contribution, and pay market pressures. In setting salaries the Committee considers the Group as a whole and relies on up-to-date information extract from market reports on a comparator group of similar companies within the sector. No increases have been made to the basic salary arrangements from the prior year.
Intec operates a flexible benefits scheme for all staff and Directors, under which they may choose how a benefits allowance of 28 per cent of salary is allocated towards a range of employee benefits, including holiday in excess of the statutory minimum of twenty days and personal pension contributions. Any unallocated amounts will be paid monthly in cash. Outside of the Flexible Benefits scheme, all staff and the Directors are also entitled to private medical insurance and death in service benefit. All Directors are eligible to participate in the performance related annual bonus scheme for senior management described above. The maximum potential bonus will not exceed 100 per cent of salary.
The Directors believe that retaining a workforce which is motivated to achieve the Group’s objectives is fundamental to its continued prosperity. Accordingly, Executive Directors and key employees are eligible to participate in a performance related annual bonus scheme. The maximum potential bonus for any individual, together with the associated performance measures and targets, are set by the Remuneration Committee.
Challenging performance measures and internal targets reflecting the objective of achieving key results were set for the year ended 30 September 2002 and reflected an appropriate balance between Group revenue, earnings and business unit objectives. Overall results did not meet the targets set and therefore no bonuses have been earned for this year.
The Group operates the Intec Company Share Option Scheme (“Company Scheme”) which is constituted by rules, and includes a section which has been approved by the Inland Revenue under the Income and Corporation Taxes Act 1988 (“UK Approved Section”). The Remuneration Committee may select eligible employees and full-time Directors of the Company and its participating subsidiaries, nominated by the Directors, to receive options over Ordinary Shares in the Company.
Details of the options granted and performance criteria are set out in notes 6 and 19 to the accounts. The rationale behind the grant of such options is to incentivise as well as to strengthen the links between the interests of the optionholders and those of the shareholders. All options granted are subject to certain vesting conditions.
The Directors’ service contracts are terminable on 12 months’ prior written notice by either party, but the Company has the option to terminate the agreement immediately at any time on making a payment of salary in lieu of the notice period. Copies of Directors’ service contracts will be available for inspection at the Annual General Meeting.
Each of the non-Executive Directors (Mr Roger McDowell, Mr Edward Astle and Mr Gordon Crawford) is engaged on letters of appointment. All appointments are subject to re-appointment by the Board at the next AGM. Appointments are terminable on three months’ prior written notice or in the event that the non-Executive Director ceases to be a Director of the Company. Each non-Executive Director receives annual fees of £25,000 payable by equal monthly instalments in arrears. Non-Executive Directors are entitled to directors’ and officers’ liability insurance cover under any scheme established by the Company. Non-Executive Directors do not participate in share option or bonus schemes.
There have been no increases in directors’ salaries during the current year. The difference between 2002 and 2001 are due to salaries which applied for a full twelve months in 2002 compared to a pro-rata prior period.
The interests of the Directors and their immediate families, both beneficial and non-beneficial, in the ordinary shares of the Company were as follows:
The above interests are in the ordinary share capital of the Company. No Director had any beneficial interest in any share capital of other Group companies or in any debenture of any Group company. As at 2 December 2002 there were no changes to the interests of the Directors as stated above.
Options to subscribe for or acquire ordinary shares of the Company were held by the following Directors during the year:
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