Responsibilities and governance:
Report on directors' remuneration and related matters
1. Remuneration Committee
1.1 Role
The Remuneration Committee is responsible for:
- determining the remuneration level and structure
for executive directors and approving that of selected executives
who report to the executive directors;
- communicating to shareholders on remuneration
policy and the Committee’s work on behalf of the Board;
- reviewing and recommending the design of the Company’s share schemes.
The remuneration of non-executive directors and the Chairman is a matter reserved for the Board as a whole. No director is involved in any discussions as to his or her own remuneration.
The Remuneration Committee has written terms of reference which are available on request from the Company Secretary and are also published on the Company’s website (www.gusplc.com).
1.2 Membership and meetings
The Remuneration Committee is a Board committee consisting exclusively of the following independent non-executive directors:
Lady Patten of Wincanton (Chairman until 31 December 2005)
Oliver Stocken (Chairman from 1 January 2006)
John Coombe
Andy Hornby
Frank Newman
Sir Alan Rudge
The Committee met on eight occasions during the year. Attendance at these meetings is set out in the corporate governance statement on page 33. Lady Patten retired from the Board on 31 January 2006.
1.3 Advisors
In making its decisions, the Committee consults with the Chairman, the Group Chief Executive and the Group Director of Human Resources who are invited to attend meetings of the Committee as and when appropriate.
The Committee also appointed Kepler Associates and Towers Perrin. Kepler advised on the following:
- executive remuneration matters;
- profit calibration for the setting of annual
bonus targets; and
- review and confirmation of the total shareholder return of GUS plc and the comparator group companies for the 2002 Performance Share Plan, the performance cycle of which ended on 31 March 2005.
Towers Perrin advised on executive remuneration issues and provided salary survey data.
Other than the above remuneration advice, no other services were provided to the Company by Kepler Associates and Towers Perrin respectively.
In addition, the following advisors have been retained on behalf of the Company, and provide information to the Committee on relevant matters being considered by the Committee:
- Watson Wyatt – retirement benefits and pensions
advice.
- Linklaters – legal services in respect of
executive remuneration. They also provide corporate legal services
to GUS plc.
- PricewaterhouseCoopers – tax services in
respect of company share schemes. They also provide audit and
tax services to GUS plc as disclosed in note 6 of the financial
statements.
- Abacus – administrative support on various share schemes.
2. Remuneration policy
The Committee has reviewed the remuneration policy for executive directors in light of the future separation of the Group. The Committee has determined that the policy remains appropriate for the coming year. The long-term plans will continue to operate as before and awards will be rolled over, as appropriate. Policy for the years following separation will be a matter for the relevant remuneration committees.
2.1 Principles
The reward strategy aims to align executive director and senior management remuneration with shareholders’ interests and to attract and retain the best talent for the benefit of the Group. The key principles are:
- To provide competitive performance-related
compensation which influences performance, and helps attract and
retain executives by providing the opportunity to earn substantial
rewards for outstanding performance.
- To apply demanding performance conditions
to deliver sustained profitable growth in all our businesses,
thereby aligning incentives to shareholders’ interests.
- To provide a balanced portfolio of incentives
– bonus, options and shares.
- To pay market-competitive base salary levels
but no higher than this.
- To provide accountability and transparency.
Consistent with the strategy, salaries are set on the basis of mid-market practice amongst UK companies of comparable size. Performance-related incentives are targeted at upper quartile levels for outstanding performance to produce a highly leveraged package if our growth objectives are attained. The Company is committed to performance-related payments at all levels within the organisation.
2.2 Elements of remuneration
The remuneration package is weighted towards the performance-related elements. In fair value terms, the proportion of total pay (excluding pensions and benefits) which is variable is approximately 64 per cent, as illustrated below.
Fair value of executive director remuneration
The Remuneration Committee selects performance measures that align with the Company’s strategic goals and that are transparent and clear to both directors and shareholders. Each element in the reward package is designed to support the achievement of different Company objectives, as illustrated below:
| Element | Purpose | Performance measure |
|
|
|
|
(b) Annual bonus |
|
|
(c) Share options |
|
|
(d) Performance Share Plan |
|
|
(a) Base salary and benefits
To ascertain the job’s market value, external remuneration consultants annually review and provide data about market salary levels and advise the Remuneration Committee. Executive directors’ salaries are benchmarked against a mid-market level of main board executive directors from the comparator companies in the FTSE 100 Index, currently defined as those ranked from FTSE11 – 40. Before making a final decision on individual salary awards, the Committee assesses each director’s contribution to the business, to reflect individual performance and experience.
In addition to base salary, executive directors receive certain benefits in kind including a car or car allowance, private health cover and life assurance.
(b) Annual bonus
To reward annual performance, executive directors are eligible for an annual incentive with a target of 50 per cent of base salary and a maximum of 100 per cent of salary for substantially exceeding targets.
Directors are given the opportunity to defer receipt of their bonus and invest it in GUS shares under the Co-investment Plan. The number of shares acquired on behalf of the executive is matched on a sliding scale depending on the achievement against target for the relevant financial year and can be summarised as follows:
| Threshold | Target | Maximum | |
| Bonus potential (% of base salary) | 0% | 50% | 100% |
| Matching ratio | 0* | 1:1 | 2:1 |
| * Between threshold and target the matching ratio rises from 0.25:1 to 1:1 on a straight line basis. | |||
The release of these shares is deferred for three years including the deferred bonus. For matching shares awarded after 31 March 2004 and in subsequent years, dividends will be accrued. If an executive resigns during the three-year period he/she will forfeit the right to the matching shares and associated dividends. Matching shares awarded after 31 March 2006 are subject to compulsory rollover at the date of demerger.
Bonuses are currently awarded for achieving profit growth and meeting efficient capital usage targets. We believe that linking incentives to profit growth helps to reinforce our growth objectives. Targets are calibrated by Kepler Associates using benchmarks that reflect internal and external expectations. For 2007, these benchmarks will relate to ARG and Experian specifically as well as to GUS to ensure targets are appropriate throughout the year. Benchmarks include: broker earnings estimates; earnings estimates for competitors; straight-line profit growth consistent with median/upper quartile shareholder returns over the next three to five years; latest projections for the current year; budget; strategic plan; long-term financial goals, etc.
(c) Share options
The Executive Share Option Scheme (ESOS) is linked to share price providing a built-in performance driver for option holders and further aligns them with shareholders’ interests. In addition, there is a performance test based on adjusted Earnings Per Share (EPS). This requires EPS compound annual growth to exceed compound annual retail price inflation by +4 per cent per annum over a continuous three-year period.
For options granted since January 2004 there is no retesting of the EPS performance condition. Unapproved options granted from May 2005 are subject to compulsory rollover at the date of demerger.
Subject to meeting the performance test, options vest three years after grant, and remain exercisable for seven years after vesting. No director may normally receive an option grant with a face value of more than one times salary in any one year. In exceptional circumstances the Remuneration Committee has discretion to grant up to two times salary.
(d) Performance Share Plan
The Performance Share Plan underpins the longer-term incentive structure by providing a share-based reward which is earned only when the Company out-performs its peers.
GUS’ performance under this plan is assessed in terms of three-year total shareholder return in relation to the following group of peer companies:
| Acxiom | Kingfisher | Reed Elsevier |
| Boots | Marks & Spencer | Reuters |
| DSG (formerly Dixons) | N. Brown Signet | Signet |
| Equifax | Next | Tesco |
| Harte Hanks | Pinault Printemps Redoute |
None of the awards vest if GUS’ total shareholder return (defined as share price movement plus reinvested dividends) is below the median return for the comparator group. Once GUS achieves median performance, 40 per cent of the award may vest, while 100 per cent of the award may be earned for an upper quartile return or better. This can be summarised as follows:
| Position | % of performance shares that will vest |
| 1 | 100 |
| 2 | 100 |
| 3 | 100 |
| 4 | 100 |
| 5 | 85 |
| 6 | 70 |
| 7 | 55 |
| 8 (median) | 40 |
| 9 to 15 | 0 |
No awards will be released unless the Remuneration Committee is also satisfied with the Company’s underlying financial performance over the relevant period.
The maximum grant normally available to directors is 100 per cent of salary, converted to shares at the price prevailing at the time the awards are made. In exceptional circumstances the Remuneration Committee has discretion to grant a higher amount. The awards vest, to the extent that the performance test is met, after three years. The majority of participants receive a grant of 50 per cent of salary.
During 2004, the Remuneration Committee decided to introduce dividend accrual on performance shares to strengthen alignment with shareholders. Consequently, performance shares awarded after 31 March 2004 accrue dividends. Performance shares awarded from May 2005 are subject to compulsory rollover at the date of demerger.
(e) Pensions
Pensions are offered in line with competitive practice. The retirement age for directors is 60 under arrangements which broadly provide a pension of two thirds of final salary, life assurance and ill health and dependants’ pensions. Incentive payments (such as annual bonuses) are not pensionable.
Arrangements have been in place for a number of years to provide pension benefits to those UK executive directors affected by the Inland Revenue earnings cap. These are designed to provide pension benefits on salary in excess of the cap thereby placing those directors in broadly the same position as directors whose pension is unaffected by the cap.
The Finance Act 2004, together with the Pensions Act 2004, make major changes to the taxation and regulation of occupational pension schemes, and to the benefits which occupational pension schemes may provide. GUS has considered the implications of the new legislation for the provision of pensions to all of its employees and directors and has made a number of changes to its registered pension arrangements to take advantage of the new flexibility. The Company, with the agreement of the trustees of the schemes, has decided to retain a notional earnings cap for its existing and future employees, with the exception of new senior GUS and Experian executives who will be pensioned on full basic salary.
The Company has put security in place for the unfunded pension entitlements of executives affected by the earnings cap, by establishing Secured Unfunded Retirement Benefits Schemes (SURBS) for each of GUS, Experian and ARG. Further details are provided under the disclosure of the arrangements for each director.
(f) Service contracts
All executive directors have rolling service contracts which can be terminated by the Company giving twelve months’ notice. In the event of termination of the director’s contract, any compensation payment is calculated in accordance with normal legal principles, including the application of mitigation to the extent appropriate in the circumstances of the case.
Further details of service contracts are outlined in Section 11.
(g) Impact of IFRS
Appropriate adjustments have been made, where relevant, to performance targets and tests under the Company’s incentive plans to ensure consistency of treatment notwithstanding the transition from UK GAAP to IFRS reporting. These adjustments have been agreed by the Remuneration Committee and reviewed by the Company’s auditors.
3. Non-executive directors' remuneration policy
The GUS policy on non-executive directors’ remuneration is that:
- Remuneration should be in line with recognised
best practice and sufficient to attract, motivate and retain high
calibre non-executives.
- Remuneration should be set by reference to
the responsibilities undertaken by the non-executives.
- Remuneration should be a combination of cash
fees (paid monthly) and GUS shares (bought annually in July).
- Non-executive directors are obliged to retain
shares awarded until their retirement from the Board. Any tax
liability connected to these arrangements is the responsibility
of the individual director.
- Non-executive directors should not receive
share options from the Company.
- Non-executive directors do not receive any benefits in kind, with the exception of the Chairman who has the use of a Company Car.
The fees of non-executive directors are normally reviewed every two years with effect from 1 July. Fees are reviewed in the light of market practice in FTSE 100 companies and anticipated number of days worked, tasks and responsibilities. Following the 2004 review, remuneration is as follows:
| Cash £ | Number of shares |
|
| Chairman | 267,000 | 15,000* |
| Non-executive director base fee | 35,000 | 2,500 |
| Senior non-executive director | 10,000 | – |
| Chairman of Audit/Remuneration Committee | 10,000 | 1,500 |
| *18,000 shares with effect from July 2005. | ||
4. Performance graph
The directors have chosen to illustrate the total shareholder return (‘TSR’) for GUS plc against the FTSE 100 Index for the last five financial years. In the opinion of the directors, the FTSE 100 Index is the most appropriate index against which TSR should be measured, as it is a widely used and understood index of leading UK companies.
The information set out in sections 5 to 9 below has been subject to audit.
5. Directors' emoluments
The following table shows an analysis of the emoluments of the individual directors for the year ended 31 March 2006.
| Salary and fees £'000 |
Annual bonus £'000 |
Taxable benefits £'000 |
Total 2006 £'000 |
Total 2005 £'000 |
|
| Executive directors | |||||
| Terry Duddy | 710 | 370 | 25 | 1,040 | 1,364 |
| John Peace (Note 1) | 805 | 346 | 30 | 1,181 | 1,550 |
| Don Robert (Notes 1 and 2) | $1,165 | $1,165 | $63 | $2,393 | – |
| David Tyler (Note 1) | 500 | 215 | 20 | 735 | 959 |
| Non-executive directors | |||||
| Sir Victor Blank (Note 3) | 164 | – | 33 | 197 | 416 |
| John Coombe (Note 4) | 60 | – | – | 60 | – |
| Andy Hornby | 58 | – | – | 58 | 55 |
| Frank Newman | 58 | – | – | 58 | 55 |
| Sir Alan Rudge | 68 | – | – | 68 | 65 |
| Oliver Stocken | 81 | – | – | 81 | 77 |
| Lady Patten of Wincanton (Note 5) | 74 | – | – | 74 | 77 |
| 3,229 | 1,517 | 143 | 4,889 | 4,618 | |
| The following shares were purchased for the non-executive directors on 21 July 2005. The value reported below is included within the remuneration reported in the above table: | |||||
| Number of shares |
Value £ |
||||
| Sir Victor Blank | 18,000 | 163,680 | |||
| John Coombe | 2,500 | 22,734 | |||
| Andy Hornby | 2,500 | 22,734 | |||
| Frank Newman | 2,500 | 22,734 | |||
| Lady Patten of Wincanton | 4,000 | 36,374 | |||
| Sir Alan Rudge | 2,500 | 22,734 | |||
| Oliver Stocken | 4,000 | 36,374 | |||
Notes
- During the year under review, John Peace
served as non-executive Chairman and David Tyler as a non-executive
director on the board of Burberry Group plc, a listed company
in which GUS retained approximately 65 per cent of the issued
share capital until 13 December 2005. David Tyler served as a
non-executive director until his resignation on 5 August 2005
on the board of Lewis Group Limited, a company listed in South
Africa in which GUS retained approximately 54 per cent of the
issued share capital until May 2005. Neither executive received
any additional remuneration for such services. Don Robert served
as a non-executive director of First Advantage Corporation for
which he received fees of US$43,000.
- Don Robert was appointed to the Board on
1 April 2005. Remuneration for Don Robert is reported in US Dollars
as he is on the US payroll. Amounts have been converted to Sterling
at the average rate for the year.
- Sir Victor Blank received his cash remuneration
(an additional £267,000) in the form of a company contribution
to his defined contribution pension arrangement (see Section 10).
- John Coombe was appointed to the Board on
1 April 2005.
- Lady Patten of Wincanton left the Board on 31 January 2006.
6. Share options
In May 2005, executive directors received an option grant with a face value of one times salary under the Company’s executive share option schemes.Details of options granted to executive directors, under the Company’s executive share option schemes, are set out in the table below:
| Number of options at 1 April 2005 or date of appointment |
Options granted during the year |
Options exercised during the year |
Exercise price |
Share price on date of exercise |
Date from which exercisable |
Expiry date |
Total number of options at 31 March 2006 |
|
| Terry Duddy | ||||||||
| 11.06.01 | 150,155 | – | – | 612.7p | 11.06.04 | 10.06.11 | ||
| 06.06.02 | 80,398 | – | – | 653.0p | 06.06.05 | 05.06.12 | ||
| 19.06.03 | 85,862 | – | – | 675.5p | 19.06.06 | 18.06.13 | ||
| 01.06.04 | 82,797 | – | – | 809.2p | 01.06.07 | 31.05.14 | ||
| 31.05.05 | - | 87,702 | – | 858.5p | 31.05.08 | 30.05.15 | ||
| 481,914 | ||||||||
| John Peace | ||||||||
| 11.06.01 | 195,854 | – | – | 612.7p | 11.06.04 | 10.06.11 | ||
| 06.06.02 | 99,540 | – | – | 653.0p | 06.06.05 | 05.06.12 | ||
| 19.06.03 | 103,626 | – | – | 675.5p | 19.06.06 | 18.06.13 | ||
| 01.06.04 | 93,919 | – | – | 809.2p | 01.06.07 | 31.05.14 | ||
| 31.05.05 | – | 93,768 | – | 858.5p | 31.05.08 | 30.05.15 | ||
| 586,707 | ||||||||
| Don Robert( Note 1) | ||||||||
| 06.06.02 | 173,151 | – | 173,151 | 653.0p | 921.5p | 06.06.03 | 05.06.08 | |
| 19.06.03 | 145,196 | – | – | 675.5p | 19.06.04 | 18.06.09 | ||
| 01.06.04 | 134,890 | – | – | 809.2p | 01.06.05 | 31.05.10 | ||
| 31.05.05 | - | 74,334 | – | 858.5p | 31.05.08 | 30.05.15 | ||
| 354,420 | ||||||||
| David Tyler | ||||||||
| 06.06.02 | 58,192 | – | – | 653.0p | 06.06.05 | 05.06.12 | ||
| 19.06.03 | 62,176 | – | – | 675.5p | 19.06.06 | 18.06.13 | ||
| 01.06.04 | 58,082 | – | – | 809.2p | 01.06.07 | 31.05.14 | ||
| 31.05.05 | – | 58,241 | – | 858.5p | 31.05.08 | 30.05.15 | ||
| 236,691 | ||||||||
Notes
- Options granted to Don Robert prior to his date of appointment to the Board in April 2005 were granted under the North America Stock Option Plan. The 2005 grant was made under the UK Executive Share Option Scheme. Don Robert exercised 173,151 options during the year when the share price was 921.5p and made a total gain of £464,910.
The exercise prices represent the average of the middle market quotations of a GUS share as derived from the Daily Official List of The London Stock Exchange for the three immediately preceding dealing days to the date on which options were granted.
The market price of the shares at the end of the financial year was 1055p; the highest and lowest prices during the financial year were 1128p and 827p respectively.
Full details of directors’ shareholdings and options to subscribe are contained in the Company’s Register of Directors’ Interests.
SAYE share option scheme
Details of awards outstanding to directors under the Company’s SAYE share option scheme are as follows:
| Number of options at 1 April 2005 |
Options exercised during the year |
Number of options at 31 March 2006 |
Exercise price |
Date from which exercisable |
Expiry date |
|
| Sir Victor Blank | 4,394 | – | 4,394 | 384p | 01.05.06 | 31.10.06 |
| Terry Duddy | 4,394 | – | 4,394 | 384p | 01.05.06 | 31.10.06 |
| John Peace | 4,394 | – | 4,394 | 384p | 01.05.06 | 31.10.06 |
| Oliver Stocken | 4,394 | – | 4,394 | 384p | 01.05.06 | 31.10.06 |
| David Tyler | 4,394 | – | 4,394 | 384p | 01.05.06 | 31.10.06 |
As previously reported, a number of non-executive directors received, in 2001, invitations to participate in the Company’s SAYE share option scheme. This was a ‘one-off’ arrangement.
On 2 May 2006, Sir Victor Blank, Terry Duddy, Oliver Stocken and David Tyler each exercised 4,394 options at an option price of 384p under the 2001 Scheme resulting in a gain of £28,517 each. The GUS share price on the date of exercise was 1033p. Sir Victor Blank and Oliver Stocken were responsible for paying tax on the gain.
7. Performance Share Plan
In May 2005, executive directors received a share award with a face value of one times salary.
Details of awards made to directors under the Performance Share Plan are as follows:
|
Plan shares |
Plan shares awarded during the year to 31 March 2006 |
Plan shares released during the year to 31 March 2006 |
Share price on date of award |
Share price on date of release |
Vesting date |
Total plan shares held at 31 March 2006 |
|
| Terry Duddy | |||||||
| 06.06.02 | 80,398 | – | 80,398 | 653.0p | 853.1p | June 2005 | |
| 19.06.03 | 85,862 | – | – | 675.5p | June 2006 | ||
| 01.06.04 | 82,797 | – | – | 809.2p | June 2007 | ||
| 31.05.05 | – | 82,702 | – | 858.5p | May 2008 | ||
| 251,361 | |||||||
| John Peace | |||||||
| 06.06.02 | 99,540 | – | 99,540 | 653.0p | 853.1p | June 2005 | |
| 19.06.03 | 103,626 | – | – | 675.5p | June 2006 | ||
| 01.06.04 | 93,919 | – | – | 809.2p | June 2007 | ||
| 31.05.05 | – | 93,768 | – | 858.5p | May 2008 | ||
| 291,313 | |||||||
| Don Robert | |||||||
| 19.06.03 | 26,619 | - | - | 675.5p | June 2006 | ||
| 01.06.04 | 22,481 | - | - | 809.2p | June 2007 | ||
| 31.05.05 | - | 74,334 | - | 858.5p | May 2008 | ||
| 123,434 | |||||||
| David Tyler | |||||||
| 06.06.02 | 58,192 | – | 58,192 | 653.0p | 853.1p | June 2005 | |
| 19.06.03 | 62,176 | – | – | 675.5p | June 2006 | ||
| 01.06.04 | 58,082 | – | – | 809.2p | June 2007 | ||
| 31.05.05 | – | 58,241 | – | 858.5p | May 2008 | ||
| 178,499 | |||||||
8. Co-investment Plan
As explained in note 2.2 (b) on page 42, directors are given the opportunity to defer receipt of their annual bonus and have it invested in GUS shares (‘invested shares’). For the year ending 31 March 2005, John Peace, Terry Duddy and David Tyler received a bonus of 100 per cent of base salary and chose to invest the whole of their ‘net’ bonus. Don Robert received a bonus of 100 per cent of base salary and chose to invest the whole of his bonus. The invested shares so purchased on their behalf are included in the table below and also in the table of directors’ interests appearing on page 51. The related matching shares under these arrangements are also shown in the table below. They are not released until the expiry of a three-year period and the right to the matching shares is forfeited if a director resigns before then.
| Invested shares (Note 3) |
Matching shares |
Invested and Matching Shares released during year to 31 March 2006 |
Share price on date of release |
Vesting date |
|
| Terry Duddy (see Notes 1 & 2) | |||||
| 17.06.02 | 187,273 | 882.5p | June 2005 | ||
| 20.06.03 | 40,132 | 158,193 | June 2006 | ||
| 11.06.04 | 37,961 | 209,008 | June 2007 | ||
| 13.06.05 | 38,888 | 153,285 | June 2008 | ||
| John Peace (see Note 1) | |||||
| 17.06.02 | 244,270 | 882.5p | June 2005 | ||
| 20.06.03 | 49,689 | 195,858 | June 2006 | ||
| 11.06.04 | 42,178 | 166,256 | June 2007 | ||
| 13.06.05 | 44,111 | 173,875 | June 2008 | ||
| Don Robert | |||||
| 20.06.03 | 36,257 | 56,191 | June 2006 | ||
| 11.06.04 | 78,512 | 157,024 | June 2007 | ||
| 13.06.05 | 83,109 | 166,219 | June 2008 | ||
| David Tyler (see Note 1) | |||||
| 17.06.02 | 142,490 | 882.5p | June 2005 | ||
| 20.06.03 | 29,049 | 114,501 | June 2006 | ||
| 11.06.04 | 25,307 | 99,754 | June 2007 | ||
| 13.06.05 | 27,279 | 107,528 | June 2008 | ||
Notes
- Invested shares for Terry Duddy, John Peace
and David Tyler are purchased with the bonus net of tax. The matching
share awards are made on a gross basis and are taxed at the point
of vesting.
- As previously disclosed, the Remuneration
Committee agreed to grant in June 2004 an extra number of matching
shares to Terry Duddy to the value of £500,000 as a one-off
award. The additional shares are included in the total number
disclosed above.
- As a result of the demerger of Burberry, UK based Co-Investment Participants were entitled to receive the special dividend of Burberry shares in respect of their Invested Shares. Participants were able to dispose of their Burberry shares, without affecting their Matching Shares. The above figures reflect the adjustment to the number of Invested Shares following the demerger and share consolidation.
9. GUS plc ESOP Trust
As at 31 March 2006, the executive directors are, together with other employees of the GUS group, discretionary beneficiaries under the GUS plc ESOP Trust and, as such, each director is deemed to be interested in 10,463,212 ordinary shares in GUS held by the trustee of the Trust.
10. Retirement benefits
In lieu of Sir Victor Blank’s cash remuneration of £267,000, an equivalent amount was paid in the form of a pension contribution into a defined contribution Executive Pension Plan during 2006.
Terry Duddy is a member of the Argos Pension Scheme which will provide him on retirement at age 60 with a pension of up to two thirds of the pension earnings cap, subject to Inland Revenue limits. The figures shown below are based on his capped pensionable earnings. In addition, his contract provides for the choice of a funded or unfunded scheme to provide benefits in excess of the pension earnings cap. Mr Duddy elected to have paid to him a cash sum for investment at his own discretion. The amount so paid in the year under review was £278,024. From April 2006, Mr Duddy has elected to join the ARG Secured Unfunded Retirement Benefits Scheme (see section 2.2 (e)) and will receive pension benefits on full basic salary. The cash sum ceased at 31 March 2006.
John Peace is a member of the GUS Pension Scheme. His benefits within the Scheme are not restricted by the pension earnings cap, and therefore the following pension figures reflect his tax-approved Scheme benefits. Mr Peace has elected to remain a member of the GUS Pension Scheme in 2007.
David Tyler is a member of the GUS Pension Scheme. His benefits within the Scheme are restricted by the pension earnings cap. However, his contract allows for an unfunded scheme to provide for benefits in excess of the cap (although part of this promise will be provided for by a funded arrangement which was closed to future contributions on 1 April 2002). The pension figures below reflect both his approved and unapproved entitlements. From April 2006, Mr Tyler has elected to join the GUS Secured Unfunded Retirement Benefits Scheme in respect of his unfunded entitlement.
Don Robert is provided with benefits under a US defined benefit arrangement – a Supplemental Executive Retirement Plan (SERP) – which aims to provide benefits which broadly match the pension arrangements for UK directors. He also participates in a defined contribution arrangement in the US – a 401k – and the employer contributions during the year were $8,985. The figures below are in respect of his SERP entitlement.
A number of former directors receive pensions from GUS plc under ex-gratia arrangements. Pensions paid in the year totalled £429,596 (2005: £434,197).
The table set out below provides the disclosure of directors’ pension entitlements in respect of benefits from tax-exempt schemes and unfunded arrangements.
| Accrued pension at 31 March 2006 per annum (1) £’000 |
Accrued pension at 31 March 2005 per annum (2) £’000 |
Transfer value at 31 March 2006 (3) £’000 |
Transfer value at 31 March 2005 (4) £’000 |
Change in |
Additional pension earned to 31 March 2006 (net of inflation) per annum (6) £’000 |
Transfer value of the increase (less Director’s contributions) (7) £’000 |
|
| Terry Duddy | 13 | 11 | 150 | 112 | 22 | 2 | 5 |
| John Peace | 467 | 415 | 7,655 | 6,080 | 1,575 | 41 | 672 |
| David Tyler | 142 | 115 | 1,871 | 1,365 | 490 | 24 | 300 |
| $ ’000 | $ ’000 | $ ’000 | $ ’000 | $ ’000 | $ ’000 | $ ’000 | |
| Don Robert | 204 | 165 | 3,257 | 2,575 | 682 | 34 | 549 |
Notes
Columns (1) and (2) represent the deferred pension to which the directors would have been entitled had they left the Group at 31 March 2006 and 2005, respectively.
Column (3) is the transfer value of the deferred pension in column (1) calculated as at 31 March 2006 based on factors supplied by the actuary of the relevant Group pension scheme in accordance with actuarial guidance note GN11.
Column (4) is the equivalent transfer value, but calculated as at 31 March 2005 on the assumption that the director left service at that date.
Column (5) is the change in the transfer value of accrued pension during the year net of contributions by the director.
Column (6) is the increase in pension built up during the year, recognising (i) the accrual rate for the additional service based on the pensionable salary in force at the year end, and (ii) where appropriate the effect of pay changes in ‘real’ (inflation adjusted) terms on the pension already earned at the start of the year.
Column (7) represents the transfer value of the deferred pension in column (6).
The disclosures in columns (1) to (5) are as required by the Directors’ Remuneration Report Regulations 2002.
The disclosures in columns (6) and (7) are as required by the UK Listing Authority’s Listing Rules. The requirements of the Listing Rules differ from those of the Directors’ Remuneration Report Regulations. The Listing Rules require the additional pension earned over the year to be calculated as the difference between the pension accrued at the end of the financial year and the pension accrued at the start of the financial year less the increase in the pension earned over the year solely due to inflation. The change in transfer value required by the Directors’ Remuneration Report Regulations will be significantly influenced by the assumptions underlying the calculation at the beginning and the end of the financial year.
11. Directors' service contracts
Terry Duddy
Terry Duddy has a service contract, dated 27 July 1999, which provides for 12 months’ notice on the part of the Company and six months by the executive. The contract ends automatically when Mr Duddy reaches the normal retirement age of 60.
Under the terms of the contract, the Company reserves the option, in its absolute discretion, to terminate the executive’s employment by paying in lieu of notice. The payment in lieu shall be calculated by reference to basic salary taking into account any pension contributions and benefits in kind for the duration of the notice period but without taking into account any bonus or incentive payment of any kind.
John Peace
John Peace has a service contract, dated 31 March 2000, which provides for twelve months’ notice on the part of the Company and six months by the executive. The contract ends automatically when Mr Peace reaches the normal retirement age of 60.
The Company may, in its absolute discretion, make a payment in lieu of the whole or part of the notice period of salary, benefits and any bonus due for that period. The bonus will be calculated by reference to that paid in the previous financial year. The Company will use its best endeavours to procure that the executive is treated under the terms of the LTIP and share option arrangements such that he is vested to the maximum extent possible in LTIP and share options granted to him and that he is granted augmented benefits in the pension scheme as if he had remained in service for the notice period.
If the Company terminates the executive’s employment contract in breach of its terms the Company will pay and the executive agrees to accept as liquidated damages, in full and final settlement of all claims arising from such termination, a payment and arrangements in respect of pension and share options computed as indicated above.
Don Robert
Don Robert has a service contract, dated 25 May 2004, which provides for 12 months’ notice on the part of the Company and six months by the Executive.
The contract provides for the following payments to be made if the contract terminates in the event of the Executive’s death in addition to payments due but unpaid before death: a pro rata annual bonus for the bonus year to the termination date based on the Company’s performance in that bonus year (such bonus to be paid on the normal bonus payment date); a lump sum equal to 12 months’ base salary to be paid no later than 90 days after the date of death. Any deferred compensation obligations will be governed in accordance with the relevant plan rules. If the employment is terminated due to the Executive’s disability the Company will pay in addition to payments due but unpaid before termination; a pro rata bonus as described above. Any deferred compensation obligations will be governed in accordance with the relevant plan rules.
The employment may be terminated by the Company for cause in which event it is only obliged to pay the Executive for his base salary earned but unpaid to the termination date. Any deferred compensation obligations will be governed in accordance with the relevant plan rules. Where the Company terminates the employment without cause the Company will pay the Executive in addition to payments due but unpaid at termination the following severance amounts: his monthly salary at the times when he would normally have received payment for 12 months from the termination date; 12 months’ participation in welfare benefit plans in which he participated during his employment; and an annual bonus based on a 100% achievement of objectives payable in equal monthly instalments for 12 months’. Stock options and deferred compensation plans will be treated in accordance with the plan rules. The same amounts are payable by the Company if the executive terminates the contract following material breach by the Company.
The Executive may terminate his employment for Good Reason following a change of control of the Company. Good Reason means during the six month period following a change of control a material and substantial adverse reduction or change in the executive’s position or if he is reassigned to an office location more than 50 miles from Orange County, California. In this situation the Company must pay him the same amount as if he had been terminated by the Company without cause.
David Tyler
David Tyler has a service contract, dated 3 February 1997, which provides for 12 months’ notice on the part of both the executive and the Company. The contract will end automatically at normal retirement age of 60.
Under the terms of the contract, the Company reserves the option, in its absolute discretion, to terminate the Executive’s employment by making a payment in lieu of notice. The payment in lieu shall be calculated by reference to basic salary taking into account any pension contributions and benefits in kind for the duration of the notice period but without taking into account any bonus or incentive payment of any kind.
Chairman and non-executive directors
The Chairman and the non-executive directors do not have service contracts and their appointment may be terminated at any time without compensation. Non-executive directors are appointed for specific terms of three years and the appointment reviewed at the end of each three-year term.
12. Combined Code
The constitution and operation of the Remuneration Committee are in compliance with the principles of good governance and the Combined Code on Corporate Governance published by the Financial Reporting Council.
13. Shareholding guideline
It is one of the tenets of GUS’ reward strategy that shareholders’ and directors’ interests be aligned. To reinforce this, the Remuneration Committee expects that, over a period of five years or so, executive directors will build a personal holding in GUS shares. This holding should be 200,000 shares in the case of the Group Chief Executive and 120,000 shares in the case of other executive directors.
To underpin this commitment, the Committee expects that, while the guideline holding remains unfulfilled, executive directors will not dispose of any shares vesting to them under any of the GUS incentive plans (save for any disposals necessary to meet tax liabilities arising from them).
14. Directors' interests
The beneficial interests of the directors, together with non-beneficial interests, in the Ordinary shares of the Company are shown below in sections (i) and (ii). Share options granted to directors, awards under the Performance Share Plan and the contingent interests in matching shares under the Co-investment Plan are shown on pages 46 to 48. The directors have no interests in the debentures of the Company or in any shares or debentures of the Company’s subsidiaries.
| GUS plc | ||
| 31 March 2006 (Notes 1 and 2) |
31 March 2005 or on date of appointment |
|
| (i) Beneficial holdings | ||
| Sir Victor Blank | 208,980 | 225,000 |
| John Coombe | 12,469 | 3,000 |
| Terry Duddy | 282,926 | 151,524 |
| Andy Hornby | 6,811 | 5,420 |
| Frank Newman | 8,600 | 7,500 |
| John Peace | 434,127 | 294,154 |
| Don Robert | 197,878 | 114,769 |
| Sir Alan Rudge | 11,085 | 11,450 |
| Oliver Stocken | 30,627 | 31,500 |
| David Tyler | 269,589 | 182,893 |
| (ii) Non-beneficial holdings | ||
| Sir Victor Blank | 2,580 | 3,000 |
Notes
- The Directors’ interests as at 31 March 2006
reflect the adjustment to the number of GUS shares following the
share consolidation as a result of the Burberry demerger.
- On 2 May 2006, Sir Victor Blank, Terry Duddy, David Tyler and Oliver Stocken each exercised 4,394 options under the Company’s 2001 SAYE share option scheme, at an option price of 384p, and kept the resultant shares.