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Report on directors’ remuneration and related matters
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The Board presents its report on directors’
remuneration and related matters in compliance with
new Directors’ Remuneration Report Regulations
which came into force for the first time this year. The
report includes the following sections:
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1. Remuneration Committee
Both the level and structure of executive directors’
pay and the remuneration of the Chairman are
decided by the Remuneration Committee. The
remuneration of non-executive directors is a matter
reserved for the Board as a whole.
The Remuneration Committee is a Board committee
consisting exclusively of independent non-executive
directors: Lady Patten (Chairman), Sir Alan Rudge and
Oliver Stocken. It has written terms of reference from
the Board which currently specify the major duties to
be as follows:-
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To make recommendations to the Board, within
these terms of reference, on the Company’s
framework of executive remuneration and its cost,
its aim being to demonstrate that executive
remuneration is set objectively and that executive
directors are fairly rewarded.
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To determine on behalf of the Board specific
remuneration packages for each of the executive
directors, following the process described below,
together with conditions of employment (including
pension rights), contracts of employment and any
compensation package in the event of the early
termination of a contract.
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To monitor the remuneration of senior executives
below Main Board level so that it can be
sensitive to the wider scene especially when
determining annual salary increases for Main
Board executive directors.
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To establish incentive schemes for executive
directors, set performance criteria and monitor
their performance.
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Pay decisions are made on the advice of or proposals
prepared by 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. In addition, in making its decisions,
the Committee has had direct access to the relevant
external advisers appointed by the Remuneration
Committee and the Company. For the year ended
31 March 2003 the principal remuneration advisers
were Towers Perrin and Kepler Associates. Other than
remuneration advice, no other services were provided
by Kepler Associates. Towers Perrin provided
administrative support on various share schemes.
The Committee meets at least three times a year
and holds additional meetings where necessary.
During the year under review, the Committee met
on five occasions.
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2. Policy Statement
GUS now has three core businesses that are well
positioned to achieve sustained growth. Key to
success has been a move towards a performanceoriented
culture with a clear link between
remuneration and performance.
The four tenets on which our remuneration structure
is founded are as follows:-
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Base pay levels are established on a market
competitive basis but no higher than this.
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Benefits (for example pensions and cars) are
provided on a basis that is appropriate to the local
market in which the director is employed.
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Performance related incentives provide the
opportunity to deliver substantial rewards for
high performance.
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Wherever reasonable, pay is aligned to
shareholders’ interests. This is reflected in the
choice of performance standards applied to
incentive awards and the fact that, for a large part
of the overall incentive package, rewards are
denominated in GUS shares.
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Consistent with our philosophy, 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 to
produce a highly leveraged package if our growth
objectives are attained.
Performance linkages
Each element in the reward package is designed to support the achievement of different corporate objectives. These are illustrated below:
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| Element |
Purpose |
Performance standard |
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| (a) Base salary |
Reflects the competitive salary level for the particular job and takes account of personal contribution and performance. |
Individual contribution |
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| (b) Annual bonus |
Rewards the delivery of current operational targets.
Provides leveraged opportunity to reward the achievement of current
performance targets through re-investment of the bonus in GUS shares
with matching opportunities.
Aligns with shareholder through delivery of shares.
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Profit before tax together with efficient capital usage |
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| (c) Share options |
Direct link to growth objectives through EPS growth hurdle and to value creation through share price increase.
Aligns with shareholder interests.
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EPS growth |
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(d) Performance
share plan |
Aligns with shareholder interests through delivery of shares.
Rewards out-performance of peers.
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Relative total shareholder return |
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In fair value terms, the proportion of total pay
(excluding pensions and benefits) which is variable is
equal to approximately 60 per cent.
We believe that linking incentives to profit growth helps
to reinforce our growth objectives and is an appropriate
measure for a predominantly retail business.
The pay elements are further explained below:
(a) Base salary
To ascertain the job’s market value, external
remuneration consultants annually review and
provide data about market salary levels, and advise
the Remuneration Committee accordingly. These
market rates are based on peer group data and
derived from the pay position described above. Before
making a final decision on individual salary awards,
the Committee assesses each director’s contribution
to the business, to reflect individual performance.
(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. 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. The number of matching shares may vary from a
threshold ratio of one half for one, to a maximum of
two for one. The release of these shares is deferred
for three years including the deferred bonus. If an
executive resigns during the three-year period he will
forfeit the right to the matching shares.
Bonuses are currently awarded for achieving profit
before tax growth and meeting efficient capital
usage targets. These targets are calibrated using
a range of benchmarks based on internal and
external expectations.
(c) Share options
The link to share price provides a built in
performance driver for option holders and further
aligns them with shareholders’ interests. In addition,
the scheme applies a further performance test which
requires EPS to grow by 4 per cent above inflation
when measured over a continuous period of three
years commencing no earlier than the latest financial
year during which the option is granted and
terminating no later than the end of the fifth financial
year after the year in which the option is granted.
Options granted to GUS directors are typical in the UK
market in that they vest three years after grant, are
subject to the performance test and remain exercisable
for seven years after vesting. No director may normally
receive annually an option grant with a total exercise
price of more than one times salary. In exceptional
circumstances the Remuneration Committee has
discretion to grant up to two times salary.
(d) Performance share plan
The primary objective of the performance share plan
is to underpin 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,
Boots, Dixons, Equifax, Harte Hanks, Kingfisher,
Marks & Spencer, N. Brown, Next, Pinault Printemps
Redoute, Reed Elsevier, Reuters, Signet and Tesco.
None of the awards will 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 will vest, while 100 per cent of the award
will be earned for an upper quartile return or better.
Between median and upper quartile performance,
awards will vest by straight-line interpolation.
For the year to 31 March 2003, the maximum grant
available to directors was 100 per cent of salary,
converted to shares at the price prevailing at the time
the awards were made. The awards were made in
June 2002 and will vest, to the extent that the
performance test is met, in June 2005.
No awards will be released unless the Remuneration
Committee is also satisfied with the Company’s
underlying financial performance over the
relevant period.
(e) Pensions and other benefits
Pensions are offered in line with local competitive
practice. The retirement age for directors in the UK is
60 under arrangements which broadly provide a
pension of two thirds of final salary (subject to Inland
Revenue limits), life assurance at four times salary and
ill health and dependants’ pensions. Incentive payments
(such as annual bonuses) are not pensionable.
Arrangements are in place to provide pension
benefits to those executive directors affected by the
pensions cap. These are designed to provide pension
benefits in excess of the Inland Revenue cap thereby
placing those directors in broadly the same position
as directors whose pension is unaffected by this cap.
Further details are provided under the disclosure of
the arrangements for each director.
Cars are provided on a basis that is consistent with
competitive practice.
Directors, in the UK, in common with all GUS’ UK
employees, are eligible to participate in the
Company’s Savings Related Share Option Scheme.
(f) Service contracts
The Board’s policy over many years has been to limit
service contracts of executive directors to one-year
rolling terms. 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
which is appropriate to the circumstances of the case.
Historically, there has been one exception to this
policy which the Board justified as being in
shareholders’ interests. As a reflection of local
employment conditions in South Africa, Alan Smart,
Chief Executive of our retailing interest in that country,
had a contract which provided for 24 months’ notice
on the part of both the company and the executive.
These arrangements were varied during the course of
the year under review in that, by letter dated 21
August 2002, the parties agreed that the notice of
termination would be reduced to 12 months on the
part of both the executive and the company.
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3. Performance Graph
The following performance graph shows the total
shareholder return (‘TSR’) for GUS versus the FTSE 100
for the last five financial years.
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| Value of £100 invested in March 1998 - shown on a monthly basis |
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| 4. Directors’ emoluments |
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2003 |
2002 |
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£’000 |
£’000 |
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| Total emoluments: salary |
1,781 |
2,053 |
| performance related bonuses |
1,628 |
1,670 |
| taxable benefits in kind |
107 |
93 |
| non-executive directors |
548 |
426 |
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4,064 |
4,242 |
| Long Term Incentive Plans (‘LTIPs’) |
– |
683 |
| Payments to former directors (Note 1) |
41 |
312 |
| Pension contributions |
289 |
293 |
| Pensions in respect of former directors |
398 |
292 |
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4,792 |
5,822 |
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The following table shows an analysis of the remuneration of the
individual executive directors: |
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Annual |
Taxable |
Total |
Total |
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Salary |
bonus |
benefits |
2003 |
2002 |
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|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
| Eric Barnes |
(Note 1) |
– |
– |
– |
– |
60 |
| Victor Barnett |
(Note 2) |
129 |
– |
– |
129 |
630 |
| David Bury |
(Note 3) |
– |
– |
– |
– |
84 |
| Terry Duddy |
|
525 |
525 |
24 |
1,074 |
1,294 |
| John Peace |
(Note 9) |
650 |
650 |
31 |
1,331 |
1,551 |
| Alan Smart |
|
89 |
61 |
6 |
156 |
147 |
| Craig Smith |
(Note 8) |
8 |
12 |
– |
20 |
– |
| David Tyler |
(Note 9) |
380 |
380 |
18 |
778 |
712 |
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| Benefits for executive directors comprise a fully expensed company
car or cash equivalent and private medical insurance. |
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| The following table provides details of the emoluments of the Chairman
and individual non-executive directors. There were no
taxable benefits other than those disclosed in note 4.
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2003 |
2002 |
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£’000 |
£’000 |
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| Sir Victor Blank |
(Note 4) |
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296 |
240 |
| Jonathan Charkham |
(Note 5) |
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– |
10 |
| Lord Harris of Peckham |
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42 |
30 |
| Frank Newman |
(Note 6) |
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42 |
10 |
| Lady Patten of Wincanton |
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57 |
37 |
| Sir Alan Rudge |
(Note 7) |
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54 |
62 |
| Oliver Stocken |
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57 |
37 |
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Notes
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Eric Barnes retired from the Board on 25 July 2001.
He was paid £41,000 during the year under a
consultancy agreement which commenced on 1
August 2001 and was renewed on 15 March 2002.
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Victor Barnett retired from the Board on 1 July 2002.
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David Bury retired from the Board on 25 July 2001.
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Sir Victor Blank’s remuneration of £296,000,
reported above, consists of £30,000 as a
non-executive director and £266,000 as Chairman.
In addition he has the use of a company car, the
taxable benefit for which in the year under review
was £28,000.
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Jonathan Charkham retired from the Board on 25 July 2001.
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Frank Newman was appointed to the Board on 10 December 2001.
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Sir Alan Rudge’s remuneration consists of £49,600
as a non-executive director and £4,200 as Chairman
of the Company’s e-Commerce Developments
Committee. The Committee was disbanded in
May 2002.
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Craig Smith was appointed to the Board on 25 March 2003.
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John Peace serves 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 retains approximately 77 per cent of
the issued share capital. Neither executive receives
any additional remuneration for such services.
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During the course of the year under review, the Board
considered the level of remuneration paid to the
Chairman and the non-executive directors. It was
decided that the remuneration paid in cash should
remain unchanged but that any increase should be
paid in shares. The new remuneration structure for
non-executive directors is as follows:-
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Each non-executive director receives a base fee of
£30,000 per annum payable in cash.
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The chairmen of the Audit and Remuneration
Committees and the senior independent director
each receive an additional fee of £7,500 per
annum payable in cash.
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In addition, each non-executive director
receives 2,500 GUS shares as part of his/her
annual remuneration.
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The chairmen of the Audit and Remuneration
Committees now receive an additional 1,500
shares as part of their annual remuneration.
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Directors are obliged to retain shares awarded
under these arrangements until their retirement
from the Board. Any tax liability connected to
these arrangements is the responsibility of the
individual director.
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The following shares were purchased on 25 July 2002
as the first such payment under these new
arrangements. The value reported below is included
within the remuneration reported in the above table:-
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Number of |
Value |
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Shares |
£ |
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| Lord Harris |
2,500 |
12,129 |
| Frank Newman |
2,500 |
12,129 |
| Lady Patten |
4,000 |
19,406 |
| Sir Alan Rudge |
2,500 |
12,129 |
| Oliver Stocken |
4,000 |
19,406 |
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As part of this review of directors’ remuneration, the
Board approved an increase in Sir Victor Blank’s
remuneration effective from 1 July 2002 and agreed
that 25 per cent of his remuneration be satisfied by
payment in shares, the number so purchased to
remain fixed for a two year period. 15,000 shares
were purchased under this arrangement on 25 July
2002. The value of the shares so purchased, £72,800,
is included within the remuneration reported in the
above table. The shares so acquired are to be
retained by Sir Victor until his retirement from the
Board.
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| 5. Share options |
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Details of options granted to executive directors, under the Company’s executive share option schemes,
are set out in the table below:
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Total |
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Number of |
Options |
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number of |
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options at |
granted |
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Date from |
|
options at |
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1 April 2002 |
during |
Exercise |
which |
Expiry |
31 March |
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or date of appointment |
the year |
price |
exercisable |
date |
2003 |
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| Terry Duddy |
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| 07.04.00 |
93,159 |
– |
375.7p |
07.04.03 |
06.04.10 |
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| 07.08.00 |
81,737 |
– |
428.2p |
07.08.03 |
06.08.10 |
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| 11.06.01 |
150,155 |
– |
612.7p |
11.06.04 |
10.06.11 |
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| 06.06.02 |
– |
80,398 |
653.0p |
06.06.05 |
05.06.12 |
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405,449 |
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| John Peace |
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| 07.04.00 |
146,393 |
– |
375.7p |
07.04.03 |
06.04.10 |
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| 11.06.01 |
195,854 |
– |
612.7p |
11.06.04 |
10.06.11 |
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| 06.06.02 |
_ |
99,540 |
653.0p |
06.06.05 |
05.06.12 |
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441,787 |
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| Alan Smart |
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| 11.06.01 |
37,038 |
– |
612.7p |
11.06.04 |
10.06.11 |
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| 06.06.02 |
– |
14,235 |
653.0p |
06.06.05 |
05.06.12 |
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51,273 |
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| Craig Smith |
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| 14.06.00 |
191,051 |
– |
381.3p |
14.06.01 |
13.06.06 |
|
| 11.06.01 |
214,048 |
– |
612.7p |
11.06.02 |
10.06.07 |
|
| 06.06.02 |
198,337 |
– |
653.0p |
06.06.03 |
05.06.08 |
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603,436 |
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| David Tyler |
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| 09.12.98 |
43,088 |
– |
580.2p |
09.12.01 |
08.12.08 |
|
| 23.06.99 |
37,308 |
– |
690.2p |
23.06.02 |
22.06.09 |
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| 07.04.00 |
86,505 |
– |
375.7p |
07.04.03 |
06.04.10 |
|
| 11.06.01 |
114,248 |
– |
612.7p |
11.06.04 |
10.06.11 |
|
| 06.06.02 |
– |
58,192 |
653.0p |
06.06.05 |
05.06.12 |
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339,341 |
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Options granted to Craig Smith prior to his appointment as a director were granted under the US Stock Option Plan. Any future grants to
Mr Smith will be made under the UK Executive Share Option Scheme.
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 options may not be exercised unless, during a period of three consecutive financial years, Group earnings per share have increased
by an average of at least 4 per cent per annum more than the Retail Prices Index.
The market price of the shares at the end of the financial year was 487p; the highest and lowest prices during the financial year were
700p and 440p respectively.
Full details of directors’ shareholdings and options to subscribe are contained in the Company’s Register of Directors’ Interests.
No options were exercised by directors during the year under review.
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Phantom share option
Previous reports have disclosed the nature of a “phantom” share option arrangement granted to Victor Barnett who retired from the Board on
1 July 2002. On exercise, in the period 1 August 2003 to 31 July 2006, Mr Barnett was to have been paid a cash sum equal to any increase in
the value of 164,007 GUS shares over the period 1 August 2000, when the share price was 430p, to the date the option was exercised.
The details of this arrangement have subsequently been varied. The gain was crystallised at the date of the Burberry initial public offering
(‘IPO’) and, instead of being paid in cash, was converted into 83,596 Burberry shares using the IPO price of a Burberry share. The Company
has agreed to match the number of Burberry shares in the ratio 1.3 to 1 with the receipt of the total number of shares deferred for a period
of five years from the date of the Burberry IPO. Mr Barnett can, however, elect to receive the shares sooner at a 10 per cent discount.
SAYE share option scheme
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Options granted to directors under the Company’s SAYE share option scheme were as follows:-
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Number of |
|
Date |
|
| |
options at |
|
from |
|
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31 March 2002 |
Exercise |
which |
Expiry |
| |
and 2003 |
price |
exercisable |
date |
|
| Sir Victor Blank |
4,394 |
384p |
01.05.06 |
31.10.06 |
| Terry Duddy |
4,394 |
384p |
01.05.06 |
31.10.06 |
| Lord Harris of Peckham |
2,522 |
384p |
01.05.04 |
31.10.04 |
| Lady Patten of Wincanton |
2,522 |
384p |
01.05.04 |
31.10.04 |
| John Peace |
4,394 |
384p |
01.05.06 |
31.10.06 |
| Oliver Stocken |
4,394 |
384p |
01.05.06 |
31.10.06 |
| David Tyler |
4,394 |
384p |
01.05.06 |
31.10.06 |
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6. Long term incentive plans – performance share plan
An award under the Company’s Performance Share Plan takes the form of a deferred right to acquire shares at no cost to the participant.
The vesting of these awards is subject to the performance conditions described
above in Performance linkages.
Awards to present directors under this plan have been as follows:-
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Shares |
|
|
| |
Shares |
awarded during |
|
Total shares |
| |
awarded at |
the year to |
|
awarded at |
| |
31 March |
31 March |
Vesting |
31 March |
| |
2002 |
2003 |
date |
2003 |
|
| Terry Duddy |
|
|
|
|
| 07.04.00 |
74,527 |
– |
April 2003 |
|
| 11.06.01 |
37,538 |
– |
June 2004 |
|
| 06.06.02 |
– |
80,398 |
June 2005 |
|
| |
|
|
|
192,463 |
|
| John Peace |
|
|
|
|
| 07.04.00 |
146,393 |
– |
April 2003 |
|
| 11.06.01 |
48,963 |
– |
June 2004 |
|
| 06.06.02 |
– |
99,540 |
June 2005 |
|
| |
|
|
|
294,896 |
|
| Alan Smart |
|
|
|
|
| 06.06.02 |
– |
14,235 |
June 2005 |
14,235 |
|
| David Tyler |
|
|
|
|
| 07.04.00 |
69,204 |
– |
April 2003 |
|
| 11.06.01 |
28,562 |
– |
June 2004 |
|
| 06.06.02 |
– |
58,192 |
June 2005 |
|
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|
|
|
155,958 |
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100 per cent of the awards made on 7 April 2000 vested on 30 April 2003 following confirmation that the GUS total shareholder return
for the performance period was in the upper quartile in relation to the total shareholder return of the comparator group and confirmation
from the Remuneration Committee that the underlying financial performance of the Company during the performance period had
been satisfactory.
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7. Co-investment plan
As explained above in note (b), directors are given the opportunity to defer receipt of their annual bonus and have it invested in GUS
shares. Last year, John Peace, Terry Duddy and David Tyler chose to invest the whole of their bonus. Shares so purchased on their behalf,
applying the bonuses reported in last year’s Annual Report, are included below in the table of
directors’ interests.
Matching shares under these arrangements are not released until the expiry of a three-year period and the right to these shares is forfeited if a director
resigns before then. The contingent interests in such matching shares are John Peace (187,900 shares), Terry Duddy (144,056 shares) and
David Tyler (109,608 shares).
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8. Retirement benefits
Victor Barnett, who retired in the year under review, has an unfunded pension arrangement for which provision has been made in the financial
statements. During the year under review an amount of £43,000 was charged against profit in order to provide for this unfunded arrangement.
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 pensions cap subject to Inland Revenue limits. In addition, his contract provides for the choice of a funded or unfunded scheme to
provide benefits above the pensions cap. Mr Duddy has 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 £197,000.
David Tyler’s pension benefits, above the pensions cap, previously were provided for through payments into a funded unapproved retirement
benefit scheme (“FURBS”). However with effect from 1 April 2002, this arrangement was changed so that, in future, such benefits will be
provided through an unfunded unapproved retirement benefit scheme after recognising amounts previously invested in a FURBS. The
aggregate invested in the FURBS in the five years to 31 March 2002, when the arrangement ceased, was £478,000. During the year under
review an amount of £629,000 was charged against profit in order to provide for the accumulated unfunded arrangement.
Alan Smart is a member of the pension scheme operated by the Company’s South African subsidiary.
Craig Smith, who was appointed to the Board on 25 March 2003, participates in Experian North America’s 401(k) pension plan, a defined
contribution style arrangement. Contributions to the plan in the year ended 31 March 2003 amounted to $10,000. In addition, instead of
providing Mr Smith with a Supplemental Executive Retirement Plan, the Company pays him an additional cash sum annually in advance for
investment at his discretion. The additional cash sum for 2003/04 was paid in the year ended 31 March 2003 and amounted to $132,000.
The table set out below provides the disclosure of directors’ pension entitlements in respect of benefits from tax exempt schemes and
unfunded arrangements.
|
| |
| |
Accrued |
Accrued |
Transfer |
Transfer |
|
Additional |
|
| |
pension at |
pension at |
value at |
value at |
Change |
pension |
Transfer |
| |
31 March |
31 March |
31 March |
31 March |
in transfer |
earned to |
value of the |
| |
2003 |
2002 |
2003 |
2002 |
value31 |
March 2003 |
increase |
| |
(1) |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
| |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
| Terry Duddy |
15 |
6 |
101 |
55 |
31 |
8 |
44 |
| John Peace |
362 |
334 |
4,161 |
4,236 |
(75) |
22 |
253 |
| David Tyler |
77 |
30 |
637 |
360 |
258 |
46 |
366 |
|
| |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
$’000 |
|
| Victor Barnett |
234 |
228 |
3,546 |
3,192 |
354 |
2 |
30 |
|
| |
Rand ‘000 |
Rand ‘000 |
Rand ‘000 |
Rand ‘000 |
Rand ‘000 |
Rand ‘000 |
Rand ‘000 |
|
| Alan Smart |
899 |
806 |
7,417 |
6,329 |
1,088 |
93 |
767 |
|
| |
The disclosures in columns (1) to (5) are as required by the Companies Act 1985 Schedule 7A.
Columns (1) and (2) represent the deferred pension to which the directors would have been entitled had they left the Group on
31 March 2003 and 2002, respectively.
Column (3) is the transfer value of the deferred pension in column 1 calculated as at 31 March 2003 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 2002 on the assumption that the director left service at that
date. Victor Barnett retired on 1 July 2002. The figures reported are in relation to accrued pension at age 65, the normal retirement age.
Column (5) is the change in 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) is the capital value of the pension in column (6). It represents the amount of cash required to secure that increase in
accrued pension.
There are four directors for whom retirement benefits are accruing under defined benefit schemes. One director has a money purchase
pension arrangement. The Chairman and the non-executive directors are not entitled to pension benefits from the Company.
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 Companies Act. 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 the transfer value required by the Companies Act will
also be significantly influenced by the assumptions underlying the calculation at the beginning and the end of the financial year and
market conditions.
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9. Directors’ service contracts
The disclosures required by the Regulations in respect of directors’ service contracts are as follows:-
Terry Duddy
Terry Duddy has a service contract, dated 27 July 1999, which provides for twelve 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 states that it will end automatically when Mr Peace reaches the normal retirement age of 65 but, as
previously reported, the retirement age for directors subsequently was reduced to 60.
Under the terms of the contract, the Company reserves the option, in its absolute discretion, to pay the executive in lieu of the period of
notice or the unexpired balance. The payment will be of an amount equal to basic salary and an amount equal to the value of any benefits in
kind for the duration of the notice period or the unexpired balance and an amount equal to any bonus to which the executive would have
been entitled had he remained in office for the balance of the fixed term or for the notice period or the unexpired balance as the case may
be (such bonus to be computed by reference to the bonus paid in respect of the financial year ended immediately before the termination of
employment). The Company is to 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 will also procure
that the executive is granted augmented benefits in the pension scheme as if he had remained in service for the duration of the notice
period or the unexpired balance.
The contract also contains a clause covering liquidated damages. If, in breach of the terms of the contract, the Company terminates the
executive’s employment then 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 sum computed as indicated above. As also indicated above, the Company will use its best
endeavours concerning LTIP, share option and pension arrangements.
Alan Smart
Alan Smart has a service contract the commencement date for which is 1 April 1997 and which, as reported elsewhere, has been varied in
terms of the provision covering periods of notice. Once notice of termination has been given the Company shall continue to pay the
executive’s salary and provide all the benefits provided for in the agreement.
David Tyler
David Tyler has a service contract, dated 3 February 1997, which provides for twelve months’ notice on the part of both the executive and
the Company. The contract will end automatically at normal retirement age which, as reported elsewhere, has been reduced from 65 to 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.
Craig Smith
Craig Smith has a service contract, dated 27 March 2003, which provides for twelve months’ notice on the part of the Company and six
months by the executive. The contract makes specific provisions for the amounts payable to the executive by the Company. Where
termination is without cause the agreement provides as follows:-
|
| |
-
Monthly salary to be paid at the same times as the executive would have received such payment had he remained in employment for
a period of twelve months from the termination.
-
Payment of the annual bonus to which the executive would have been entitled for the bonus period during which the termination
date occurred as if the level of achievement of target objectives were 100 per cent as of the end of such period, payable in equal
monthly instalments.
-
In accordance with normal practice in the US the contract contains a no mitigation clause.
-
The executive’s stock options under any stock option or similar plan will be exercisable as specified in the relevant plan rules and any
applicable grant agreement. Vesting of stock options will not be accelerated unless provided in the stock option or similar plan rules or
the applicable grant agreement.
|
Victor Barnett
Victor Barnett, who retired from the Board on 1 July 2002, did not have a written contract of service. A written memorandum of his terms of
employment was available for inspection showing that, in common with other executive directors, its duration was limited to one-year
rolling terms.
Chairman and non-executive directors
The Chairman and 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 specified terms of 3 years and the appointment reviewed at the end of each 3 year term.
As explained elsewhere, it has been agreed that Lord Harris should seek re-election annually in the light of his length of service on the Board.
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10.Combined Code
The constitution and operation of the Remuneration Committee are in compliance with the principles of good governance and Code of Best
Practice set out in the Listing Rules of the Financial Services Authority.
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11. 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).
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12.Directors’ interests
The beneficial interests of the directors, together with non-beneficial interests, in the Ordinary shares of the Company and in the Ordinary
shares of Burberry Group plc, being a body corporate of the same group, 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 above in point 5. Save for the disclosures in relation to Burberry shares, the directors have no interests in the debentures of the
Company or in any shares or debentures of the Company’s subsidiaries.
|
| |
| |
|
Company |
|
Burberry Group plc |
|
|
|
|
| |
|
|
1 April 2002 |
|
|
1 April 2002 |
| |
|
|
or date of |
|
|
or date of |
| |
|
31 March 2003 |
appointment |
|
31 March 2003 |
appointment |
|
| (i) |
Beneficial holdings |
|
|
|
|
|
| |
Sir Victor Blank |
195,000 |
100,000 |
|
– |
– |
| |
Terry Duddy |
60,717 |
2,500 |
|
– |
– |
| |
Lord Harris of Peckham |
9,700 |
7,200 |
|
– |
– |
| |
Frank Newman |
2,500 |
– |
|
– |
– |
| |
Lady Patten of Wincanton |
8,370 |
4,370 |
|
– |
– |
| |
John Peace |
96,370 |
30,000 |
|
16,000 |
– |
| |
Sir Alan Rudge |
6,450 |
3,950 |
|
– |
– |
| |
Alan Smart |
– |
– |
|
– |
– |
| |
Craig Smith |
– |
– |
|
– |
– |
| |
Oliver Stocken |
22,231 |
12,621 |
|
– |
– |
| |
David Tyler |
52,882 |
20,000 |
|
16,000 |
– |
| (ii) |
Non-beneficial holdings |
|
|
|
|
|
| |
Sir Victor Blank |
3,000 |
3,000 |
|
– |
– |
| |
Lord Harris of Peckham |
25,000 |
25,000 |
|
– |
– |
|
| |
|
|
| |
On behalf of the Board
Lady Patten of Wincanton
Chairman – Remuneration Committee
27 May 2003
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