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Executive Directors’ cash incentives and ROE
Pre-tax return Average bonus as a
on equity percentage of salary
% %
1998 16 73
1999 0 0
2000 3 0
2001 (24) 0
2002 13 90
2003 30 202
2004 28 173
2005 19 54
2006 35 274
2007 36 372
2008 14 53
2009 34 287
The payment of larger bonuses is normally
deferred over a three-year period as follows.
Bonus of £50,000, Entire bonus taken
€75,000, $100,000
and below
in cash in year one
Bonus above £50,000 £50,000, €75,000,
and below £100,000 $100,000 taken in
Bonus above €75,000 year one
and below €150,000 Balance of bonus
Bonus above $100,000 split 50% in year two,
and below $200,000 and 50% in year three
Bonus above £100,000 50% of bonus taken
Bonus above €150,000 in year one
Bonus above $200,000 Balance of bonus
split 50% in year two,
and 50% in year three
Share ownership is encouraged amongst senior
personnel by allowing the deferred element of
the annual bonus to be used, without deferral for:
payment of the exercise price on the
exercise of share options;
payment of tax on the exercise
of performance shares;
purchase of shares; and
payment of debt due on share purchases.
The only exception to this is for US-based
employees where, due to the implications
of the US Internal Revenue Code, employees
are not able to receive the deferred element of
their bonuses early in order to purchase shares.
Early payment of deferred bonuses for reasons
other than the above can only be made with
the agreement of the Chief Executive (and
the Remuneration and Nomination Committee
in the case of Executive Directors).
The Remuneration and Nomination Committee
has decided that bonuses earned in respect of
performance in financial year 2009 need not be
deferred. Employees will, however, be required
to repay a proportion of their bonuses in the
event that they leave in circumstances in which
they would otherwise have forfeited them.
Share Incentive Schemes
The Remuneration and Nomination Committee
believes that employees should be encouraged
to own Hiscox shares so that they are aligned
with the long-term success of the Company.
Hiscox operates a Performance Share Plan for
senior managers, a UK Save as You Earn
scheme and an International Save as You Earn
scheme.
Performance Share Plan
Restricted share awards or nil cost option
awards (depending on the appropriate practice
by country) are made to Executive Directors
and other senior managers at the discretion of
the Remuneration and Nomination Committee.
Awards under this plan were made in 2009 and
the Remuneration and Nomination Committee
has also agreed to make awards under this plan
in 2010. The maximum annual award to an
individual under the Performance Share Plan is
a value of 200% of basic salary. The highest actual
grant awarded in 2009 was 193% of basic salary.
Dividend payments
In order to better align senior managers with
Total Shareholder Return, the concept which
is applied to the Performance Share Plan
awards is that the recipient is provided with
the equivalent of the dividend either in shares
or cash. This specifically works as follows:
dividends (or amounts equal to dividends)
on shares granted under the Performance
Share Plan roll up in the form of shares
between the grant and vesting;
at the end of the performance period the
employee would have options over the
proportion of the share grant which vests
by reference to the satisfaction of the
applicable performance target as well as
over the number of shares representing the
‘rolled up’ dividends on those shares; and
for UK-based employees only, after
vesting but before exercise, the employee
would then receive ‘shadow dividends’
(i.e. amounts equal to dividends paid) on
the total number of shares remaining under
option. Up to a maximum of 200,000
shares under option per individual, these
amounts would be paid in cash, twice
yearly, at the same time as dividends
are paid to shareholders, until the option
is exercised (which could be for up to
a further seven years, when the option
expires). Above 200,000 shares under
option, the ‘shadow dividends’ would be
re-invested into shares within the trust.
Executive Directors, however, would have
Directors’ remuneration report Hiscox Ltd Report and Accounts 2009
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