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direCtors’ remuneration report
This report has been prepared in accordance with the requirements of
Regulation II and Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (the Regulations) and of the
Combined Code on Corporate Governance 2008 (“the Combined Code”).
unaudited information
the remuneration Committee
During the 52 weeks ended 26 April 2009 (the Year), the members of the
Remuneration Committee (the Committee), were:
• Dave Singleton (Chairman)
• Simon Bentley
• Malcolm Dalgleish
Dave Singleton and Malcolm Dalgleish are independent non-executive directors.
Simon Bentley was an independent non-executive director on his appointment
as Acting Chairman.
The main responsibilities of the Committee are summarised in the Corporate
Governance Report on page 20.
advisers
The Committee has appointed Towers Perrin to provide it with independent
advice in determining the appropriate remuneration, including bonus schemes,
and other terms and conditions of employment of directors, and to assist it in
the review of remuneration policies and practices throughout the Group.
Towers Perrin has, with the consent of the Committee, assisted the Company
in the past by providing market data and advice in connection with the
remuneration of senior managers. The Committee is conscious of the need to
ensure that no conflict of interest arises as a result of Towers Perrin advising
both it and the Company, but believes that the benefits of consistent advice
outweighs the possible problems that could arise from these arrangements.
A summary of the terms of reference of Towers Perrin in their role as
independent advisors to the Committee are set out on the Company’s website
and are available upon request from the Company Secretary.
Dave Forsey, the Chief Executive, Bob Mellors, the Group Finance Director, and
Mike Ashley, the Executive Deputy Chairman have also advised or materially
assisted the Committee when requested.
remuneration poliCy
The Committee has endorsed the provisions of Section 1B of the Combined
Code, and has had those provisions in mind when determining remuneration
policies for the past, current and future years. Policies and practice in respect
of remuneration inevitably evolve over time and, while it is currently believed
that the policies described in this report will apply in future years, they will be
subject to regular review.
The Group operates in a highly competitive retail environment, and the
Committee seeks to ensure that the level and form of remuneration is
sufficient to attract, retain and motivate directors and senior managers of the
quality and talent required to run the Group successfully. In order to maintain
the Group’s historic focus on growth, the Committee has adopted a strongly
performance based remuneration policy for executive directors, under which
a large proportion of their remuneration will be dependent upon the Group’s
performance, and paid in shares.
Basic salaries for executive directors other than Mike Ashley have been set at
a level well below the median level for a business of the size and complexity
of the Group. The maximum payment under the annual bonus plan during the
Year was 100% of salary, and the Performance Share Plan permits annual
grants of up to four times salary. The maximum payment under the proposed
Bonus Share Scheme, described below, is shares having a market value of
approximately 100% of salary, deferred for 2 years. If the establishment of the
Bonus Share Scheme is approved then it will replace the Annual Bonus Scheme
during the term of the Bonus Share Scheme.
If the Committee were to change its policy on basic salaries, then it would
revisit the salary multiple for grants under the Performance Share Plan, and the
Committee’s remuneration policy set out above will not necessarily apply to any
new appointment to the Board.
Mike Ashley has agreed that he will not receive a salary for his role as Executive
Deputy Chairman, nor does he participate in the Performance Share Plan, and
he will not participate in the Bonus Share Scheme if approved.
22 Directors’ Remuneration Report
Executive directors do not participate in a company pension arrangement in
respect of which the Company makes a financial contribution, and do not have
the use of a company car or other similar benefits often available to executive
directors. Towers Perrin has advised the Committee that in aggregate the total
remuneration of Dave Forsey and Bob Mellors is well below median.
The Committee intends to establish and thereafter maintain contact with
major shareholders and representative groups where appropriate concerning
remuneration matters.
The expected value of a four times salary award under the Performance
Share Plan is approximately 170% of salary. Accordingly, if the Company’s
performance meets target levels, disregarding the proposed Bonus Share
Scheme, performance related pay in 2009-10 is likely to account for
approximately 70% of Dave Forsey and Bob Mellors’ total remuneration, and
at upper quartile performance, performance related pay would account for
approximately 85% of total remuneration, depending in each case on share
price improvement during the relevant performance period. The expected
value of the Bonus Share Scheme, if approved, is approximately 100% of salary
over four years. If target level performance under that and other schemes is
reached in 2009-10 then performance related pay in that year is likely to account
for approximately 66% of Dave Forsey and Bob Mellors total remuneration
and at upper quartile performance related pay would account for 81% of total
remuneration depending upon share price performance.
The Committee is at all times mindful of the Company’s social, ethical and
environmental responsibilities, and is satisfied that current remuneration
arrangements do not inadvertently encourage irresponsible behaviour.
remuneration poliCies and key elements of remuneration
The Committee has reviewed the salaries, other remuneration and other
employment conditions of senior and middle managers throughout the Group,
and has taken them into account in considering directors salaries, bonus
awards and the creation of new bonus schemes in order to create a sense of
common purpose and sharing of success. The Performance Share Plan has
been extended to certain senior managers and the proposed Bonus Share
Scheme will apply to all UK permanent employees of the Group in the UK
Retail, Brands and Head Office on the same basis, including applying the same
percentage of salary, irrespective of seniority.
Executive directors’ remuneration and the remuneration of other key senior
management during the Year comprised:
• Basic Salary
• Annual Bonus Scheme
• Performance Share Plan
• Pension
Subject to approval of the Bonus Share Scheme at the Annual General Meeting,
it is intended that in 2009-10 executive directors’ remuneration will comprise
the Bonus Share Scheme and the elements listed above other than the Annual
Bonus Scheme.
BasiC salary
Basic salaries are reviewed annually, but the first review post the Admission of
the Company to the official list and to trading on the London Stock Exchange
on 2 March 2007 (Admission) did not take place until April 2008. There was no
increase in executive directors’ salaries on that review and in April 2009 the
Committee decided again not to alter executive directors’ salaries. Executive
directors’ salaries have now been at the same level since 2002.
annual Bonus sCheme
The Annual Bonus Scheme rewards executive directors for achieving
challenging business performance targets, chosen at the beginning of the
period for their relevance in driving the short term performance of the Group
towards the achievement of strategic goals. In the Year the maximum bonus
payable to Dave Forsey and Bob Mellors was 100% of salary, and one half of the
bonus was to be paid if both target sales and target EBITDA were achieved, and
the remainder of the bonus would be paid if target sales are achieved and if a
stretch target EBITDA is achieved, with no intermediate payments. Performance
was such that no bonus was paid in respect of the Year.
The Committee has determined that, if the proposed Bonus Share Scheme is
approved at the Company’s Annual General Meeting in September 2009 and
implemented with effect from the beginning of the current financial year, then
no Annual Bonus Scheme will be operated for executive directors while the
Bonus Share Scheme is being operated. Mike Ashley did not participate in the
Annual Bonus Scheme for the Year, and will not participate in the proposed
Bonus Share Scheme.