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Service contracts
The Board considers that. in the light of competitive practices
in the global entertainment industry, it is not appropriate for the
Company to comply with the principle in the Combined Code
that one-year notice periods or contract terms be set as a firm
objective for Executive Directors. Howevet the Company intends
to continue its current practice of providing contracts normally
terminable on one years notice for those Executive Directo6 to
whom industry competitive practices do not directly apply.
The Remuneration Committee endoEes the principle of mitiqation
of loss on early termination of a service contract. lt also recognises
the advantage of service contracts including an explicit calculation
of compensation payable upon early termination, other than for
misconduct or in other circumstances justifying summary
termination. However, it is the Committees policy that where a
service contrad provides such a calculation, it should also include
an explicjt obligation to mitigate and to offset earnings from
alternative employment against all or part of the compensation
payment.
Mr Nicoli has a service contract terminable on one years notice,
except that the notice period from the Company is increaed
to two yea6 up to 30 April 2001. Following a change of control
of the Company the notice period from the Company will be
at least two years.
ln the light of competitive music industry practice, Mr Berry Mr
Bandier and Mr Bates have service contracts which allow the
employer to terminate the contract at any time without notice,
with a specified severance payment (broadly, base salary, benefits
and target bonus for two years) being payable on termination by
the employer without cause or by the executive for good reason
(each as defined in the contract). However, there is an express
obligation on the executive to mitigate, and any earnings from
alternat've employment during the year following termination are
offset against the severance payment; for Mr Bates, this period
of one year commences 12 months after termination. ln other
circumstances, the executive must give one years notice of
termination. Following a change of control of the Company,
Mr Berry and Mr Bandier are entitled to terminate their service
contracts after a one-year transitional period and to receive a
severance payment as if they had terminated the contract with
good reason. Mr Bandier's contract also provides for its automatic
expiry on 31 March 2003.
Any compensation payable to Mr Nicoli on early termination of
his service contract would be sublect to a requirement to mitigate,
except that in the case of termination following a change of
control of the Company, the first years compensation would
not be subject to this requirement.
Non-executive DirectoB
Fees for Non-executive Directos were increased during the year
for the fir:l time in four yean. Each Non€xecutive Director receives
a basic fee, which, {ollowing the increase. is nor,rr inclusive of all
committee memberships. Sir Dominic Cadbury receives a further
amount in respect of his addrtional duties and responstbilittes in
his capacity as Deputy Chairman and senior independent Nonexecutive
Director. Ms O'Donovan also receives a further sum
for chairinq the Audit Committee. The level of these fees is set
by the Board and the Non-executive Directors take no part in
the discussion and do not vote on the matter. The Non-executive
Directors do not pafticipate in the Companys incentive, share
option or retfement plans. nor do they have service contracts, but
each appointment is subject to review at least every three years.
Formation of Warner EMI Music
lf the proposed combination of the Company5 music business
with that of Time Warner. to form Warner EMI Music, is
implemented the malority of the options granted under the
Companys share option schemes will become exercisable for
a limited period of time, and share awards under the SEIP will
become vested. Further information on these and other matters
related to Directors' remuneration will be given in the Circular and
Listing Particulars relating to the proposed combination which are
expected to be posted to shareholders on 2 June 2000.