Chemring Group PLC |Annual Report and Accounts 2012

40
Corporate governance
Directors’ remuneration report
continued
An award of performance shares worth 200% of salary was made to Mr Papworth on 21 November 2012. The aim of the award was
to ensure an immediate interest in the Company’s performance and alignment with its shareholders, and was agreed as part of
Mr Papworth’s recruitment package. This award was made under the exceptional circumstances provisions of the Group’s Performance
Share Plan. No further awards will be made to him in the current financial year. Vesting of the awards is subject to the achievement of
demanding targets linked to growth in the Company’s share price over three financial years beginning with the current year, as follows:
Average share price over the three month period from 1 August 2015 to 31 October 2015
Percentage of the award vesting
Less than 275p
Nil
275p (approximately 26% above the Company’s share price
on the date of grant) 25%
500p or above (approximately 130% above the Company’s share price
on the date of grant) 100%
Between 275p and 500p
Pro-rata between 25% and 100% on a straight-line basis
In addition, this award will be subject to the Company’s clawback arrangements which apply to all awards made under the Performance
Share Plan from 2011 onwards. These enable the Company to claw back awards prior to vesting in the event of subsequent discovery of
material misstatement of the Company’s financial results, and after having first clawed back any unvested deferred shares awarded as
part of the annual bonus for the financial year in which the results were misstated.
The Committee has historically set highly challenging earnings per share targets, reflecting the Board’s confidence in the strong growth
prospects for the Group but also the Committee’s firm commitment to align the interests of shareholders with the executive management
through the use of significant levels of potential variable pay triggered by exceptional levels of performance.
In considering the performance condition for awards which will be made in 2013, the Committee has remained consistent with its
commitment to tough target setting. However, with defence budgets around the world continuing to be under significant pressure and
given that the new senior management team is conducting an ongoing review of the Group’s operations, it is difficult to set robust
earnings per share performance targets for the next three years. Earnings per share is not therefore felt to be an appropriate measure
at the current time, and the long term incentives granted to other senior executives in early 2013 will also be subject to a performance
condition based on the share price growth as set out below:
Average share price over the three month period from 1 August 2015 to 31 October 2015
Percentage of the award vesting
Less than 350p
Nil
350p (approximately 18% above the Company’s share price
on the date of this report) 25%
500p or above (approximately 69% above the Company’s share price
on the date of this report) 100%
Between 350p and 500p
Pro-rata between 25% and 100% on a straight-line basis
The Committee believes that the adoption of this performance condition will ensure that the Company’s senior executives are
appropriately aligned with one another and incentivised to achieving an improvement in the Group’s share price. However, the Committee
intends to review the performance measures used in the Performance Share Plan going forward, and will consider reintroducing a
financial measure such as earnings per share for future awards.
Shareholding guidelines
Over a five year period following appointment, executive directors are expected to build-up and maintain a shareholding in the Company
equivalent to one year’s basic salary. Other participants in the Performance Share Plan are expected to build-up a shareholding
equivalent to 25% to 50% of their basic salary over a five year period.
Other schemes
The Company operates all-employee savings-related share schemes in the UK (The Chemring Group 2008 UK Sharesave Plan), in which
executive directors can participate, and in the US (The Chemring Group 2008 US Stock Purchase Plan). There are no performance criteria
for these arrangements, and options are issued to all participants in accordance with UK HM Revenue & Customs and US Internal Revenue
Service regulations.
The Company complies with the dilution guidelines contained within the “ABI Principles of Remuneration”. At 31 October 2012, awards
outstanding and issued under all share schemes during the previous ten years amounted to 3.5% of the ordinary share capital of the
Company. At 31 October 2012, awards outstanding and issued under executive share schemes during the previous ten years amounted to
2.95% of the ordinary share capital of the Company.
Chemring Group PLC Report and Accounts 2012