Annual Report & Accounts 2012 - Euromoney Institutional Investor ...

Euromoney Institutional Investor PLC Annual Report and Accounts 2012
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Directors’ Remuneration Report
Introduction
This Remuneration Report sets out the group’s
policy and structure for the remuneration of
executive and non-executive directors together
with details of directors’ remuneration packages
and service contracts. The report has been
prepared in accordance with Schedule 8 (Quoted
Companies: Directors’ Remuneration Report) to
the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008 and shareholders will be invited to approve
this report at the Annual General Meeting on
January 31 2013.
Remuneration committee
During the year the remuneration committee
comprised JC Botts (chairman), MWH Morgan,
and DP Pritchard (independent). All members of
the committee are non-executive directors of
the company. MWH Morgan is also a director of
Daily Mail and General Trust plc (DMGT) but has
no personal financial interests in the company
(other than as a shareholder), and no day-to-day
involvement in running the business. For the year
under review, the committee also sought advice
and information from the company’s chairman,
managing director and finance director. The
committee’s terms of reference permit its
members to obtain professional external advice
on any matter, at the company’s expense, and
they did so in 2012 as part of the independent
executive search process undertaken in
connection with the succession planning for the
company’s chairman. The group itself can use
external advice and information in preparing
proposals for the remuneration committee. It
does apply external benchmarking although
no material assistance from a single source was
received in 2012.
Remuneration policy
The group believes in aligning the interests
of management with those of shareholders.
It is the group’s policy to construct executive
remuneration packages such that a significant
part of a director’s compensation is based on
the growth in the group’s profits contributed
by that director. The two consistent objectives
in its remuneration policy since the company’s
inception in 1969 have been the maximisation
of earnings per share and the creation of
shareholder value.
Maximising earnings per share
The first objective is achieved through a profit
sharing scheme that links the pay of executive
directors and key managers to the growth in
profits of the group or relevant parts of the
group. This scheme is completely variable with
no guaranteed floor and no ceiling. All those
on profit shares are aware that if profits rise, so
does their pay. Similarly if profits fall, so do their
profit shares.
To support the policy of profit sharing, the
group is divided into approximately 100 profit
centres. The manager of each profit centre is
paid a profit share based on the profit centre’s
profit growth. Each profit centre is in turn part
of a larger business unit and each business
unit manager or executive director has a profit
share based on the unit’s profit growth. The
profit sharing scheme is closely aligned with the
group’s strategy in that it encourages managers
and directors to grow their businesses, to
manage costs tightly, to launch new products
and to search for acquisitions.
Creating shareholder value
The second objective is encouraged through the
Capital Appreciation Plan (CAP).
The CAP is a highly geared performancebased
share option scheme which both directly
rewards executives for the growth in profits of
the businesses they manage, and links this to
the delivery of shareholder value by satisfying
rewards in a mix of shares in the company and
cash. The current CAP, CAP 2010, aims to mirror
the success of CAP 2004 for both shareholders
and management by delivering exceptional
profit growth over the performance period.
Further details of CAP 2004 and CAP 2010 are
set out on pages 42 to 44.
The company also has an executive share option
scheme which was approved by shareholders in
January 1996. The performance criteria under
which options granted under this scheme may
be exercised are set out on page 44. This scheme
expired in 2006, and no options have been
issued under it since February 2004 although
options previously granted may be exercised
before various dates to February 2014.
The directors believe that these profit sharing and
share option arrangements are responsible for
much of the company’s success since 1969. These
arrangements align the interests of the directors
and managers with those of shareholders and are
considered an important driver of the company’s
growth.
Detailed remuneration
arrangements of executive
directors
Base salary and benefits
The base salary and benefits is generally not
the most significant part of a director’s overall
compensation package, and variable profit
share makes up much of their total pay. For
example, of the total remuneration of the nine
executive directors who served in the year,
89% was derived from variable profit shares, as
illustrated in the following table:
Fixed
salary &
benefits
Variable
profit
share
PM Fallon
(died October 14 2012) 4% 96%
PR Ensor 4% 96%
NF Osborn 30% 70%
DC Cohen 26% 74%
CR Jones 29% 71%
DE Alfano 19% 81%
CHC Fordham 17% 83%
JL Wilkinson 62% 38%
B AL-Rehany 26% 74%
Total 11% 89%
Directors’ Remuneration Report
Company Accounts Group Accounts Our Governance
Our Performance
41