G4S Annual Report and Accounts 2011

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Overview Strategic review Performance Directors’ remuneration report at 31 December 2011 “Mindful of regulatory developments in the UK and in particular the consultation launched by the Department of Business, Innovation and Skills, the Remuneration Committee has decided to start the evolution of its report and adopt what it considers to be a clearer and easier to read form of reporting. The Remuneration Committee needs to ensure that the remuneration of the directors provides an adequate incentive to motivate, particularly in the context of the challenges posed by macroeconomic factors both in the UK and the wider global markets, and that any incentive payouts withstand reasonable and appropriate scrutiny by the company’s stakeholders. The company made good progress in 2011 despite a number of challenges. Nevertheless, the executive directors and the Remuneration Committee have agreed that it would not be appropriate to consider the payment of an annual bonus for this year. In addition, the executive directors have proposed that their base salaries are frozen for 2012, and this has been endorsed by the committee.” Lord Condon Chair of the Remuneration committee This report is prepared on behalf of and approved by the board. It: uu uu uu sets out the activities of the Remuneration Committee in the year under review; sets out the company’s remuneration policies for the current financial year and, subject to ongoing review, for subsequent financial years; and details the remuneration of each of the directors. The report will be put to the company’s Annual General Meeting for approval by the shareholders. Remuneration Committee The committee is responsible for setting all aspects of the remuneration of the chairman, the executive directors and the company secretary and for monitoring the level and structure of remuneration for other senior management of the group. It is also responsible for the operation of the company’s share plans and monitors the level and structure of the remuneration for senior management. Its terms of reference are available on the company’s website. How the committee spent its time Executive remuneration Calibrating incentive levels and performance metrics Best practice update Oversight of other benefits including pension Oversight of remuneration for senior management Other During the year, the committee received advice from Towers Watson Limited as the committee’s appointed advisor on executive and senior management remuneration matters. Towers Watson has also provided management remuneration information to the company during the period under review. The committee ensures that the value of this other service is of relative insignificance so as not to affect the advisor’s independence. Their terms of appointment are available on the company’s website. In addition, Alithos Limited has been appointed by the committee to verify the calculation of certain elements of payments due under the company’s performance share plan. Alithos has not provided any other services to the company during the period under review. Nick Buckles, chief executive, provided guidance to the committee on remuneration packages for senior executives within the group. Further guidance was received from the group’s HR director, Irene Cowden. Neither Mr Buckles nor Mrs Cowden participated in discussions regarding their own remuneration. As part of an effectiveness review for the entire board, an externally facilitated evaluation of the committee was also undertaken. The review concluded that the committee has operated efficiently. Remuneration policy The policy for the remuneration of the executive directors and the executive management team aims to achieve: uu the ability to attract, retain and motivate high calibre executives; uu a strong link between executive reward and the group’s performance; uu alignment of the interests of the executives and the shareholders; and uu provision of incentive arrangements which focus appropriately on both annual and longer term performance. In terms of market positioning, the overall objective is to achieve remuneration levels which provide a market competitive base salary with the opportunity to earn above market norms through the company’s incentive schemes on the delivery of superior performance. A significant proportion of total remuneration is therefore related to performance, through participation in both short-term and long-term incentive schemes. 62 G4S plc Annual Report and Accounts 2011
Governance Financial statements Shareholder information In 2011 the mix of remuneration available to the executive directors was as follows: Target – CEO % 1 4 1 Base salary 29.2% 2 Annual bonus 26.3% 3 Long-term incentives 32.7% 4 Pension 11.7% Maximum – CEO % 4 1 1 Base salary 20.4% 2 Annual bonus 30.6% 3 Long-term incentives 40.8% 4 Pension 8.2% 2 2 3 3 Target – all other executive directors % 1 4 1 Base salary 33.4% 2 Annual bonus 25.1% 3 Long-term incentives 28.1% 4 Pension 13.4% Maximum – all other executive directors % 1 4 1 Base salary 24.1% 2 Annual bonus 30.1% 3 Long-term incentives 36.1% 4 Pension 9.6% 2 3 2 3 The committee believes that the current balance between base pay, annual bonus and long-term incentives is appropriate given its desire to ensure a strong link between performance and remuneration whilst, at the same time, avoiding a system which might incentivise inappropriate risk taking. The committee is satisfied that the existing long-term incentive scheme, allied to the claw back processes described below and minimum shareholding requirements which were introduced in 2009 and 2010, provide suitable controls and incentives which are designed to avoid rewarding excessive risk taking or behaviour aimed at short term, unsustainable gains. The balance between long- and short-term incentives, and between basic salary and performance-related bonuses, is however kept under close review. The committee is also satisfied that the incentive structure for the board does not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour. Bonus payments do not form part of salary for pension purposes. G4S plc Annual Report and Accounts 2011 63
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