G4S Annual Report and Accounts 2011

Overview Strategic review Performance
Directors’ remuneration report continued
The claw-back mechanism
Any payment under either the annual bonus scheme or the PSP may be
clawed back from the director concerned if the committee so determines
and, in the case of misstatement of accounts, where the Audit Committee
concurs. The time period in which the claw back can be made depends on
the reason for the overpayment.
Misstatement of financial accounts
Fraud or reckless behaviour
Annual bonus
scheme
up to 2 years
after payment
up to 2 years
after payment
Performance Share
Plan
up to 2 years
after vesting
up to 6 years
after vesting
The amount to be clawed back directly from the executive will be the
overpaid amount after netting off taxes and social security deductions.
How have the elements of remuneration
changed year-on-year?
Elements of
remuneration
Base salary
Annual bonus
Long-term
incentive
plan
Change
No increase in 2009, 2010 or 2012. An increase was made
in January 2011.
Unchanged in maxima but the potential payouts on
threshold and budgeted profit targets were altered
for one year in 2011 only.
After consultation with major shareholders, a change was
made on the inflation measurement to reflect increasing
global footprint and exposure to markets outside the UK.
For 2012 TRS/EPS measurements to be weighted equally.
Link between pay and performance
The payouts under the annual bonus scheme and long-term incentive plan
in previous years have been made in accordance with the agreed measures.
Where there has been a payout under the annual bonus scheme or
long-term incentive plan, the committee has not exercised any discretion
to increase payments above that to which the executives were entitled
under the applicable rules.
Pay for group executive committee
Number in band
Base Pay (£000) 2011 2010
151–200 0 1
201–250 2 1
251–300 3 4
301–350 1 2
351–400 2 0
The maximum bonus level for the members of the group executive
committee is 100% of base salary.
Elements of remuneration
Elements of
remuneration
Availability
Fixed Base salaries Available to all
employees worldwide
Pensions
Available to most employees
in developed markets
Variable Annual bonus Available to all senior
managers worldwide
Long-term incentive plan Available to some senior
managers worldwide
Benefits Car or car allowance Available to all senior
managers worldwide
Protection insurance Available to most employees
in developed markets
Healthcare
Available to all senior
managers worldwide
(a) Base salary and benefits
The salaries of the executive directors are reviewed with effect from
1 January each year. Although interim salary reviews may be carried out
following significant changes in responsibility, no such reviews have taken
place since the appointments of the current executive directors. The
salaries take account of benchmarking exercises based on a robust sample
of similarly sized companies by revenue and market capitalisation, with a
significant part of their business overseas. They also reflect responsibility,
individual performance, internal relativities and salary and other market
information supplied by Towers Watson. Base salaries for the executive
directors were frozen in 2009 and 2010. However, the position following
two consecutive pay freezes was not consistent with the company’s stated
remuneration policy, and the committee took steps to more closely align
base salaries to its competitive mid-market policy in 2011. At the executive
directors’ request though, the committee has agreed to freeze those
directors’ base salaries again in 2012 in view of the economic circumstances
and the pay and employment conditions across the group, notwithstanding
the consistently strong performance of the group throughout the period.
(b) Performance-related bonus scheme
For the year under review, the executive directors participated in an
annual performance-related bonus scheme, payments under which were
dependent on the attainment of defined PBTA (profit before tax and
amortisation) targets of the group, adjusted for the effect of any exceptional
items and discontinued operations and using constant exchange rates.
The committee believes that PBTA best reflects the various key drivers of
business success within the group. The maximum bonus entitlement for the
executive directors is an amount equal to 125% of base salary (150% in the
case of the chief executive). For 2011, 75% of maximum bonus entitlement
was payable on achievement of the budgeted target and the amount of
bonus increased on a straight-line basis up to 100% of maximum bonus
entitlement for achievement of a stretch profit target. Any bonus due above
50% of the individual’s maximum bonus entitlement would be awarded as
deferred shares which would not vest for three years. For achievement of a
threshold level of profits which is at least 95% of the budgeted profit target,
a bonus payment of 50% of maximum bonus entitlement was due, with no
bonus payable for performance below threshold.
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G4S plc
Annual Report and Accounts 2011