Annual report and accounts 2009 (PDF) - Coventry Building Society

DIRECTORS’ REMUNERATION REPORTINTRODUCTIONThis report informs members of the Society of the policy forthe remuneration of directors, executive and non-executive,who are equally responsible in law for directing the Society’saffairs.POLICY FOR EXECUTIVE DIRECTORSExecutive directors are employed by the Society and arerequired to devote substantially the whole of their time to itsaffairs. The policy of the board is to recruit and retain highcalibre executive directors and to ensure that theirremuneration packages (consisting of basic salary,performance related bonuses, pension arrangements andother benefits) reflect their responsibilities, performance andexperience. The level of remuneration for the executivedirectors is set by the Remuneration Committee. TheCommittee consists of the non-executive directors only and ischaired by Bridget Blow, the Society’s Deputy Chairman andSenior Independent Director.The principal elements of the executive directors’remuneration packages are as follows:a) Basic salaryThe Society’s reward strategy for executive directors aimsto pay competitive market salaries and to recogniseindividual development and progression through theannual salary and personal review processes.Salaries are reviewed annually, taking into accountcomparative data from other building societies. The latestreview of remuneration policy found that base salaries forthe executive directors remain below median levels relativeto other societies of a comparable size.b) Annual performance related bonusAll eligible Coventry Building Society staff participate in anannual performance related bonus scheme. Eligibility isdependent upon satisfactory individual performance. Theexecutive directors participated in this scheme in 2009.The performance of the Society during 2009 gave rise to acalculated bonus for all 1,350 eligible members of staffequivalent to 8% of basic salary. The bonus percentagepayable to each of the executive directors of 8% of basicsalary was identical to that of all other eligible staff.In view of the continuing difficult economic environmentand its impact on members, David Stewart elected towaive all bonus payments for 2009.c) Long Term Incentive PlanIn order to ensure that the remuneration package ofexecutive directors reflects the long term performance ofthe Society and members’ interests, the RemunerationCommittee operates a Long Term Incentive Plan (LTIP) forexecutive directors.The primary objective of this plan is to align remunerationwith the longer term goals of the Society. The LTIP alsohelps the Society to recruit and retain executives of thecalibre required to promote the interests of members.Under the LTIP, the executive directors are eligible toreceive a performance related payment based on thefinancial performance of the Society over rolling three yearperiods. The first period over which performance wasmeasured ended 31 December 2009. A second periodends 31 December 2010.The plan is designed to make payments in the early part ofthe year following the end of the three year periodproviding that consistent and strong performance isachieved against the current three year plan. An on-planperformance over each of the three year periods wouldprovide a 20% of salary cash payment, with a maximum of40% (which is below the 50% of salary maximumpermitted under the Society’s Rules) for consistent overperformanceover the three year period. Performancemeasures have been designed to balance the objective ofsustained profit growth with the need for the Society toprovide competitive lending and savings rates to members.In addition, to protect the interests of members, theCommittee may amend any payment if it considers itappropriate in light of either the Society’s overallperformance or economic conditions. In assessing this,the Committee will take account of a range of factors suchas customer and member satisfaction, the impact of ‘oneoff’exceptional items, the performance of competitors,and the Society’s health and safety record.Notwithstanding the very strong performance of theSociety, in view of the impact of the ‘credit crunch’ on theSociety’s members, the Committee determined that nopayment was made for the period 2007-2009.Any payments under the LTIP are subject to approval bythe Remuneration Committee and are not pensionable. Itis expected that further plans will be put in place givingpotential payments in years subsequent to 2011.As with base salaries, bonus payments are alsobenchmarked on a regular basis. Bonuses earned byexecutive directors are significantly below median levelsrelative to the comparison group of building societies.25