REUTERS GROUP PLC ANNUAL REPORT AND ACCOUNTS 1999

Report on remuneration and related mattersThis report on remuneration and relatedmatters covers issues which are the concernof the Board as a whole in addition to thosewhich are dealt with by the RemunerationCommittee.REMUNERATION OBJECTIVESRemuneration policy has never been moreimportant than it is today. The competitionfor talent in the new economy is fierce andthe pool limited. Reuters policy must help thecompany to guard against losses of keypeople, which is a bigger threat than it everhas been, because Reuters occupies a leadingposition in the electronic world and hasexcellent technical and management talent.Policy must also focus on bringing in newpeople and skills which are needed tomaintain and develop that positioning inorder to enhance shareholder value.Reuters remuneration has to measure up topolicy and practice in the US, which is theundisputed leader in the new internet-basedenvironment and which will increasinglydictate future direction. Reuters competes fortalent not only with large companies but alsowith small start-ups that offer attractive stockparticipation to people who join them. Bothlarge and start-up companies in the US offerstock options which pay out on the basis of acompany’s stock price, with no otherperformance links. Reuters believes that, tocompete, it must be prepared to do the same.It would seem that companies outside the USare progressively adopting the Americanmodel as they too enter the internet age. Theremuneration environment has become global,as is the challenge and the opportunity.It has become appropriate in certaincircumstances for companies to float groupassets publicly. This occurred in Reuters in1999 with the Initial Public Offering of aportion of TIBCO Software Inc., itself aportion of TIBCO Inc., which was bought byReuters in 1994 for US$125 million. Thisfloated portion had a market value of £0.9billion (US$1.4 billion) on 31 December1999. Reuters does not believe this wouldhave been possible without the issue ofoptions to those individuals responsible forcreating this value.Reuters needs to react quickly to these newcircumstances. It should also do its best toensure that remuneration policy is seen to beequitable by all employees. Terms governingsalary, pension and benefits are basically setby market conditions in each country.However, Reuters believes variable rewardsfor internationally mobile management,based on the performance of the companyand its share price, cannot differ too muchfrom place to place. It also believes managersrewarded for delivering good growth shouldbe expected to maintain outrightshareholdings in the company, in order topreserve identity of interest between themand the generality of shareholders.All employees in Reuters should also be giventhe opportunity to share in the company’ssuccess, and support its values. Since thebeginning of its life as a public company,Reuters has offered Save-As-You-Earn sharerewards to its employees all over the world.More recently shareholders approved anall-employee option scheme, Plan 2000,maturing generally in 2001.The Remuneration Committee expects toreview its remuneration policy in line withthese trends in the course of 2000.REMUNERATION POLICIESThe specific remuneration policies currentlyin force are as follows:Salaries: salaries will be competitive whencompared against those of other companiesoperating in the same markets.Annual bonuses: Reuters believes inproviding annual incentive bonus plans toencourage the achievement of predeterminedannual performance targets. Such plans willexist typically for middle and seniormanagement levels throughout the world.Competitive market compensation: Reutersseeks to have annual cash compensationpackages for senior managers which canreach the upper quartile of the market forupper quartile performance where amaximum bonus is earned.Benefits: Reuters believes in providingbenefits which are required according tolocal practice.Pensions: pension provision will beappropriate to the local market.Long-term benefits, including share plans:Reuters seeks to provide long-term benefitswhich are competitive in the appropriatemarket and seek to achieve consistency withthe interests of shareholders. There arecircumstances in which Reuters enables keyexecutives and employees of certainsubsidiaries to acquire shares in theircompany.SUMMARY OF DIRECTORS’REMUNERATION FOR 1999The 1999 remuneration packages ofexecutive directors consisted of annual salary,health and car benefits, prolonged disabilityinsurance, an annual cash bonus plan,pension contributions and participation in aperformance-linked share plan (describedbelow) and all-employee share schemes. Byfar the most significant portion of eachexecutive director’s potential remunerationpackage was performance related.EXECUTIVE DIRECTORS’ SALARIESIn setting the 1999 salary levels theRemuneration Committee was assisted byreports prepared by independent professionalconsultants which basically comparedReuters remuneration packages with themedian levels of the FTSE top 50 companies.EXECUTIVE DIRECTORS’ BONUSESFor 1999 the executive directors’ bonuseswere capped at 70% of salary and dependedon the extent to which three key targets weremet. The first target, covering 57% of thebonus, related to the growth in operatingprofit at constant exchange rates. The secondtarget, covering 29% of the bonus, was basedon the growth in earnings per share for theChief Executive and on growth of divisionalprofits for directors with divisionalresponsibilities. The third target, 14% of thebonus, was based on a satisfactory completionof Reuters Millennium Programme.Targets were partially met as regardsdivisional and operating profit and fully met asregards earnings per share. The MillenniumProgramme has been successful. Directors’bonuses amounted to 1.5% of total cashbonuses paid to all employees of the group.24 Reuters Group PLC Annual Report 1999