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Remuneration reportBob LeeIndependent Non-ExecutiveDirectorCommittee ChairmanChristine Bogdanowicz-BindertIndependent Non-ExecutiveDirectorColin SmithSenior IndependentNon-Executive DirectorIain NapierNon-Executive ChairmanJeff CarrIndependent Non-ExecutiveDirectorSandra TurnerIndependent Non-ExecutiveDirectorThis report, prepared on behalf of the Board, sets out thepolicy and disclosures on remuneration for the executiveand non-executive directors of the Board. It takes full accountof the Code and the latest ABI/NAPF guidelines and has beenprepared in accordance with the provisions of section 421of the Act. A resolution will be put to shareholders at theCompany’s AGM inviting them to approve this report.Terms of reference and activities in the yearBoth the constitution and operation of the RemunerationCommittee comply with the principles incorporated inthe Code.The Committee is responsible for determining theremuneration policy for the executive directors and forkey senior executives. The main duties of the Committee are:> To review the ongoing appropriateness and relevanceof the remuneration policy;> To follow formal and transparent procedures regardingexecutive remuneration and remuneration packages;> To consider and make recommendations to the Boardon remuneration issues for the executive directors andother senior executives taking into account the interestsof relevant stakeholders;> To review the implementation and operation of theCompany’s share option schemes, bonus schemes andlong-term incentive plan (LTIP); and> To review the Company’s management development plans.The Committee is authorised by the Board to investigate anymatters within its terms of reference. It meets as frequentlyas needed, but at least twice a year, to consider remunerationpackages for directors and senior executives including reviewsof basic salary, pension rights, bonus and share based awards.In the financial year ended 30 June 2011 the Committee metthree times, in July 2010, August 2010 and June 2011.Subsequent to the year end, one further meeting of theCommittee has taken place in August 2011. Attendanceby individual members of the Committee is disclosed in thetable on page 63.The Committee’s terms of reference are reviewed regularlyto ensure continuing compliance with evolving best practiceguidelines. This year’s review has incorporated minoramendments to update the duties of the Committee. TheCharter setting out the constitution and terms of referenceof the Remuneration Committee is available from the Group’swebsite at www.mcbride.co.uk.The principal activities of the Committee during the periodwere to review the performance and related pay awardproposals of the Chief Executive and Finance Director; to agreeobjectives for the executive directors; to consider seniorexecutive salary reviews and bonus scheme payments; toreview share schemes’ conditions and terms; to deal with theallocation of LTIP awards; to review the plans for managementdevelopment and talent management. The Committee alsoconsidered the latest proposed changes to corporategovernance guidelines relating to remuneration matters.Composition of the Remuneration CommitteeThe composition of the Committee comprises theindependent non-executive directors and the Chairman ofthe Company. Bob Lee is Chairman of the Committee withthe other members being Christine Bogdanowicz-Bindert,Colin Smith, Iain Napier, and Jeff Carr and Sandra Turner whojoined the Committee on 9 June 2011 and 1 August 2011respectively. A quorum of the Committee is two members.Meetings may be attended by the Chief Executive on allmatters except those relating to his own remuneration.Support is provided by the Group’s Human Resources Directorwho also serves as Secretary to the Committee. During theyear we sought advice from the independent consultants,Towers Watson, on executive remuneration. Towers Watsonhas no other connection with the Company. Aon HewittLimited (operating through the brand Hewitt New BridgeStreet (HNBS)), were formally appointed by the Committeewith effect from May 2011 as independent external advisorsfor the purposes of providing professional advice to guidethe Committee in their decision-making. Neither Aon HewittLimited nor any other part of the Aon Corporation Groupprovided other services to the Company during the year.Remuneration policyThe basic principles that guide remuneration policy forexecutives, including the executive directors, include:> Salaries should be reviewed annually taking into accountboth internal and prevailing market conditions. It is theCommittee’s objective to set basic salaries around themedian of the Group’s comparator benchmark. This canrise to between median and upper quartile for consistentlystrong or outstanding individual performance, or startat below median for new appointees developing into a role.> In accordance with the core principles of the Code,consideration should be given to general pay andemployment conditions across the Group. The Committeeis kept abreast of such matters via regular interactionwith the Company’s HR function.> The Group’s approach for all employees, includingexecutives, should be to set remuneration that takesaccount of market practice, economic conditions, theperformance of the Group and of teams or individualsrecognising any collective agreements that may apply aswell as any legal or regulatory requirements in jurisdictionswhere it operates.> For all executives, basic salaries should be combinedwith performance-related variable elements.> Performance conditions for variable pay should be setindependently by the Committee at the outset of each yearand assessed by the Committee both quantitatively andqualitatively at the end of each performance period.> Both short and long-term rewards should be linked toperformance as well as to Company strategy to maximiselong-term shareholder value.> Executives should develop and be encouraged to holda shareholding as this represents the best way to align theirinterests with those of shareholders.> The personal objectives for executives are reviewed by theCommittee to ensure they adequately reflect the strategicaims of the Group. Good governance and best practiceshould be reviewed.> The Committee should consult with the Chief Executive andpay due regard to his recommendations for other seniorexecutives. Individual directors should not be involved inthe decisions concerning their own remuneration.> Any significant pay awards or incentive payments shouldtake due account of the economic background and theexternal environment. There should be a justification givenfor any awards that may not appear appropriate in theprevailing climate.> In general, environmental, social and governance issuesshould also be taken into account and the remunerationpolicy should neither encourage nor reward irresponsiblebehaviour in this regard.> The Committee should consider the extent to whichpayment of bonuses can be justified if the Company suffersa material negative effect.The Committee believes that this policy provides anappropriate balance between fixed remuneration, short-termbonus and long-term incentives. The Committee is committedto keeping its policy under regular review, taking into accountchanges in the competitive environment, in remunerationpractices and in guidelines set by the key institutionalshareholder bodies.The Committee carefully considers on a regular basis themarket positioning of the remuneration of all executives forwhose remuneration it is responsible against the most recentand relevant market data available. When conducting its mostrecent review of the remuneration of the executive directors,the Committee took account of pay levels and structures intwo benchmark comparator groups as follows: (i) a groupof UK listed manufacturing companies that supply goods tosupermarkets and (ii) a group of pan-sector companies whoshare similar characteristics to McBride in terms of marketcapitalisation and turnover. The review indicated thatexecutive director base salary levels were broadly consistentwith the Committee’s intended market positioning but thatannual bonus potential and, as a result, the potential total paypackage was significantly below the market median.In light of this review, the Committee made the followingkey decisions for executive director pay in 2011/12:> Salaries will be frozen at 2010/11 levels.> A challenging vesting schedule will continue to applyto LTIP awards granted in 2011/12 with limited vestingat threshold performance levels for both TSR and EPSperformance measures.> There will be an increase in maximum bonus opportunityto 100% of salary, of which a maximum of 70% will be paidin cash. The Committee took account of the increasedbonus opportunity when setting the targets for the2011/12 bonus.Overview Business review Governance Financials Shareholder information70 McBride plc Annual Report and Accounts 2011 McBride plc Annual Report and Accounts 2011 71