CRH Annual Report 2007 PERFORMANCE AND GROWTH

Report on Directors’ RemunerationThe Remuneration CommitteeThe Remuneration Committeeof the Board consists of nonexecutiveDirectors of the Company.The terms of reference for theRemuneration Committee are todetermine the Group’s policy onexecutive remuneration and toconsider and approve salaries andother terms of the remunerationpackages for the executiveDirectors. The Committee receivesadvice from leading independentfirms of compensation and benefitconsultants when necessaryand the Chief Executive attendsmeetings except when his ownremuneration is being discussed.Membership of the RemunerationCommittee is set out on page 40.Remuneration PolicyCRH is an international group ofcompanies, with activities in 32countries. Our policy on Directors’remuneration is designed toattract and retain Directors of thehighest calibre who can bring theirexperience and independent viewsto the policy, strategic decisionsand governance of CRH.In setting remuneration levels,the Remuneration Committeetakes into consideration theremuneration practices of otherinternational companies of similarsize and scope. Executive Directorsmust be properly rewarded andmotivated to perform in the bestinterest of the shareholders. Thespread of the Group’s operationsrequires that the remunerationpackages in place in eachgeographical area are appropriateand competitive for that area.Performance-related rewards,based on measured targets, are akey component of remuneration.CRH’s strategy of fosteringentrepreneurship in its regionalcompanies requires well-designedincentive plans that reward thecreation of shareholder valuethrough organic and acquisitivegrowth. The typical elementsof the remuneration packagefor executive Directors arebasic salary and benefits, aperformance-related incentive plan,a contributory pension scheme andparticipation in the share optionplan. It is policy to grant optionsto key management to encourageidentification with shareholders’interests and to create a communityof interest among differentregions and nationalities.The Group also operates shareparticipation plans and savingsrelatedshare option schemes foreligible employees in all regionswhere the regulations permit theoperation of such plans. In totalthere are approximately 6,700employees of all categories whoare shareholders in the Group.Executive Directors’RemunerationBasic salary and benefitsThe basic salaries of executiveDirectors are reviewed annuallyhaving regard to personalperformance, companyperformance, step changes inresponsibilities and competitivemarket practice in the area ofoperation. Employment-relatedbenefits relate principally to theuse of company cars and medical/life assurance. No fees arepayable to executive Directors.Performance-related incentive planThe performance-related incentiveplan is totally based on achievingclearly defined and stretch annualprofit targets and strategic goalswith an approximate weightingof 80% for profits and 20% forpersonal and strategic goals.At target performance payout is80% of basic salary for Europebasedparticipants and 90%of basic salary for US-basedparticipants. A maximum payoutof 1.5 times these levels ispayable for a level of performancewell in excess of target.The three componentsof the plan are:(i)(ii)(iii)Individual performanceEarnings per share growthtargetsReturn on net assetstargetsUp to one-third of the earned bonusin each year is receivable in CRHshares and deferred for a periodof three years, with forfeiture inthe event of departure from theGroup in certain circumstancesduring that time period.In addition, the Chief Executive hasa special long-term incentive planincorporating targets set for thefour-year period 2005-2008. Theplan incorporates challenging goalsin respect of Total ShareholderReturn by comparison with a peergroup, growth in earnings per shareand the strategic development ofthe Group, with a total maximumearnings potential of 40% ofaggregate basic salary. Whileaccruals are made on an annualbasis, there is no commitmentto any payment until the end ofthe period. Details of the mannerin which earnings are providedfor under the plan are set out innote 2 to the table of Directors’remuneration on page 50.Performance Share Plan/ShareOption SchemeLong-term incentive plans involvingconditional awards of shares arenow a common part of executiveremuneration packages, motivatinghigh performance and aligningthe interests of executives andshareholders. The PerformanceShare Plan approved byshareholders in May 2006 is tied toTotal Shareholder Return (TSR). Halfof the award is assessed againstTSR for a group of global buildingmaterials companies and the otherhalf against TSR for the constituentsof the Eurofirst 300 Index. Anearnings per share growth underpinof the Irish Consumer Price Indexplus 5% per annum is also applied.The maximum award under thePerformance Share Plan is 150%of basic salary per annum in theform of conditional shares and thevesting period is three years. Theawards lapse if over the threeyearperiod CRH’s TSR is belowthe median of the peer group/index; 30% of the award vests ifCRH’s performance is equal tothe median while 100% vests ifCRH’s performance is equal to orgreater than the 75th percentile;for TSR performance betweenthe 50th and the 75th percentiles,between 30% and 100% of theaward vests on a straight-line basis.Participants in the Plan are notentitled to any dividends (or otherdistributions made) and have noright to vote in respect of the sharessubject to the award, until suchtime as the shares vest. Detailsof awards to Directors under thePlan are provided on page 53.Under the terms of the shareoption scheme approved byshareholders in May 2000, twotiers of options have been availablesubject to different performanceconditions as set out below:(i)(ii)Exercisable only whenearnings per share (EPS)growth exceeds the growthof the Irish Consumer PriceIndex by 5% compoundedover a period of at leastthree years subsequent tothe granting of the options(Basic Tier).Exercisable, if over a periodof at least five yearssubsequent to the grantingof the options, the growthin EPS exceeds the growthof the Irish Consumer PriceIndex by 10% compoundedand places the Company inthe top 25% of EPSperformance of a peergroup of internationalbuilding materials and othermanufacturing companies.If below the 75th percentile,these options are notexercisable (Second Tier).With the introduction of thePerformance Share Plan, theRemuneration Committee decidedthat no further Second Tier shareoptions should be granted underthe existing share option scheme;however, Basic Tier optionscontinue to be issued. Subject tosatisfactory performance, optionsare expected to be awardedannually, ensuring a smoothprogression over the life of theshare option scheme. Grants ofshare options are at the marketprice of the Company’s shares atthe time of grant, and are madeafter the final results announcementensuring transparency.48 CRH