Tullow Oil plc Annual Report 2011 - The Group

Service agreementsEach Executive Director has entered into a service agreementwith Tullow Group Services Limited (dated 2 September 2002 inthe case of Aidan Heavey and Graham Martin, dated 29 March2006 in the case of Paul McDade, dated 18 April 2006 in the caseof Angus McCoss and dated 1 September 2008 in the case ofIan Springett). Aidan Heavey has also entered into a serviceagreement with Tullow Oil International Limited on 16 September2002 on similar terms.The term of each service contract is not fixed. Each agreementis terminable by the Director on six months’ notice and by therelevant employing company on 12 months’ notice. There areno specific provisions under which any Executive Director isentitled to receive compensation upon the early termination ofhis service agreement, other than in accordance with thesenotice periods.Each service agreement sets out restrictions on the ability ofthe Director to participate in businesses competing with thoseof the Group or to entice or solicit away from the Group anysenior employees in the six months after ceasing employment.The above reflects the Committee’s policy that service contractsshould be structured to reflect the interests of the Group and theindividuals concerned, while also taking due account of marketand best practice. It is also the Committee’s policy that, on anyearly termination of a Director’s service contract, the Committeewill take account of the departing Director’s duty to mitigate hisloss when determining the amount of any compensation.Material contractsThere have been no other contracts or arrangements duringthe financial year in which a Director of the Company wasmaterially interested and/or which were significant in relationto the Group’s business.External appointmentsThe Board has not introduced a formal policy in relation to thenumber of external directorships that an Executive Director mayhold. Currently, the only Executive Directors who hold externaldirectorships are Aidan Heavey and Angus McCoss. Aidan isa director of Traidlinks, a charity promoting enterprise in thedeveloped world, especially Africa. He receives no fee forthis position. Angus has been nominated by Tullow as itsrepresentative on the board of Ikon Science Limited, acompany in which Tullow has a small equity stake. Anyfees payable for his services have been waived by Tullow.Non-executive Director remuneration policyFeesA Committee of the Board comprising the Chairman andExecutive Directors sets the remuneration of non-executiveDirectors. The fees paid are set at a level to attract individualswith the necessary experience and ability to make a significantcontribution to the Group’s activities, while also reflecting thetime commitment and responsibility of the role. Each nonexecutiveDirector currently receives an annual fee of £67,000.Steven McTiernan receives an additional annual fee of £15,000to reflect his responsibilities as Senior Independent Director.David Bamford and David Williams each receive an additionalannual fee of £15,000 and £20,000 respectively, to reflect theirresponsibilities as Chairman of the Remuneration and AuditCommittees. Each non-executive Director is also entitled toreimbursement of necessary travel and other expenses.Non-executive Directors do not participate in any sharescheme or annual bonus scheme and are not eligible to jointhe Group’s Pension Schemes. The Remuneration Committee,with the Chairman absenting himself from discussions, setsthe remuneration of the Chairman, whose annual fee iscurrently £300,000.Non-executive Director fee structure2011 2012Chairman fee £220,000 £300,000Non-executive Director base fee £63,000 £67,000Additionalfees forSenior IndependentDirector£14,000 £15,000Audit Committee Chair £14,000 £20,000RemunerationCommittee ChairTerms of appointmentNon-executiveDirectorSimonThompsonStevenMcTiernanDavidBamfordDavidWilliamsYearappointedDirectorNumber ofcompleteyears onthe Board£14,000 £15,000Date ofcurrentengagementletterExpiry ofcurrentterm2011 0 16.12.11 31.12.142002 10 28.02.12 31.12.122004 7 30.06.10 30.06.132006 5 08.12.09 31.05.12Ann Grant 2008 3 19.04.11 14.05.14Tutu Agyare 2010 1 24.08.10 24.08.13In each case, the appointment is renewable thereafter if agreedby the Director and the Board. The appointments for each of thenon-executive Directors may be terminated by either party onthree months’ notice. There are no arrangements under whichany non-executive Director is entitled to receive compensationupon the early termination of his or her appointment.4CORPORATE GOVERNANCE95www.tullowoil.com