Governance - Xstrata

Remuneration report
Remuneration Committee
The Remuneration Committee is chaired by Willy Strothotte and its
other members are David Rough and Dr. Con Fauconnier, all of
whom are non-executive directors. The Board recognises that Willy
Strothotte is not an independent non-executive director as defined
by the Combined Code (or the new UK Corporate Governance
Code, which will replace it for accounting periods beginning after
28 June 2010). However, Willy Strothotte will retire from the Board
and from the Remuneration Committee effective from the end of the
Annual General Meeting on 4 May 2011.
The Remuneration Committee reviews the structure of remuneration
for executive directors on an ongoing basis and has responsibility for
the determination, within agreed terms of reference, of specific
remuneration packages for executive directors and other members of
the Executive Committee, including salaries, retirement benefits,
bonuses, long-term incentives, benefits in kind and any compensation
payments. The Remuneration Committee is also aware of the level
and structure of remuneration for senior management and advises
on any major changes in employee remuneration and benefit
structures throughout the Group, including the continuous review
of incentive schemes to ensure that they remain appropriate for
the Group. The Remuneration Committee commits to bringing
independent thought and scrutiny to the development and
review process of the Group with regards to remuneration.
The Remuneration Committee met twice during 2010 and was
attended on both occasions by all members. The Chairman will
continue to ensure that the Group maintains contact, as necessary,
with its principal shareholders about remuneration. The purpose and
function of the Remuneration Committee in the future will not differ
materially from this year and its terms of reference (which have
recently been reviewed to take account of changes introduced in the
new UK Corporate Governance Code) can be found on the Group’s
website (www.xstrata.com).
The remuneration of non-executive directors, other than for the
Chairman, will be considered by the Chairman and the Chief
Executive and will not be considered by the Remuneration
Committee. The Chairman’s remuneration will be determined by
the Remuneration Committee while the Chairman is absent.
The Chief Executive attends the Remuneration Committee meetings
by invitation and assists the Remuneration Committee in its
considerations, except when issues relating to his own remuneration
are discussed. The Remuneration Committee is provided with
national and international pay data commissioned from external
survey providers.
During the year, Hay Group provided independent advice to the
Remuneration Committee on executive remuneration. The Group
also uses the Hay Group to provide market information on
remuneration for positions below Executive Committee level. The
Hay Group provided no other services to the Group during 2010.
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Remuneration policy
Xstrata’s remuneration policy is designed to attract, retain and
motivate the highly talented individuals needed to deliver its business
strategy and to maximise shareholder value creation.
The policy for 2011 and, so far as practicable, for subsequent years, will
be framed around the following principles for the Executive Committee:
� remuneration arrangements will be designed to support
Xstrata’s business strategy and to align it with the interests
of Xstrata’s shareholders;
� total reward levels will be set at appropriate levels to reflect the
competitive global market in which Xstrata operates, with the
intention of positioning such levels within the top quartile for
outstanding performance when measured against a peer group
of global mining companies and the FTSE 100;
� a high proportion of the remuneration should be ‘at risk’, with
performance-related remuneration making up at least 50% of
the total potential remuneration for Executive Committee
members; and
� performance-related payments will be subject to the satisfaction
of demanding and stretching performance targets over the short
and long term, which are designed to promote the long-term
success of the Group. These performance targets will be set in
the context of the prospects of the Group, the prevailing
economic environment in which it operates and the relative
performance against that of competitor companies.
The Remuneration Committee considers that a successful
remuneration policy needs to be sufficiently flexible to take account
of future changes in the business environment and in remuneration
practices. Consequently, the remuneration policy and the
Remuneration Committee’s terms of reference for subsequent years
will be reviewed annually in the light of matters such as changes
to corporate governance best practice or changes to accounting
standards or business practices among peer group mining
companies. This will help to ensure that the policy continues to
provide Xstrata with a competitive reward strategy. In doing so, the
Remuneration Committee will take into account the UK Listing Rules,
the provisions of the UK Corporate Governance Code and associated
guidance attached to it, as well as the guidance provided by a
number of institutional investor representative bodies on the design
of performance-related remuneration.
The Remuneration Committee is satisfied that Xstrata’s pay and
employment conditions for both directors and non-Board employees
around the world are appropriate to the various markets in which
Xstrata operates. The Remuneration Committee has liaised with the
Group’s Human Resources function in order to have regard to pay
and employment conditions across the Group in setting directors’
remuneration but it does not consider a ratio comparison between
executive directors and non-Board employees to be a useful way
of assessing the fairness and balance of Xstrata’s remuneration
practices. The vastly different costs of living in the countries where
Xstrata has operations, and fluctuations in exchange rates, mean any
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