Governance - Xstrata

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award linked to TSR will vest (although up to 50% of the overall combined award could vest depending on the extent to which the cost saving targets are met). It should be noted that these amounts are based on the Group’s results at this provisional stage and do not necessarily reflect the eventual outcome. Performance graph (£) Total shareholder return value of investment (£) 300 250 200 150 100 50 0 05 06 07 08 09 Xstrata Plc FTSE 100 Index The performance graph set out above shows the value at 31 December 2010 of £100 invested in Xstrata shares on 31 December 2005 compared with the value of £100 invested in a hypothetical holding of shares of the same kind and number as those by reference to which the FTSE 100 index is calculated. The other points plotted are the values at intervening financial year ends. The Board considers that the FTSE 100 currently represents the most appropriate of the published indices for these purposes. The value shown is based on TSR, which has been calculated assuming that dividends are invested in additional shares. Benefits receivable in the form of shares are also added to the relevant holding. Retirement benefits Mick Davis and Trevor Reid have participated in targeted money purchase retirement plans from their respective dates of joining the Group. The plans are designed having regard to the taxation and employment status of each executive. Group contributions are reassessed at regular intervals and are based on actuarial advice, with the objective of accumulating sufficient funds over the working lifetime of each executive to provide an overall target retirement benefit that is currently intended to be equivalent to approximately 60% of final salary at normal retirement age for executives who begin participating in the plans at the age of 40. The financial dynamics of the arrangement therefore have similarities to a defined benefit scheme at the point of contribution. The actual benefits payable from the retirement benefit plans will be based on the amount that has accumulated in that member’s money purchase accounts. Prior to 6 April 2006, these contributions were paid to a combination of an approved money purchase retirement plan and a funded unapproved retirement 10 www.xstrata.com | 125 benefits scheme (FURBS). From 6 April 2006, contributions have been made through a combination of payments to a registered retirement benefit plan and cash sums to each executive, having regard to the tax limits on contributions and benefits from registered UK retirement benefits plans (with only cash payments being made after 2007). No employee contributions are currently payable by Mick Davis and Trevor Reid. As noted below, Santiago Zaldumbide receives no retirement benefits under the terms of his professional services agreement. Other benefits Many of the Group’s operations are located in areas not well served by commercial flight routes and therefore a company-leased aircraft is provided for the purposes of business travel by Group executives. The Remuneration Committee has approved the private use of the company-leased aircraft for the Chief Executive for an agreed maximum number of hours per annum, subject to the aircraft not being required for work purposes by other Xstrata executives at the relevant time(s). Company policy permits the provision of short-term interest free loans to any eligible employee, including executive directors, to cover periods where employees suffer double taxation on any employment income because they are required to work in multiple jurisdictions and are unable to claim repayments or credits for such double taxation until a later point in time. External appointments No executive directors held external directorships or offices as at 31 December 2010. Non-Executive Directors The level of fees for non-executive directors is set at the level considered necessary to obtain the services of individuals with the relevant skills and experience to bring added depth and breadth to the composition of the Board. Non-executive directors’ fees are reviewed annually by the Chairman and the Chief Executive in the light of fees payable to non-executive directors of comparable companies and the importance attached to the retention and attraction of high-calibre individuals as nonexecutive directors. Non-executive directors are eligible to forego all or part of their directors’ fees to acquire shares in Xstrata, after deduction of applicable income tax and social security contributions. The non-executive directors do not, and it is anticipated that they will not in the future, participate in the Bonus Plan or LTIP or any other form of performance-related incentive arrangement or retirement benefit that may be introduced from time to time. Entitlements under service contracts Executive Directors Mick Davis and Trevor Reid have employment agreements with Xstrata Services (UK) Limited (XSL) effective from 1 February 2002. Their services as Chief Executive and Chief Financial Officer, Overview Strategy Performance Governance Financials
126 | Governance Remuneration report continued respectively, are provided to the Group under a secondment agreement entered into between the Group and XSL on 19 March 2002. Mick Davis and Trevor Reid were both seconded to the Group for a fixed term of two years, with XSL and the Group subsequently renewing for further two-year fixed periods. The employment of Mick Davis and Trevor Reid may be terminated by at least 12 months’ notice being given by XSL or the director concerned or by a payment in lieu of notice by XSL. On termination of their employment by XSL in breach, or on a change of control, or if Mick Davis or Trevor Reid resigns in circumstances where they cannot in good faith be expected to continue in employment, each director is entitled to be paid a sum equal to 100% of his annual salary plus retirement benefits and other benefits and his previous year’s bonus (plus any accrued basic salary and expenses) and to have all entitlements under his retirement benefit plans paid in accordance with the plan rules. As both Mick Davis and Trevor Reid participate in money purchase arrangements, it is not expected that any significant additional liability would arise in respect of retirement plan entitlements beyond that already accrued in the Group’s accounts. For the purposes of calculating termination payments, annual bonus is capped at 300% of annual salary (which is in any event the maximum allowable under the Bonus Plan). The terms of Mick Davis's and Trevor Reid’s contracts are considered to be in line with those operated by other global businesses listed in London. In addition, each of the executive directors is eligible to participate in the Bonus Plan which provides that deferred amounts up to an aggregate ceiling of 200% of salary remain payable in the event of cessation of employment by reason of death, injury, ill health or disability (in which case they are payable immediately) or retirement (in which case they are payable on the normal vesting date). No deferred amounts are payable in the event of cessation by dismissal for cause. In the case of termination by reason of death, injury, ill health or disability before the date the bonus is awarded for a financial year, or if the Remuneration Committee in its discretion so resolves, a proportion of the annual bonus pool may still be awarded subject to the normal discretion of the Remuneration Committee. Executive directors are entitled to any outstanding LTIP awards on cessation of employment by reason of death, injury, ill health or disability (in which case they vest immediately in full) or retirement (in which case they are payable on the normal vesting date to the extent they vest for performance at that time). Santiago Zaldumbide provides his services to the Group under a professional services agreement entered into between him and Asturiana on 23 July 2007, pursuant to which Santiago Zaldumbide agreed to act as Chairman and Chief Executive Officer of Xstrata Zinc. This agreement continues indefinitely unless terminated by one of the parties on at least six months’ written notice. The annual gross fee payable to Santiago Zaldumbide for the year ended 31 December 2010 was €1,000,000. This annual fee is subject to review in line with the other executive directors. Santiago Zaldumbide receives no retirement benefits under the terms of his professional services agreement but is eligible to participate in the Bonus Plan and the LTIP. On termination of his professional services agreement, other than on his voluntary termination or termination for gross negligence, Santiago Zaldumbide is entitled to be paid a sum equal to 100% of his annual salary and other benefits and his previous year’s bonus (plus any accrued basic salary and expenses). Pursuant to a letter of appointment dated 18 March 2002 and subject to the continuing existence of his agreement with Asturiana, Santiago Zaldumbide is engaged as a director of Xstrata. Santiago Zaldumbide receives no additional remuneration for his position as director of Xstrata and is not entitled to any compensation in respect of the termination of his office as a director of Xstrata. Non-executive directors Willy Strothotte is engaged by the Group as a non-executive director and Chairman on the terms of a letter of appointment. He will retire from the Board and from the Remuneration Committee at the end of the AGM on 4 May 2011. David Rough is engaged by the Group as the Senior Independent Director and Deputy Chairman on the terms of a letter of appointment. The appointment may be terminated by six months’ notice by David Rough. The Group may terminate David Rough’s appointment at any time and on such termination David Rough will not be entitled to any compensation for loss of office. The term of his appointment may be renewed by the Board. However, in accordance with the UK Corporate Governance Code, all directors will retire at the forthcoming AGM and all directors, other than Willy Strothotte, will offer themselves for re-election. Ivan Glasenberg, Dr. Con Fauconnier, Peter Hooley, Sir Steve Robson, Ian Strachan and Claude Lamoureux are each engaged by the Group as a non-executive director on the terms of a letter of appointment. Each appointment may be terminated by six months’ notice by the non-executive director. Dr. Con Fauconnier’s appointment commenced on 5 May 2010. Paul Hazen retired as a non-executive director of the Board at the Annual General Meeting (AGM) in May 2010. The Group may terminate each non-executive director’s appointment at any time and on such termination the non-executive director will not be entitled to any compensation for loss of office. Each term of his appointment may be renewed by the Board. There is no arrangement under which a director has agreed to waive future emoluments nor have there been any such waivers during the financial year. There are no outstanding loans or guarantees granted or provided by any member of the Group to or for the benefit of any of the non-executive directors. No significant awards have been made in the financial year to any past director.
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Governance - Xstrata

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