Annual Report 2012 - Development Securities PLC

Remuneration Report
Dear Shareholder
I am pleased to introduce the Remuneration
Report for the financial period ended
29th February 2012.
The Remuneration Report has been divided into three parts:
Overview – summary of the total remuneration policy;
Remuneration explained – disclosures on Executive Directors’ and senior
managers’ pay, outlining the incentive plans; and
Remuneration in detail – detailed audited disclosures which are required
by the Directors’ Remuneration Regulations.
The Remuneration Committee (the Committee) is responsible for determining
the remuneration policy for the Company’s Executive Directors and for
ensuring that the remuneration of senior managers and other employees is
consistent with the Company’s remuneration philosophy. The Committee has
considered the performance of the Company over the period, the impact of
the strategy set previously and the strategy for future years. The Committee,
in light of the economic environment and current property market, has sought
to reinforce the Company’s objectives through the implementation of the
remuneration policy approved by shareholders in 2010, together with the
amendments to the existing policies made during the period. The Company
has complied throughout the period with the requirements of the UK
Corporate Governance Code in relation to Directors’ remuneration.
The Committee has taken into account that, whilst the result for the year is a
loss, the strategy of investing the monies received in the two equity raises is
now largely complete and the execution of the individual business plans for
each of the properties is well advanced and is on track to deliver the
predicted profits. In considering the performance of the Company’s senior
management team the Committee was of the view that this is not the year
for higher level performance packages when the full implementation of the
strategy has yet to deliver profits for the Company and its shareholders.
In this time of heightened scrutiny of executive remuneration, as the
Committee Chairman, I have been in regular contact with the Company’s
largest shareholders to discuss the current policy and ensure that their views
are appropriately reflected in any changes. The Committee continues to
believe that the current policy, together with the recent changes, supports the
needs of the business and its shareholders.
The changes are described in greater detail later in the report but can be
summarised as follows:
in future years 100.0 per cent of any annual bonus awarded in excess of
Target will be in the form of shares which will be held for a minimum of
two years;
the performance condition for the Performance Share Plan is to be widened
to take into account not only Total Shareholder Return (TSR) performance
but also growth in Net Asset Value per share (NAVps); and
a further shareholding requirement will apply where a Director’s
shareholding is less than two times salary. In the event that payments under
the focused profit plans, in aggregate, exceed £1.0 million in one financial
year, two thirds of the payment above £1.0 million will be made in shares
which must be retained for two years.
The salaries for the Executive Directors have been kept at the 2010 levels,
with the exception of M S Weiner who was awarded a 4.6 per cent increase
to reflect his increased role within the business.
During 2009 the Committee undertook a substantive review of its executive
remuneration arrangements, to take account of the changing economic
climate and to provide a framework of remuneration for the future property
cycle. This was to ensure that arrangements would support the Company’s
strategy as it moved forward into the next stage of its development at the
start of the next UK commercial property cycle.
The Committee monitors the remuneration policy on an on-going basis to
ensure that it supports the business strategy and takes into account the views
of shareholders and the evolving executive pay governance environment.
The focused profit plans relating to the principal activities of the Company
(development, investment and joint ventures) continue to be a key part of our
performance based pay arrangements, alongside the annual bonus and the
Performance Share Plan, which are considered to be sufficiently stretching
for Executive Directors and senior management and to promote the
long-term success of the Company.
The Development Profit Plan (section c) has resulted in bonuses being paid
to C J Barwick and a senior manager for the successful completion of the
hotel development at Southampton. New Development Profit Plan awards
have been made to two Directors and senior managers.
New Joint Venture Profit Plan awards have been made during the period.
The Committee has also reviewed the awards for the Strategic Profit Plan
for the financial period (sections d and f).
The Investment Growth Plan (section e) resulted in a nil vesting as
performance conditions were not satisfied for the 2012 Initial Bonus. The
performance condition in respect of the 2009 deferred award was satisfied,
resulting in payments to M S Weiner and two senior managers.
Awards under the Performance Share Plan were made on 22nd March 2011
to the Executive Directors and staff. An assessment of the performance
condition for the award made under the Plan on 8th May 2009 resulted
in a nil vesting.
A resolution will be proposed to the shareholders at the Annual General
Meeting seeking their approval of this report.
This is my last year as Chairman of the Committee as I will be stepping down
at the 2012 Annual General Meeting. N H Thomlinson, who joined the Board
in January 2012, will be succeeding me in this role. It remains for me to
thank my fellow Committee members and shareholders for their valued
contributions during my time as Chairman of the Remuneration Committee.
I am certain the Remuneration Committee is well placed to support the
Company in the future.
Michael Soames
Chairman, Remuneration Committee
1st May 2012
Development Securities PLC / Annual Report 2012 57