Annual Report 2010 in PDF - BBA Aviation

Directors’
Remuneration
Report
continued
76 — Directors’ Report
Introduction
This Report details the Company’s remuneration policy and includes
information on the remuneration of directors for the f nancial year
ended 31 December 2010, as well as other specifc disclosures required
such as those relating to directors’ shareholdings and other interests.
Information in this report is unaudited other than that which is
required to be audited and that is stated as such in the relevant table.
This report has been prepared taking into account the provisions of
The Combined Code on Corporate Governance (the Code) and in
accordance with the requirements of the Large and Medium-Sized
Companies and Groups (Accounts and Reports) Regulations 2008 and
the Listing Rules of the Financial Services Authority.
This report will be submitted to shareholders for an advisory
vote at the BBA Aviation AGM in May 2011.
1. Remuneration Committee
Although the Board considers itself ultimately responsible for
remuneration, policy and practice, it has delegated prime
responsibility for executive remuneration to the Remuneration
Committee. The Remuneration Committee is a Committee of the
Board consisting exclusively of non-executive directors and its
meetings are minuted by the Group Secretary. No Director is directly
involved in the determination of, or votes on, any matter relating to
their own remuneration.
The Committee is responsible for determining executive
directors’ remuneration (including targets for the annual bonus) and
reviewing proposals in respect of other senior executives. It also
determines the targets for longer-term performance-related share
schemes operated by the Company and oversees any major changes
in employee beneft structures throughout the Group. Further
information on the work of the Remuneration Committee and details
of the Committee’s membership are set out on page 71.
During the year the Committee received advice from Towers
Watson as the Committee’s appointed remuneration advisers. In 2010
Towers Watson provided benchmarking information relating to the
executive directors and other senior executives. In addition, Towers
Watson provided general advice in relation to remuneration strategy,
background information about remuneration trends and calculations
of total shareholder return in connection with the BBA 2006 Deferred
Bonus and Long-Term Incentive Plans.
Towers Watson also provides advice to the Company in respect
of individuals outside the terms of reference of the Remuneration
Committee, including advice on human resource policies,
benchmarking information including on non-executive directors’ fees,
advice on healthcare and benefts provision, pension administration
and actuarial services. Towers Watson is a member of the
Remuneration Consultants Group and is committed to that Group’s
voluntary code of practice for remuneration consultants in the UK. This
includes processes for ensuring integrity and objectivity of advice to
the Remuneration Committee.
During the year, the Committee also consulted the Chairman,
the Group Chief Executive, the Group Finance Director, the Group HR
Director and the Group Secretary in connection with the Committee’s
work. It is expected that the Committee will wish to continue to
consult with them in 2011 and that they will continue to be invited
to attend Committee meetings.
2. Remuneration Policy
The Committee believes that a signifcant element of executive
directors’ remuneration should be linked to performance-related
long-term incentives.
The Group’s remuneration policy is intended to ensure that the
remuneration of executive directors and other senior executives
properly refects their duties and responsibilities and is suf cient to
attract, retain and motivate high calibre senior management capable
collectively of delivering the goals of the Company.
The policy of the Committee is to provide base salaries that are
positioned around mid-market when compared with relevant local
market data to ensure that it can retain and recruit suitable talent. In
determining short and long-term incentives, reference is made to the
wider, regional and global markets.
The Remuneration Committee believes that a signifcant
element of executive directors’ remuneration should be linked to
performance-related long-term incentives and that alignment
between Group strategy and the remuneration of its senior executives
is critical.
This policy is refected in the Deferred Bonus Plan where the
Matching Awards will only vest if demanding Return on Invested
Capital (ROIC) targets are met (see below for more detail). The
compulsory requirement to defer bonus ties the long-term value of
executive remuneration closely to the Company’s performance.
Total executive remuneration is structured to create the
potential for upper quartile rewards based on the delivery of superior
performance with a signifcant proportion of variable pay subject to
stretching performance targets. The Committee believes that the
remuneration packages of the executive directors contain a suitable
balance of directly performance-related remuneration which links
both the short-term fnancial performance of the Group and longterm
shareholder returns with the executives’ total remuneration.
In connection with the ABI Responsible Investment Disclosure
Guidelines, the Remuneration Committee confrms that it considers
corporate performance on environmental, social and governance
issues when setting the remuneration of executive directors. The
Committee also believes that the incentive structure for senior
management does not raise environmental, social or governance risks
by inadvertently motivating irresponsible behaviour and is compatible
with the Company’s risk policies and systems.
To ensure that the Company ofers the best available incentives
to enhance shareholder value, the Committee assesses the constituent
elements of the remuneration of the executive directors:
Fixed elements:
– salary, benefts and service contract
– pension
Variable elements
– annual bonus
– deferred bonus plan
– long-term incentive plan and executive share option plan
In determining remuneration, consideration is given to reward levels
throughout the organisation as well as in the external employment
market. The Committee aims to reward employees fairly based on
their role, their experience, their performance and salary levels in the
wider market.
The remuneration policy described in this report will be kept
under review, but the current intention is that the policy should
continue to apply in future f nancial years.