Annual Report 2010 in PDF - BBA Aviation

The following chart shows the balance between fxed and variable
elements of the remuneration package for executive directors. The
upper bar shows the position (labelled target) if half of the maximum
potential variable remuneration was received. The lower bar shows
the position (labelled stretch) if all of the maximum potential variable
remuneration was received. The targets for variable remuneration are
strongly aligned to the Company’s strategic objective of creating
long-term sustainable value and the proportion of total remuneration
that is variable remuneration increases as more of the stretching
performance conditions and targets are achieved.
Remuneration mix
Simon Pryce: target
stretch
Mark Hoad: target
stretch
0 25 50 75 100
Fixed remuneration: includes base salary, benefits and contribution
to pension
Variable remuneration: annual bonus
Variable remuneration: long-term incentives
The actual value of performance-related incentives will depend on
actual performance. If the respective minimum performance
conditions are not met then the incentive will have no value and if the
share-based incentives vest, then the share price of the Company at
that time will determine the actual value on vesting of such incentives.
The Remuneration Committee is satisfed that the award levels under
both the Long-Term Incentive Plan and the Deferred Bonus Plan are
not excessive. In making awards under each of these plans the
Remuneration Committee took account of the then prevailing
remuneration practice and the wish for a signifcant portion of
the executive remuneration to be linked to performance, as well as
the importance of ensuring that high calibre senior management
are retained and motivated to deliver the business strategy of
BBA Aviation.
The Committee believes that the two performance measures
chosen for its long-term incentive schemes for awards from 2010
onwards – earnings per share (EPS) and ROIC – are the best available
indication of the long-term fnancial success of the Company, due to
the lack of an efective comparator group, and are well aligned with
the long-term interests of shareholders.
3. Executive Directors’ Remuneration
a. Salary, Benefts and Service Contract
Salary refects the role and contribution to the Company of the
executives in terms of skills and experience.
Base salaries are reviewed annually by reference to comparator
groups selected on the basis of comparable business size, geographic
spread and business focus. Individual salary decisions take into
account market conditions, business performance, personal
contribution and the level of pay awards and conditions elsewhere in
the Group.
Following a review at the end of 2010 the Remuneration
Committee approved (with efect from 1 January 2011) a 3.2% increase
in base salary to £542,000 for Simon Pryce, a percentage increase
broadly in line with the salary increases given to those in the wider
employee workforce who have performed strongly. In relation to Mark
Hoad the Remuneration Committee agreed (with ef ect from
1 January 2011) a 10% increase in base salary to £275,000 refecting the
progression of his experience and performance in his new role.
In addition to base salary, executive directors receive traditional
benefts, principally a company car allowance, private medical
insurance, retirement and death in service benefts.
It is the Committee’s policy to make new executive director
appointments with a rolling service agreement which can be
terminated by the Company on giving 12 months’ notice and this
policy was applied when Mark Hoad joined the Board in April 2010.
Set out below are the contractual notice periods for executive
directors who served during the year.
Months’ Notice
Contract By To
Date Company Company
Simon Pryce 23/04/07 12 12
Andrew Wood* 13/02/01 12 6
Mark Hoad 29/04/10 12 6
*A Wood retired as a director on 29 April 2010
In the event of early termination, the Remuneration Committee will,
within legal constraints, determine the approach to be taken
according to the circumstances of each individual case, taking account
of the departing director’s obligation to mitigate his loss. In certain
circumstances, and other than for termination for non-performance,
the executive directors may receive compensation upon early
termination of a contract which could, depending on the
circumstances at the relevant time, amount to up to one year’s
remuneration based on base salary, bonus, benefts in kind and
pension rights during the notice period. Any payment of bonus in
these circumstances would depend on the facts at the time as there
are no guaranteed bonus provisions.
Table 1 (on page 81) sets out details of the executive
directors’ salaries.
b. Annual Bonus
The annual bonus provides focus on the delivery of stretching
and strategically aligned annual fnancial targets and
personal objectives.
The Company’s annual bonus plan seeks to provide executive
directors, members of the Executive Management Committee and
senior managers with the opportunity to increase overall
remuneration levels for achieving demanding performance targets.
2010 Annual Bonus arrangements
The structure for the 2010 annual bonus included both f nancial and
personal objectives and provided a maximum bonus opportunity for
executive directors of up to 125% of salary: 105% being based on
fnancial objectives (with a maximum of 35% for achievement of
Group free cash fow targets and 70% for achievement of Group
operating proft targets) and the remaining 20% based on measurable
personal objectives. For the annual bonus that will be paid in 2011 in
respect of the year ended 31 December 2010, 50% of any bonus paid
to Simon Pryce and 50% of any bonus paid to Mark Hoad will be
compulsorily deferred into BBA Aviation shares under the Deferred
Bonus Plan described below. A further 50% is eligible to be deferred
voluntarily at the director’s discretion.
Directors’ Report — 77