Reward Governance for Senior Executives (Law Practitioner Series)

Cover......Page 1
Half-title......Page 3
Series-title......Page 4
Title......Page 5
Copyright......Page 6
Contents......Page 7
Contributors......Page 8
Preface......Page 9
Introduction......Page 11
1 Striking the deal......Page 14
Deconstructing the current package......Page 15
The buyout......Page 16
Expatriate benefits......Page 19
Pension benefits......Page 21
The run rate......Page 23
Preparing the ground......Page 33
Main provisions of the contract......Page 35
When does the agreement start?......Page 36
What potential changes in the employment relationship need to be captured?......Page 37
How will the contract be brought to an end, by either party? And if it is, what restrictions will apply?......Page 38
The final check......Page 40
Overview......Page 42
Potential approaches to valuing short- and long-term incentive and share plans......Page 44
Salary......Page 47
Projected value......Page 49
Annual incentives – matching shares on deferral......Page 50
Share price growth assumption......Page 51
Performance conditions......Page 52
Dividends......Page 53
Share price volatility......Page 54
Performance conditions......Page 55
Expected value vs projected value......Page 59
Pensions......Page 62
And a final thought......Page 64
Determining the policy......Page 65
Salary benchmarking......Page 67
Methods of analysis......Page 69
Regression analysis......Page 70
Ranking analysis......Page 71
Targeting median or upper-quartile pay......Page 73
Useful questions to ask......Page 75
Pension......Page 76
Testing benefits against the annual allowance......Page 80
Transitional arrangements......Page 81
Current pension provision......Page 82
Variable elements of remuneration......Page 83
Annual bonus......Page 84
Annual bonus deferral and co-investment plans......Page 91
Long-term incentive plans......Page 94
Share option plans......Page 96
Performance share plans......Page 107
The choice of measures......Page 108
Total shareholder return (TSR)......Page 110
Return on capital employed (ROCE)......Page 111
Measuring TSR relative to a comparator group......Page 113
Index-based TSR+2 approach......Page 117
Setting EPS targets......Page 122
Probability of meeting EPS targets......Page 123
EPS adjustments for International Accounting Standards......Page 128
Vesting levels......Page 130
Director shareholding requirements......Page 131
The balance of the package......Page 132
Pulling it all together......Page 139
Start up and initial public offering (IPO)......Page 142
Private companies......Page 145
IPO......Page 146
Rapid growth......Page 148
Cost saving......Page 151
Organic growth......Page 152
Growth by acquisition......Page 153
Impact of acquisitions......Page 155
Setting the targets......Page 156
Larger, mature businesses......Page 158
Mergers, de-mergers and acquisitions – the threat from private equity......Page 159
Turnaround......Page 161
Conclusion......Page 163
Communicating remuneration policy......Page 164
A decade of pay turmoil......Page 165
Avoiding crisis......Page 166
Elements of a successful remuneration communication strategy......Page 167
Summary......Page 170
The 1990s......Page 172
Rules and guidance......Page 174
Remuneration committee......Page 175
Remuneration policy......Page 177
Aggregate directors’ remuneration......Page 182
Directors’ share options......Page 184
Long-term incentive schemes......Page 185
Directors’ pension entitlements......Page 187
In summary......Page 189
7 Governance of senior executive remuneration......Page 190
A brief history lesson......Page 191
A new dawn......Page 193
Remuneration committee terms of reference......Page 194
Membership of the committee......Page 195
Attendance at the meeting......Page 196
Advisors to the committee......Page 197
Committee authority and remit......Page 198
The process for determining remuneration......Page 200
Other provisions......Page 201
Further pieces in the governance jigsaw......Page 202
The external dimension......Page 204
The effective remuneration committee......Page 206
Alternative Investment Market (AIM)......Page 208
Association of British Insurers (ABI)......Page 209
Binomial model......Page 210
Cadbury Report......Page 211
Change of control......Page 212
Company Share Option Plan (COSOP)......Page 213
Correlation......Page 214
Defined contribution plan (DC plan)......Page 215
Dividend......Page 216
Earnings per share (EPS)......Page 217
Enhanced protection......Page 218
Exercise......Page 219
Expected value......Page 220
Fixed compensation......Page 221
FTSE......Page 222
Gearing......Page 223
Hampel Report......Page 224
Indemnity......Page 225
Key performance indicator (KPI)......Page 226
Listing Rules......Page 227
Main market......Page 228
National Association of Pension Funds (NAPF)......Page 229
Notice period......Page 230
Payment in lieu of notice (PILON)......Page 231
Performance share plan (PSP)......Page 232
Primary protection......Page 233
Quartile (upper and lower)......Page 234
Remuneration committee......Page 235
Retail Prices Index (RPI)......Page 236
Rolling re-testing......Page 237
Service agreement......Page 238
Share options......Page 239
Termination payments......Page 240
Total direct compensation......Page 241
Underpin......Page 242
Volatility (share price)......Page 243
Weighted average cost of capital (WACC)......Page 244
Index......Page 245