Report of The Board in relation to remuneration policy and practice
10. Directors’ remuneration for the year ended 31 December 2007
10.1 Emoluments
Table 1a below has been prepared in accordance with regulatory requirements in respect of Directors’ remuneration for the year ended 31 December 2007:
Table 1a
| Notes | Salary including fees & further remuneration £000 | Taxable benefits and allowances £000 | Annual cash incentive for 2007 £000 | Biennial cash incentive for 2006/2007 £000 | Total year ended 31.12.07 £000 | Total year ended 31.12.06 £000 | Total year ended 31.12.07 excluding the pension allowance £000 | Total year ended 31.12.06 excluding the pension allowance £000 | |
| Chairman | |||||||||
| Dennis Stevenson | 5,11 | 708 | 113 | – | – | 821 | 628 | 821 | 628 |
| Executive Directors | |||||||||
| Peter Cummings | 1,2,3,7, 8,9,10,12 | 630 | 180 | 1,624 | 172 | 2,606 | 1,491 | 2,448 | 1,386 |
| Jo Dawson | 1,2,7,8, 9,10 | 550 | 117 | 276 | 156 | 1,099 | 514 | 993 | 514 |
| Mike Ellis | 1,2,4,7,8 | 169 | 45 | 78 | – | 292 | – | 250 | – |
| Philip Gore-Randall | 1,2,4,7,8 | 159 | 43 | 73 | – | 275 | – | 235 | – |
| Phil Hodkinson | 1,2,7,8, 9,10,12 | 635 | 169 | 297 | 168 | 1,269 | 1,157 | 1,110 | 1,043 |
| Andy Hornby | 1,2,7,8, 9,10,12 | 940 | 283 | 449 | 254 | 1,926 | 1,570 | 1,691 | 1,417 |
| Colin Matthew | 1,2,8,9, 10,12 | 602 | 170 | 283 | 160 | 1,215 | 1,093 | 1,065 | 986 |
| Dan Watkins | 1,2,4,7, 8,9,10 | 162 | 51 | 74 | 42 | 329 | – | 289 | – |
| Non- executive Directors | |||||||||
| Richard Cousins | 4,6 | 70 | – | – | – | 70 | – | 70 | – |
| Charles Dunstone | 6 | 83 | – | – | – | 83 | 75 | 83 | 75 |
| Sir Ron Garrick | 6 | 235 | – | – | – | 235 | 213 | 235 | 213 |
| Anthony Hobson | 6 | 221 | – | – | – | 221 | 250 | 221 | 250 |
| Karen Jones | 6 | 100 | – | – | – | 100 | 62 | 100 | 62 |
| John E Mack | 4,6 | 66 | – | – | – | 66 | – | 66 | – |
| Coline McConville | 6 | 151 | – | – | – | 151 | 111 | 151 | 111 |
| Kate Nealon | 6 | 151 | – | – | – | 151 | 138 | 151 | 138 |
| Former Directors | |||||||||
| Sir James Crosby | 4,10,12 | – | 5 | – | – | 5 | 968 | 5 | 895 |
| Benny Higgins | 1,2,4,7, 8,9,10 |
1,865 | 117 | 183 | 143 | 2,308 | 1,056 | 2,210 | 952 |
| Sir Brian Ivory | 4,6 | 49 | – | – | – | 49 | 142 | 49 | 142 |
| David Shearer | 4,6 | 38 | – | – | – | 38 | 109 | 38 | 109 |
| Total | 7,584 | 1,293 | 3,337 | 1,095 | 13,309 | 9,577 | 12,281 | 8,921 |
Notes to Table 1a
Note 1:
The table includes in ‘taxable benefits and allowances’ the non-pensionable cash allowances of 25% of salary, payable monthly, to those Executive Directors who have no servicerelated accrual of pension benefits. The allowances paid in 2007 were: Peter Cummings £157,500, Jo Dawson £106,250 (nine months), Mike Ellis £42,000 (three months), Philip Gore-Randall £39,945 (three months), Phil Hodkinson £158,750, Andy Hornby £235,000, Colin Matthew £150,416 and Dan Watkins £40,410 (four months). The allowance paid in 2007 to Benny Higgins was £97,569. Comparative year end totals excluding the non-pensionable cash allowances are also detailed.
Note 2:
The annual cash incentive amounts, approved by the Committee, relate to performance under the short term incentive plan for 2007. The biennial cash incentive amounts, approved by the Committee, relate to performance under the short term incentive plan for 2006-07. Annual performance outcomes using EPS, Shareholder Value Added and Costs were between 97% and 100% of target levels and therefore the STI for 2007 was 46% compared to a target of 60%. Biennial performance, using equivalent performance metrics, was around target level and therefore the biennial cash incentive for 2006-07 was 26% compared to a target of 25%. These outcomes were driven from financial targets consistent with the Group business plans for 2007 (in the case of the annual scheme) and 2006-07 (in the case of the biennial scheme). Both the target cash incentive percentage and the actual cash incentive percentage exclude the additional annual incentive arrangements for Peter Cummings.
Note 3:
The additional incentive amount for Peter Cummings, included in the table, was £1,320,000.
Note 4:
Mike Ellis was appointed as an Executive Director on 25 September 2007. His contract, incentives and benefits are in a form comparable to those for existing Executive Directors. Philip Gore-Randall was appointed as an Executive Director on 15 September 2007. His contract, incentives and benefits are in a form comparable to those for existing Executive Directors. Dan Watkins was appointed as an Executive Director on 5 September 2007. His contract, incentives and benefits are in a form comparable to those for existing Executive Directors. Richard Cousins and John E Mack were appointed as Non-executive Directors on 1 March 2007 and 1 May 2007, respectively.
Sir James Crosby retired as an Executive Director on 31 July 2006 on terms set out in last year’s report. Benny Higgins remained employed, after resigning as an Executive Director, until 31 December 2007. He received salary, pension allowance and incentive payments for that period totalling £464,000. These amounts are included in the table. He was paid a lump sum after his employment ceased, including salary and pension allowance in respect of his 12 month notice period (£819,000) plus some incentive allowances and other payments (£192,000). These amounts are included in the table within the ‘Salary including fees and further remuneration’ column.
Sir Brian Ivory and David Shearer retired as Non-executive Directors on 25 April 2007. No termination payments were made.
Note 5:
The fee payment to Dennis Stevenson comprises payments made to him personally in respect of his service as Chairman of the Group of £707,500 (2006 – £627,500).
Note 6:
From 1 May 2006 the basic Board membership fee payable to Non-executive Directors was at a rate of £57,750 p.a. and from 1 May 2007 it was increased to a rate of £66,000 p.a. The basic Board membership fee covers the range of duties and responsibilities associated with Non-executive Directorship, including Board meetings and the Annual General Meeting. The figures shown in the table also include fees for services on committees of the Board, details of which are set out in the Corporate Governance Report on pages 114 to 121. The levels of fees for some Non-executive Directors reflect the significant time spent by them on such committee duties.
The figures shown in the table also include fees for services as Directors of subsidiaries and joint ventures; and for services on other committees. The fees in relation to these subsidiaries, joint ventures and other committees were as follows:
Table 1b
| 2007 £000 |
2006 £000 |
|
| Richard Cousins | 6 | – |
| Charles Dunstone | 20 | 20 |
| Sir Ron Garrick | – | – |
| Anthony Hobson | 75 | 116 |
| Sir Brian Ivory | 11 | 34 |
| Karen Jones | – | – |
| John E Mack | 12 | – |
| Coline McConville | 47 | 20 |
| Kate Nealon | 63 | 59 |
| David Shearer | 10 | 30 |
| Total | 244 | 279 |
Note 7:
Certain Executive Directors are non-executive directors of other companies. Their roles and fees were as follows:
Andy Hornby was a Non-executive Director of Home Retail Group plc during 2007 for which he received fees (which he retained) of £58,708. In addition, he received 4,375 ordinary shares of Home Retail Group plc and has an entitlement to a further 3,500 ordinary shares of Home Retail Group plc.
Andy Hornby and Jo Dawson were Non-executive Directors of St James’s Place plc during 2007. The fees were paid directly to HBOS and not to them personally.
Mike Ellis was a Non-executive Director of WH Smith plc during 2007 for which he received fees from his date of appointment to HBOS on 25 September 2007 (which he retained) of £11,277.
Philip Gore-Randall was appointed a Non-executive Director of Compass Consulting Group Holdings Limited on 14 August 2007 for which he received fees from his date of appointment to HBOS on 15 September 2007 (which he retained) of £5,834.
Phil Hodkinson was a Non-executive Director of BT Group plc during 2007 for which he received fees (which he retained) of £60,000.
Jo Dawson was a member of the Board of the Association of British Insurers during 2007. No fees were paid.
Peter Cummings was a Director of The Maggie Keswick Jencks Cancer Caring Centres during 2007. No fees were paid.
Benny Higgins was a Non-executive Director of Sainsbury’s Bank plc until 10 August 2007. No fees were paid.
Benny Higgins was a Non-executive Director of Visa Europe Limited until 13 August 2007 for which he received fees (which he retained) of Euro 5,000.
Dan Watkins was appointed a Non-executive Director of Sainsbury’s Bank plc on 5 September 2007. No fees were paid.
Note 8:
The annual cash incentive for 2007 (excluding the additional incentive for Peter Cummings) may be applied, if a participant so chooses, to buy shares in March 2008 under the arrangements described in Section 7.4.
Note 9:
The biennial cash incentive for 2006-07 may be applied, if a participant so chooses, to buy shares in March 2008 under the arrangements described in Section 7.4.
Note 10:
Taxable benefits and allowances comprise the benefits in kind values of company cars, healthcare, additional life assurance, concessionary rate mortgages and, where relevant, a contribution towards the cost of providing distant accommodation away from the Executive Director’s primary residential area, as well as the amounts referred to in Note 1.
Note 11:
The taxable benefits and allowances payment to Dennis Stevenson comprises a distant accommodation allowance of £20,000 p.a. due from May 2002 and paid during 2007.
Note 12:
The comparative figures for 2006 exclude the deferred share incentive for 2003, which was included in total remuneration in last year’s report. Equivalent details for 2007 are set out in Section 10.3.2.