Report of The Board in relation to remuneration policy and practice
10.3.2 Short Term Incentive Plan– HBOS Executive Directors
All Executive Directors, excluding Philip Gore-Randall, who did not join the Group until 2007, have conditional entitlements to shares arising from sharekicker. Where the annual incentive for 2003 and/or 2004 and/or 2005 was taken in shares and these shares are retained in trust for three years, additional shares may also be transferred to the Directors. Details of these shares are set out in Table 5a.
All Executive Directors, excluding Mike Ellis and Philip Gore-Randall, who did not join the Group until 2007, have performance contingent entitlements to shares arising from the EPS performance based long term incentive arrangements outlined in Section 7.4 of this report. Where the annual incentive for 2006 was taken in shares and these shares are retained in trust for three years, additional performance shares may also be transferred to the Directors. Details of these shares are set out in Table 5a.
All Executive Directors, excluding Mike Ellis and Philip Gore- Randall, who did not join the Group until 2007, had the option to switch share awards effective from March 2005 and March 2006 from the sharekicker arrangements (described in the first paragraph above) to the EPS performance-based long term incentive arrangements (described in the second paragraph above). All relevant Executive Directors chose to do so.
The basic and additional shares shown in Table 5a which vested in 2007, and have been retained, are also included in Table 4.
Table 5a
|
At 31.12.06/01.01.07 |
Added in year |
At 31.12.07 |
|||||
| Award effective from | Basic shares | Additional shares | Basic shares | Additional shares | Released in year | Basic shares | Additional shares | |
| Peter Cummings | Mar 04 | 3,807 | 1,903 | 5,710 | ||||
| Mar 05 | 10,808 | 7,205 | 10,808 | 7,205 | ||||
| Mar 06 | 15,153 | 12,626 | 15,153 | 12,626 | ||||
| Mar 07 | 8,366 | 8,366 | 8,366 | 8,366 | ||||
| 29,768 | 21,734 | 34,327 | 28,197 | |||||
| Jo Dawson | Mar 04 | 11,280 | 5,640 | 16,920 | ||||
| Mar 05 | 14,648 | 9,765 | 14,648 | 9,765 | ||||
| Mar 06 | 14,232 | 11,859 | 14,232 | 11,859 | ||||
| Mar 07 | 17,672 | 17,672 | 17,672 | 17,672 | ||||
| 40,160 | 27,264 | 46,552 | 39,296 | |||||
| Mike Ellis | Mar 04 | 17,315 | 8,657 | 25,972 | ||||
| Mar 05 | 34,069 | 17,034 | 34,069 | 17,034 | ||||
| 51,384 | 25,691 | 34,069 | 17,034 | |||||
| Phil Hodkinson | Mar 04 | 12,826 | 6,413 | 19,239 | ||||
| Mar 05 | 20,511 | 13,674 | 20,511 | 13,674 | ||||
| Mar 06 | 23,052 | 19,209 | 23,052 | 19,209 | ||||
| Mar 07 | 23,887 | 23,887 | 23,887 | 23,887 | ||||
| 56,389 | 39,296 | 67,450 | 56,770 | |||||
| Andy Hornby | Mar 04 | 18,437 | 9,218 | 27,655 | ||||
| Mar 05 | 28,436 | 21,327 | 28,436 | 21,327 | ||||
| Apr 05 | 141,826 | 70,913 | 141,826 | 70,913 | ||||
| Mar 06 | 27,462 | 27,462 | 27,462 | 27,462 | ||||
| Mar 07 | 33,791 | 42,238 | 33,791 | 42,238 | ||||
| 216,161 | 128,920 | 231,515 | 161,940 | |||||
| Colin Matthew | Mar 04 | 12,505 | 6,252 | 18,757 | ||||
| Mar 05 | 20,511 | 13,674 | 20,511 | 13,674 | ||||
| Mar 06 | 22,050 | 18,374 | 22,050 | 18,374 | ||||
| Mar 07 | 22,333 | 22,333 | 22,333 | 22,333 | ||||
| 55,066 | 38,300 | 64,894 | 54,381 | |||||
| Dan Watkins | Mar 04 | 4,994 | 2,497 | 7,491 | ||||
| Mar 05 | 3,744 | 2,496 | 3,744 | 2,496 | ||||
| Mar 06 | 7,094 | 5,911 | 7,094 | 5,911 | ||||
| Mar 07 | 13,530 | 13,530 | 13,530 | 13,530 | ||||
| 15,832 | 10,904 | 24,368 | 21,937 | |||||
Notes to Table 5a
Note 1:
Shares under these plans were awarded using an average market price around the date of award, as follows:
| Plan | Share award price £ |
| Mar 04 – Mar 07 | 7.36 |
| Mar 05 – Mar 08 | 8.19 |
| Apr 05 – Apr 08 | 8.32 |
| Mar 06 – Mar 09 | 9.86 |
| Mar 07 – Mar 10 | 10.58 |
Note 2:
Shares will be released after three years, subject to the basic shares still being held and to the participant still being in the Group’s employment at that time or being a qualifying leaver.
For awards effective from March 2005 and/or March 2006, where the additional shares are partially contingent on EPS performance as outlined in last year’s report, the ‘on target’ additional share award is shown in the table.
For awards effective from March 2007, where the additional shares are wholly contingent on EPS performance, the ‘on target’ additional share award is shown in the table.
Note 3:
The performance period for the March 2005 award ended on 31 December 2007. HBOS’s EPS growth, in excess of the RPI, over the relevant performance period, was equivalent to 5.71% p.a., so an additional share award of 65.06% (72.99% in the case of the Chief Executive) of the basic award will be released to award recipients in March 2008.
Note 4:
Because the basic shares are the participant’s entitlements, they are shown net of original income tax and National Insurance liability. The additional incentive shares are shown in a like manner although, in practice, the number of additional shares is grossed-up to take into account the associated income tax and National Insurance payable by the participant. Those released in 2007 represented the basic shares purchased by the Director’s own annual cash incentive in March 2004 plus the net number of additional shares arising as a result of sharekicker. The closing market price of the Group’s ordinary shares on the date of release was £10.81.
Note 5:
Certain former Executive Directors also have entitlements to shares arising from this plan. These remain subject to the same plan rules as apply to existing Executive Directors and the Notes apply in like manner, except when a Director leaves prior to the EPS performance period commencing, in which case the additional shares awarded will be restricted to 50%. Details of these shares are set out below.
Table 5b
| At 31.12.06/ 01.01.07 | Added in year | At 31.12.07 | |||||||
| Left | Award effective from | Basic shares | Additional shares | Basic shares | Additional shares | Released in year | Basic shares | Additional shares | |
| Gordon McQueen | 31.12.03 | Mar 04 | 17,128 | 8,564 | 25,692 | ||||
| 17,128 | 8,564 | ||||||||
| George Mitchell | 31.12.05 | Mar 04 | 17,315 | 8,657 | 25,972 | ||||
| Mar 05 | 26,338 | 13,169 | 26,338 | 13,169 | |||||
| Mar 06 | 27,375 | 13,687 | 27,375 | 13,687 | |||||
| 71,028 | 35,513 | 53,713 | 26,856 | ||||||
| Sir James Crosby | 31.07.06 | Mar 04 | 24,850 | 12,425 | 37,275 | ||||
| Mar 05 | 38,458 | 19,229 | 38,458 | 19,229 | |||||
| Mar 06 | 35,079 | 17,539 | 35,079 | 17,539 | |||||
| Mar 07 | 26,354 | 13,177 | 26,354 | 13,177 | |||||
| 98,387 | 49,193 | 99,891 | 49,945 | ||||||
| Benny Higgins | 10.08.07 | Mar 07 | 24,275 | 24,275 | 24,275 | 24,275 | |||
| 24,275 | 24,275 | ||||||||