Report of The Board in relation to remuneration policy and practice
8. Remuneration policy for the Chairman
The remuneration policy for the Chairman recognises that, whilst the Chairman was independent of the organisation when he joined it, he is not now regarded as independent. The Chairman plays an active role in influencing the strategic direction of the Group and ensuring overall performance delivery. Therefore we believe that it is entirely appropriate that the Chairman’s reward arrangements continue to be based on a mixture of a base fee and performance-related long term incentive.
The base fee of the Chairman after the most recent review with effect from 1 July 2007, and at 31 December 2007, was £735,000.
In addition, as has been the case in HBOS since 2002, the Chairman is included in a long term incentive plan equivalent to that described in the first part of Section 7.4. He receives an annual conditional grant based on 100% of his fee which is otherwise subject to the same performance conditions as apply to Executive Directors.
The Committee established the long term incentive plan for the Chairman through a separately constituted scheme, for two reasons. Firstly, so that shareholders could vote on this scheme quite separately from any vote on the scheme applying to Executive Directors. Secondly, for legal reasons, because the Chairman is not an employee of the Group and cannot therefore be included in the share-based long term incentive plan described in the first part of Section 7.4 as that plan is available to employees only. In practice, however, the scheme which applies for the Chairman is a mirror image of the scheme applying to Executive Directors, save that the annual conditional grant is based on 100% of his fee.
There is no other incentive plan and there are no benefits (car or cash in lieu, pension, paid leave, healthcare) for the Chairman. The Chairman receives a distant accommodation allowance and is reimbursed for a proportion of his office expenses.
The Committee does not seek precisely to calibrate the Chairman’s reward to a particular time commitment: in practice the Chairman has always been available as required by the Group and, in broad terms, spends at least half his working time on HBOS business.