Chapter
Main provisions of the contract
When does the agreement start?
What are the time commitments involved?
Where will any disputes about the contract be heard?
What potential changes in the employment relationship need to be captured?
How will the contract be brought to an end, by either party? And if it is, what restrictions will apply?
Potential approaches to valuing short- and long-term incentive and share plans
Deferred annual incentive plans
Annual incentives – matching shares on deferral
Share price growth assumption
Employee forfeiture rates
Expected value vs projected value
4 Constructing the package
Fixed elements of remuneration
Targeting median or upper-quartile pay
Testing benefits against the lifetime allowance
Testing benefits against the annual allowance
Unregistered arrangements
Transitional arrangements
Current pension provision
Other benefits and perquisites
Variable elements of remuneration
Annual bonus deferral and co-investment plans
Long-term incentive plans
Total shareholder return (TSR)
Return on capital employed (ROCE)
Measuring TSR relative to a comparator group
Probability of meeting TSR targets
Index-based TSR+2 approach
Other decisions that affect the calculation of TSR
Probability of meeting EPS targets
EPS adjustments for International Accounting Standards
Director shareholding requirements
The balance of the package
5 Supporting the business strategy
Start up and initial public offering (IPO)
Mature and growing companies
Larger, mature businesses
Mergers, de-mergers and acquisitions – the threat from private equity
6 Reporting and explaining the deal
Communicating remuneration policy
Elements of a successful remuneration communication strategy
Disclosing the details annually
The directors’ remuneration report (DRR)
Aggregate directors’ remuneration
Directors’ emoluments and compensation
Long-term incentive schemes
Directors’ pension entitlements
7 Governance of senior executive remuneration
The governance framework around executive reward
Remuneration committee terms of reference
Membership of the committee
Attendance at the meeting
Advisors to the committee
Committee authority and remit
The process for determining remuneration
Further pieces in the governance jigsaw
The effective remuneration committee
Alternative Investment Market (AIM)
Association of British Insurers (ABI)
Company Share Option Plan (COSOP)
Consumer Prices Index (CPI)
Defined benefit plan (DB plan)
Defined contribution plan (DC plan)
Directors’ Remuneration Report Regulations 2002
Enterprise Management Incentive Plan (EMI)
Equity settled stock appreciation rights (ESARs)
Financial Reporting Council (FRC)
Financial Services Authority (FSA)
Funded Unapproved Retirement Benefit Schemes (FURBS)
HM Revenue & Customs (HMRC)
International Accounting Standards (IAS)
International Financial Reporting Standard 2 (IFRS 2)
Key performance indicator (KPI)
Long-term incentive plan (LTIP)
National Association of Pension Funds (NAPF)
Payment in lieu of notice (PILON)
Performance share plan (PSP)
Quartile (upper and lower)
Quintile (upper and lower)
Research Recommendations Electronic Voting (RREV)
Restricted shares or stock
Retail Prices Index (RPI)
Return on capital employed (ROCE)
Securities and Exchange Commission (SEC)
Share Incentive Plan (SIP)
Stock appreciation rights (SARs)
Total direct compensation
Total shareholder return (TSR)
Unfunded Unapproved Retirement Benefit Schemes (UURBS)
Weighted average cost of capital (WACC)
Reward Governance for Senior Executives
( Law Practitioner Series )
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