Directors’ remuneration

Committee membership

I Napier (Chairman)
D Jenkinson
O Morley
J Geddes (Secretary to the Committee)

In accordance with the Company’s policy of refreshing Committee membership David Coltman stood down as Chairman of the Remuneration Committee at the annual General Meeting (AGM) in May and was replaced by Iain Napier. The Company Secretary is the secretary of the Committee. Iain Napier will become Chairman of the Board following the AGM in 2010 and he will be replaced as Chairman of the Committee by Octavia Morley.

Members of the Committee have no personal financial interest (other than as shareholders) in the matters to be decided and no day-to-day involvement in the running of the business of the Group.

Responsibilities of the Committee

The Committee determines the remuneration of the Chairman and the Executive Directors (Tier 1) and the next level of senior executives (Tier 2) on behalf of the Board. It has formal Terms of Reference set by the Board modelled on the Combined Code, which are displayed on the Company’s website.

Advisers to the Remuneration Committee

Advice sought from Kepler Associates was used by the Committee during the year. In addition, legal advice from Maclay Murray & Spens LLP was sought by the Committee where appropriate.

Paul Dollman, Group Finance Director, and John Geddes, Group Company Secretary, also provide internal support and guidance to the Committee where appropriate. They are, however, specifically excluded from any matters concerning the details of their own remuneration.

Committee evaluation

The Board extended its review of its own performance to the performance of the Committee. The results from the evaluation were circulated to the Board as a whole in December 2009 and suitable actions have been taken to address the issues raised. None of the issues raised were deemed material and their implementation will increase the flow of information to the Committee and provide for greater consistency in establishing executive remuneration.

Annual General Meeting

A resolution to approve this report on Directors’ remuneration will be tabled at the AGM. The Chairman of the Committee will be available to answer questions from shareholders on the report.

Back to top

Remuneration policy, practice and principles

The Board recognises that its continuing success depends on the quality and motivation of its employees. The Group aims to ensure that its remuneration packages are competitive, thereby enabling it to attract, retain and motivate Executives who have the experience, skills and talents to operate and develop each business to its maximum potential. This total reward position is analysed by looking across each of the different elements of remuneration, including salary, pension, bonus, and long-term incentives, to provide a total remuneration offering rather than just the competitiveness of the individual elements.

Pay, rates of salary increases and employment conditions within the Group are taken into account by the Committee in determining the remuneration packages for Executive Directors, along with current external market conditions and package competitiveness.

Directors’ salaries are maintained at competitive levels for comparable positions reflecting, where appropriate, the international nature of the business. Additional rewards for success are built into the remuneration package through incentives designed to share with Executive Directors the profitability of the Group and the value generated for shareholders.
 
In considering and determining suitable remuneration packages for the Executive Directors the Committee gives full consideration to the relevant best practice provisions set out in the Combined Code. The Committee also determines the extent to which all performance targets are met.

Salary spread/package mix

The total remuneration package is designed to include performance and non-performance-related elements. Non-performance elements include salary, taxable benefits and pension entitlements. In addition, Executive Directors are entitled to participate in the Company’s share matching schemes and savings-related share option scheme. All other parts of the package are performance related and combine a mixture of cash and share-based incentives, described in detail below.

Back to top

Distribution of remuneration (% of total)

Basis for calculations
Cash-based awards are calculated on the real cash value when the award is made.

Share-based awards are calculated on the actual share price on the date that the award is made, not an anticipated value on vesting date.

Alignment of remuneration to objectives

The performance-based plans adopt a variety of performance criteria rather than using one criterion over all the plans. This is to align Directors’ rewards with a broadly-based growth and development plan for the business. The Long-Term Incentive Plans are designed to reward improvements within divisions as well as the performance of the Group against external factors. The Committee believes that by using a combination of internal and external targets it can better align Directors’ interests with the interests of shareholders.

It is intended that on-target performance payouts should be made where the Company achieves its objectives for the period, which will be a combination of financial performance of the Group and the divisions, cost savings, business development and other divisional objectives. Stretch performance will be paid where the objectives et have been exceeded, as well as Executive Directors’ individual targets as set by the Board.

New remuneration package from 2010

The Committee held a review of the executive remuneration package during the year. It was resolved that a new package be set out which would reflect current best practice.

The appropriate rules for each plan will therefore be amended to reflect a maximum award based on a proportion of base salary rather than number of shares and, where necessary, resolutions will be put to the  AGM in 2010.

The revised package which is applicable from 1 January 2010 is as follows:

Annual bonus
The maximum annual bonus will be set at 75% of base salary. The award will be split on the following basis:

Cash element		Shares element
15% - Key Results Area (KRA)	40% cash payment	20% ordinary shares

The share element is subject to a three year retention period. If an executive is dismissed or gives notice of resignation during the three year period the shares are forfeited.

10% of salary will be paid on achieving the threshold level rising to 60% of salary for attaining stretch, with results between threshold and stretch awarding on a straight-line basis.

The Key Result Area (KRA) element will only be payable should 95% of the threshold target be met.

Long Term Incentive Plans (2005 Performance Share Plan and 2007 Divisional Performance Share Plan)
An annual award of up to one times salary can be made in ordinary shares. Attached to the award will be a three year performance period with appropriate targets attached.

Targets will be based on Group performance, with Divisional Managing Directors having 25% of their award set on their own division’s performance.

25% of the award will be paid on achieving the threshold level, 100% on attaining stretch, with results between threshold and stretch awarding on a straightline basis. Performance conditions will be reviewed for each cycle of the plan.

Bonus Co-Investment Plan
Executives will be invited to invest up to 40% of any cash bonus into the Bonus Co-Investment Plan. Matching shares are issued on a 1:1 basis with gross invested bonus, and will be released on the attainment of performance conditions following a three year performance period. 25% of the matching shares are paid on achieving threshold level, rising on a straightline basis to 100% paid at or above stretch targets.

Shareholding
The Remuneration Committee has asked each Executive Director to build up a shareholding valued at 150% of their base salary within five years.

Back to top

Executive Directors' Remuneration Package - 2009

Component	Level of award	Performance target	Performance period
Base salary	n/a	n/a	n/a
Annual bonus	Maximum of £200,000	Combination of individual group and divisional targets.	One year
Bonus Co-Investment Plan (BCIP)	Up to 50% of cash can be invested	Matching shares are released where growth in EPS exceeds growth in the RPI by at lease 3%.	Three years
	Matching share ratio 2:1	25% is awarded at growth of 3% rising in a straight-line basis to 100% of the matching shares on growth in excess of 8%
2009 Performance Share Plan	One-off award of up to 450,000 shares valued at £582,750 at time of award	Rate of Return On Capital Employed (ROCE). Threshold performance: 25% award for ROCE 10% for 2011. Stretch performance 100% award for ROCE 12.5% or greater for 2011. Vesting between threshold and awarded on a straightline basis.	Three years

Basic salary and benefits

Salaries are reviewed annually, on appointment, or on change in position or responsibility. From 2010, base salaries will form the basis for all additional performance and non-performance related incentive awards and therefore in conducting annual reviews of the Executive Directors’ salaries, the Committee considers the pay awards and employment conditions across the Group, the Executive Directors’ individual performance and experience, as well as the external competitive levels for comparable positions.

In addition to salary, the Executive Directors may receive additional benefits covering car allowance, private medical insurance and life cover. Craig Smyth, David McIntosh and Ellis Watson (prior to leaving the Group) also received a cash allowance in place of any pension entitlement above the ‘earnings cap’. Paul Dollman has an unfunded pension undertaking from the Company to provide in total the same level of pension as if the ‘earnings cap’ did not apply. David McIntosh also receives a mortgage subsidy payment shown on the remuneration HERE.

The basic salaries for the Executive Directors for the year are disclosed in the Directors’ remuneration HERE. Annual salary reviews take place in March each year, with any increase implemented from 1 May. No salary increases were awarded in 2009.

Back to top

Annual bonus scheme

The Executive Directors participate in a discretionary bonus scheme which is subject to the achievement of challenging Group, divisional and personal targets designed to encourage excellent performance. Bonus payments are non-pensionable.

The 2009 bonus scheme contained performance targets that include threshold and stretch levels derived from a review of the historical and projected performance of the Group and its peers, together with an analysis of City analysts’ expectations. Bonuses at the higher end of the range are payable only for demonstrably superior Group and individual performance and the stretch level represents upper quartile performance.

In 2009, Executive Directors were entitled to receive a bonus payment of £nil at or below threshold performance, increasing on a straight-line basis to a maximum payment of £200,000 for stretch performance. Up to 20% of any entitlement is dependent on the extent to which identified personal Key Result Areas (KRAs) are achieved.

For the year 2009, bonuses were calculated as follows and are payable on 24 March 2010:

Name	Measure	Threshold target	Stretch target	Achieved	Bonus Paid
P Dollman (1)	Group PBT Distribution EBIT New revenue Cost reduction Aviation EBIT Key Result Areas (KRAs)	£30.8m £24.3m £2.5m £3.0m £14.8m -	£31.8m £25.3m £2.7m £4.8m £15.8m -	£35.2m £28.6m £1.4m £8.6m £15.8m 75%	£176,720
D McIntosh (2)	Divisional EBIT New revenue Cost reductin Key Result Areas (KRAs)	£24.3m £2.5m £3.0m -	£25.3m £2.7m £4.8m -	£28.6m £1.4m £8.6m 72%	£102,124
C Smyth	Divisional EBIT Key Result Areas (KRAs0	£14.8m -	£15.8m -	£15.8m 83%	£193,200

1. The targets relating to P Dollman’s bonus are split one-third Group performance, one-third Menzies Aviation and one-third Menzies Distribution.
2. D McIntosh was appointed an Executive Director in July 2009, and his figures reflect his bonus both pre- and post-appointment.

Bonus Co-Investment Plan

In 2009, Executive Directors declined a bonus in respect of the financial year 2008, and therefore were unable to participate in the Bonus Co-Investment Plan (‘BCIP’) award. Under the BCIP, Executive Directors could be invited to invest up to 50% of their annual bonus in shares of the Company (net of tax) which qualify for an award of up to 2:1 matching shares (based on the gross invested amount) dependent on achieving a defined performance target. In 2010, the BCIP will be amended to reduce the matching shares from 2:1 to 1:1.

The performance target for awards made is for real per annum Earnings Per Share (EPS) growth above the Retail Price Index growth over a three year period, with the number of shares vesting being calculated on a straight-line basis from a 25% award at 3% to a full award at 8% or above. Any dividends accrued on shares which vest are paid in cash on vesting.

For Executive Directors, the maximum number of matching shares possible is shown below. The total plan summary is included in Note 20 to the Accounts. An award made in 2006 had a performance period ended December 2008. The real per annum growth in EPS for the Company over the performance period of the award did not meet threshold levels, and therefore the award lapsed.

	31 Dec 2008	Granted during year	Market price of award	Lapsed during year	31 Dec 2009
P Dollman	37,540	-	-	8,162	29,378
D McIntosh	4,634	8,698	133	-	13,332
C Smyth	48,432	-	-	8,420	40,012
E Watson	14,658	-	-	14,658	-

 

Back to top

Long Term Incentive Plans

2005 Performance Share Plan
Executive Directors may be awarded a number of conditional shares annually under the 2005 Performance Share Plan (‘2005 PSP’) as determined by the Committee. The maximum number of conditional shares which may currently be awarded to any individual under the rules of the 2005 PSP in any year is 100,000. During the year, the Committee following external advice and a market review, resolved that, in keeping with best practice, the value of any future awards under the 2005 PSP should be based on a percentage of salary up to a maximum of 100%. A resolution will therefore be put before the AGM in May 2010 to amend the scheme limit from 100,000 shares to a one times salary limit.

Shares awarded vest after three years if the Company’s Total Shareholder Return (TSR) is equal to or outperforms the FTSE250 Index (the Index) TSR for the three year performance period. The number of shares to vest will be based on the extent of any outperformance, with shares vesting on a straight-line basis up to 100% of the award for performance at 30% above the Index’s TSR. Any dividends accrued on shares which vest are paid in cash on vesting. The plan rules allow the Remuneration Committee to select and amend appropriate performance criteria for future awards.

In 2009, no awards were made to Executive Directors under the 2005 PSP. The maximum number of shares which could vest under the 2005 PSP to Executive Directors is shown below. The award of conditional shares made in 2006 which had a performance period from January 2006 to December 2008 lapsed during the period with the performance criteria not being met.

	31 Dec 2008	Granted during year	Market price of award	Lapsed during year	31 Dec 2009
P Dollman	135,000	-	-	30,000	105,000
D McIntosh	-	-	-	-	-
C Smyth	65,000	-	-	30,000	35,000
E Watson	65,000	-	-	65,000	-

2007 Divisional Performance Share Plan
The 2007 Divisional Performance Share Plan (‘2007 DPSP’) is the same in practically all respects as the 2005 PSP, except that the performance conditions are based on the achievement of Divisional Financial Results (DFR). The 2005 PSP therefore aligns each divisional Director to the performance of the Group while the performance criteria for the 2007 DPSP is set against future divisional profitability and is appropriate given the structure of the Group to incentivise each Divisional Managing Director.

In 2009, no awards were made to Executive Directors under the 2007 DPSP. The maximum number of conditional shares which may currently be awarded to any individual under the rules of the 2007 DPSP in any year is 100,000. As previously stated, the Committee, following external advice and a market review, has resolved that in keeping with best practice, the value of any future awards under the 2007 DPSP should be based on a percentage of salary up to a maximum of 100%. A resolution will therefore be put before the AGM in May 2010 to amend the scheme limit from 100,000 shares to a one times salary limit.

The DFR are set at threshold and stretch level. At threshold, 25% of the award will be paid to an individual, increasing on a straight-line basis to 100% for stretch or greater achievement. As the disclosure of the DFR targets could be considered a profits forecast and is viewed by the Committee to be both price and commercially sensitive, the Committee has decided that it will retrospectively disclose the threshold and stretch targets for an award in its report following the end of the performance period. The award made in 2007 had a performance period ended December 2009, and the performance targets are disclosed below.

DFR Measure	Threshold target	Stretch target	2009 result
Aviation Aviation operating profit	£31.0m	£36.0m	£15.8m
Distribution Distribution operating profit	£22m	£26m	£28.6m
Distribution reduction in operating costs	£3.0m	£4.8m	£8.6m
Distribution icome from new revenue streams	£3.0m	£6.7m	£3.2m

The maximum number of shares which could vest under the 2007 DPSP to Executive Directors are shown below.

	31 Dec 2008	Granted during year	Market price of award	Lapsed during year	31 Dec 2009
P Dollman	-	-	-	-	-
D McIntosh	-	-	-	-	-
C Smyth	70,000	-	-	-	70,000
E Watson	70,000	-	-	70,000	-

It remains the intention of the Committee that awards in any year under the 2005 PSP and the 2007 DPSP when combined do not exceed the limit for either scheme individually.

2009 Performance Share Plan
At the Annual General Meeting in 2009, the Company adopted a 2009 Performance Share Plan (‘2009 PSP’). This one-off plan offered Executive Directors the opportunity to benefit from the potential success of the Company over a three year performance period ending December 2011, as measured by an increase in the Return On Capital Employed (ROCE). It provided for a conditional award to be made of up to 450,000 ordinary shares with a value at award date of £582,750 to be made to Executive Directors.

Threshold vesting is based on attainment of a ROCE rate of 10% for the year ended 31 December 2011, with a stretch level for ROCE of 12.5% or more. Where ROCE is less than the threshold level at the end of the performance period, no award will be made to participants. Achievement of the threshold level will result in 25% of the maximum award vesting, with results equal to or greater than the stretch level achieving 100% of the maximum award. Results greater than the threshold but less than the stretch level will be calculated on a straight-line basis.

Dividends are accrued over the performance period. At the end of the performance period, any dividends accrued on shares which vest will be paid in cash.

An award was made following the adoption of the 2009 PSP to the Executive Directors. The number of shares over which they have an interest in the Plan is shown below.

	31 Dec 2008	Granted during year	Market price of award	Lapsed during year	31 Dec 2009
P Dollman	-	450,000	129.5	-	450,000
D McIntosh	-	337,500	129.5	-	337,500
C Smyth	-	450,000	129.5	-	450,000

 

Back to top

Share options

Executive Share Option Scheme
Prior to the introduction of the above share and incentive schemes, share options were granted to each Executive Director normally on an annual basis at a level of one times salary. All grants were discretionary, and awards could be varied depending on specific circumstances. The number of shares held in the scheme are shown below, and the cost to the Company is shown in Note 20 to the accounts.

The options are exercisable on a sliding scale if growth in underlying earnings per share exceeds RPI plus 3%-8% per annum in the three years from grant, adjusted to normalise pension and tax charges. The performance conditions attaching to these options have been met in full.

	31 Dec 2008	Lapsed during year	31 Dec 2009	Exercise price	Exercisable from	Exercisable to
P Dollman	196,048	-	196,048	239	08/11/2005	07/11/2012
	58,714	-	58,714	418	07/05/2007	06/05/2014
C Smyth	5,000	5,000	-	348	18/02/2002	17/02/2009
	5,000	-	5,000	391	28/01/2003	27/01/2010
	43,062	-	43,062	418	07/05/2007	06/05/2014

Savings Related Share Option Scheme
The Company operates a H.M. Revenue & Customs approved Savings Related Share Option Scheme (the SAYE Scheme) available to all UK-based employees in the Group, including Executive Directors. The Company believes that the SAYE Scheme is an important tool in the motivation and retention of staff. Further details of the SAYE Scheme and the cost to the Company is shown in Note 20 to the accounts. The interests of the Directors in the SAYE Scheme are set out HERE.

Service contracts

The Executive Directors have service contracts with the Company, the dates of which are listed in the Directors’ emoluments HERE. The Group’s practice on notice periods is that they should be for a period of 12 months notice. It is the Company’s policy that any termination payment be mitigated and restricted to the actual loss incurred by the Director. All Executive Directors who served during the year have service contracts on this basis. The Committee considers that the notice periods are reasonable and in the interests of shareholders having due regard to prevailing market conditions and practice among companies of comparable size.

Non-Executive Directors

The Chairman and each of the Non-Executive Directors have letters of appointment. The letters of appointment do not contain any contractual entitlement to a termination payment and the Directors can be removed in accordance with the Company’s Articles of Association. The Chairman and all Non-Executive Directors are subject to re-election by shareholders at least every three years, with the exception of any Director whose appointment exceeds nine years, in which case there is a requirement for annual re-election.

Salary

The salary mix for Non-Executive Directors comprises a basic payment, and additional payments for being Chairman of a Committee or a Committee member, or the Senior Independent Director. It is intended to be a competitive mix broadly in line with comparable companies. It remained unchanged during 2009.

Basic payment Committee Chairmanship Committee membership SID fee

£32,229 £6,000 £2,500 £14,061

 

Performance table

The table below compares the Company’s total shareholder return for the five years to December 2009 with the equivalent performance of the FTSE250 Index. The Directors consider that, given the scale and global spread of the Group’s activities, the most appropriate comparison is with this index.

	John Menzies Rebased	FTSE 250 Rebased
2004	100	100
2005	101	130
2006	105	170
2007	128	165
2008	25	102
2009	70	154

Back to top

External appointments

The Board recognises the benefits to the individual and to the Company of involvement by Executive Directors as Non-Executive Directors on the boards of other companies. Prior to accepting an invitation to become a Non-Executive Director of another company, an Executive Director must receive approval from the Group Chairman. This approval will not be denied where the Chairman is confident that the appointment will not interfere with the Director’s ability to perform his duties for the Company nor provide a conflict of interest. Executive Directors are entitled to retain any fees received under these appointments. During the year, Paul Dollman continued an external non-executive appointment with Scottish Amicable Life Association Society. Details of fees received are as follows: Paul Dollman £31,800 (2008: 25,986) (Scottish Amicable Life Association Society).

Payments to outgoing Directors

Ellis Watson resigned as an Executive Director during the year. He did not receive any payments for loss of office. It is the Company’s policy that any termination payments that are made to a Director are mitigated wherever possible and will not exceed their entitlement based on their service contract.

Share price

The market price for shares in John Menzies plc ranged from 43.5p to 360.25p during the year and was 297.75p at 31 December 2009.

Pensions

Scheme benefits
Paul Dollman, David McIntosh and Craig Smyth are members of the Menzies Pension Fund, a defined benefit scheme which provides pension on retirement at age 60 of up to two-thirds of pensionable earnings, or the ‘earnings cap’ if lower, together with additional benefits as detailed below. Pensionable earnings are based on salary excluding bonuses. Ellis Watson was a member of the defined contribution pension scheme.

Unfunded arrangement
The pensionable salary of Paul Dollman is restricted as a consequence of the ‘earnings cap’. He has an unfunded pension undertaking from the Company to provide in total the same level of pension as if the ‘earnings cap’ did not apply. This entitlement is effective from his date of appointment as a Director. Craig Smyth, David McIntosh and Ellis Watson (prior to his resignation) received a cash payment equal to 20% of their respective salaries above the earnings cap which is included in other benefits. Pension details HERE:

Back to top

 

© John Menzies plc

• Home
• Disclaimer
• Accessibility
• Site map
• Contact us
• web design by Studio 24