Guide to Directors Remuneration 2018 · The table below summarises median market practice in FTSE...

0 | Guide to Directors’ Remuneration © 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member

firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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Guide to Directors’ Remuneration 2018

KPMG Board Leadership Centre

December 2018

A wide-ranging overview of Executive and Non-Executive Directors’

remuneration trends in FTSE 350 companies

kpmg.com/uk/remreport18

https://kpmg.com/uk/remreport18

1 | Guide to Directors’ Remuneration© 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member


Summary findingsThe table below summarises median market practice in FTSE 100 companies for Chief Executives,

Finance Directors and Other Executive Directors.

FTSE100 Chief Executive Finance Director Other Executive Directors

Salary increase 2% 3% 3%

Basic salary (£’000s) 905 562 568

Annual bonus

Maximum bonus

(percentage of

salary)

200% 180% 180%

Total bonus

(percentage of maximum)71% 69% 77%

Total bonus

(percentage of

salary)

134% 126% 142%

Most common

performance measureCombination of profit, personal objectives and other non-financial measures

Deferred annual bonus

Maximum permitted

deferral (percentageof50% 50% 50%

annual bonus)

Deferral period 3 years 3 years 3 years

Performance share plans

Maximum award

(percentage of

salary)1

262% 250% 250%

Actual award

(percentage of

salary)1

250% 204% 201%

Actual gains

(percentage of

salary)

231% 177% 186%

Most common

performance measureRelative TSR* in conjunction with other measures

Total earnings2

(£’000s) 3,897 2,312 2,497

Notes: (1) Face value of award.

(2) Includes benefits, total bonus and cash value of share awards vested in the year.

(*) Total shareholder return.

The table below summarises median market practice in FTSE 250 companies for Chief Executives, Finance Directors and Other Executive Directors.

FTSE 250 Chief Executive Finance Director Other Executive Directors

Salary increase 2% 2% 3%

Basic salary (£’000s) 560 363 360

Annual bonus

Maximum bonus (percentage ofsalary)

150% 150% 150%

Total bonus(percentage ofmaximum)

71% 70% 61%

Total bonus (percentage ofsalary)

102% 98% 92%

Most commonperformance measure Combination of profit, personal objectives and cash related measures

Deferred annual bonus

Maximum permitteddeferral (percentageof 50% 50% 50%

annual bonus)

Deferral period 3 years 3 years 3 years


Maximum award (percentage ofsalary)1

200% 200% 200%

Actual award (percentage ofsalary)1

180% 151% 152%

Actual gains (percentage ofsalary)

157% 128% 147%

Most commonperformance measure Relative TSR* and EPS** in conjunction with other measures

Total earnings2 (£’000s) 1,722 1,034 1,189

Notes: (1) Face value of award.(2) Includes benefits, total bonus and cash value of share awards vested in the year.

(*) Total shareholder return.

(**) Earnings pershare.

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Highlights Basic Salary

The median basic salary increase for Chief Executives across the FTSE

350 was 2%. Around 1 in 5 Chief Executives in the FTSE 350 received

no salary increase.

Regulatory

The most important change to the remuneration rules affecting UK

main market listed companies was the publication of the updated UK

Corporate Governance Code in July 2018.

Annual bonus

Around a third of Executive Directors in the FTSE 350 received annual

bonuses of over 80% of the maximum opportunity.

Pensions

Cash in lieu of contributions is the most common pension arrangement

across the FTSE 350. There is continued pressure on companies to

bring executive pensions into line with those arrangements for the

wider workforce.

Long term incentives

Median awards were 250% and 180% of basic salary for Chief

Executives for FTSE 100 and FTSE 250 companies respectively.

Shareholders

Despite a 2018 AGM season notable for some high profile cases , the

average votes in favour of the annual Remuneration Report and

Remuneration Policy report remained above 90% across the FTSE 350.

,

Diversity

Across the executive director population only 8.4% are currently

women. Of executive director positions occupied by women 51% are

Finance Directors, 31% are Chief Executives and the remainder fall

into the Other Executive Director category.

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Contents

© 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member

Guide to Directors’ Remuneration | 4 firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

01 Introduction 5

02 The remuneration landscape 7

03 Market data overview 19

04 Chief Executive 27

05 Finance Director 33

06 Other Executive Directors 39

07 Incentives 45

08 Pensions 53

09 Non-Executive Director 57

10

11

Diversity

Methodology & assumptions

65

71



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01 Introduction

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01 | Introduction

Use of this guide

This publication is designed to be a wide-ranging guide to you as a director or policy maker

to assist in remuneration planning at your company. Where possible we have broken down

the data obtained from the FTSE 350 into groupings by market capitalisation and turnover,

to increase the relevance to you.

We recommend that this guide is used in

conjunction with other information and in

consultation with your advisers to ensure the

data is interpreted correctly and is relevant to

your company.

While data provides a useful guide, it is

important to note its historical nature, together

with the personal circumstances that are

attached to each role and benchmark.

This guide is designed to provide you with a

wide-ranging picture of trends in market

practice in remuneration for Executive and

Non-Executive Directors in FTSE 350

companies.

This publication is structured to show

information by position; namely Chief

Executive, Finance Director, Other Executive

Directors and Non-Executive Directors, to

enable all the remuneration components of

each position to be considered and discussed

together.

Where we show total earnings figures we have

based this on current disclosures, following the

methodology for the single figure table for

remuneration in Directors’ Remuneration

Reports. Additional information on pensions

and plan design for short and long term

incentives is shown separately.

This analysis is based on data gathered from

external data providers (see methodology &

assumptions section for more information) and

covers companies with financial year ends up

to and including 31 July 2018.

How KPMG can help

KPMG is one of the UK’s leading advisers on

employee incentives and executive

remuneration. We are a member of the

Remuneration Consultants Group and

signatory to its Code of Conduct. We have a

multi-disciplinary team, able to advise on

market practice, corporate governance,

incentive plan design, tax, regulatory and

accounting aspects of UK and global incentive

plans.

We work regularly with clients ranging from

Main Market and AIM listed companies to

private equity-backed and larger unlisted

companies, as well as multinational groups

headquartered both in and out of the UK. We

have significant experience in advising on all of

the following matters:

Reward strategy

and approach

Corporate

transactions

Mix of pay and

remuneration

benchmarking

Accounting,

valuations

and modelling

Remuneration

Committee

governance

Ongoing

operation of

incentive plans

Remuneration

regulatory

compliance

Directors’

Remuneration

Reports

Design and

implementation

of incentive plans





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02 The remuneration landscape

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02 | The remuneration landscape

The shareholder perspective

The 2018 AGM season saw three companies in the FTSE 350 receive majority votes against

their annual Remuneration Report and one company received a majority vote against their

policy report. Although these instances invariably attract attention they represent a small

percentage of companies.

Following the introduction of the public register of significant votes against shareholder

resolutions, commentators have watched with interest the position in relation to votes on the

annual Remuneration Reports and Remuneration Policy. A significant vote against is defined as

more than 20% of the votes cast against a resolution.

Areas of continuing concern for

shareholders

Shareholders and proxy voting agencies highlight a number of areas of continuing concern

including but not limited to:

― The lack of disclosure surrounding

performance conditions attached to bonus

awards, particularly personal performance

targets where disclosure was considered

to be vague or non-existent;

― Increases in bonus and long term

incentive plan (LTIP) opportunities with

little supporting rationale;

― Significant increases in salary for recently

recruited executives in comparison to

their predecessors;

― The lack of recognition of a material fall in

share price performance when making

LTIP awards; and

― A lack of adherence to Remuneration

Policy.

As in previous years shareholders continue to

expect companies to be able to provide well

considered rationale and clear explanations for

how they have both developed and

implemented their Remuneration Policy.



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Across the whole of the FTSE 350, the overall

percentage of companies with a significant vote

against Remuneration Reports has remained

stable. This however masks a 3% increase

across the FTSE 100 and a corresponding

decrease in the FTSE 250.

Percentage of companies with a significant

vote against their annual Remuneration

Report

2018

Percentage of com

panie

s

2018 14% 14%

2017 2017

Due to the typical three-year cyclical nature of

Remuneration Policy votes, a year on year

comparison may not provide an entirely accurate

picture with 60% less companies having put their

policy to vote in 2018 compared with 2017.

Having said that, it can be observed from the

chart below that in the FTSE 100 in particular

there was a notable increase in the number of

companies receiving a significant vote against

their Remuneration Policy.

Percentage of companies with a significant

vote against their Remuneration Policy

Pe

rcentage

of com

panie

s

4% 4%

2% 2%

0% 0%

FTSE 350 FTSE 100 FTSE 250 FTSE 350 FTSE 100 FTSE 250

Similar to last year, the average vote in favour of the Directors’ Remuneration Report was over 90%

amongst the FTSE 350 companies.

12% 12%

10%

8%

6%

10%

8%

6%

© 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member 9 | Guide to Directors’ Remuneration


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Main market listed companies’

regulation landscape

There have been a number of changes to the

remuneration rules affecting UK main market

listed companies. The most impactful of these

changes was the publication of the updated UK

Corporate Governance Code in July by the

Financial Reporting Council which takes effect

from 1 January 2019. In addition to this:

― In November 2018 the Investment

Association issued an update of its

Principles of Remuneration and an

accompanying open letter to the

Remuneration Committee chairs;

― There have a been a number of updates

to the various Financial Services

remuneration codes; and

― The Companies (Miscellaneous Reporting)

Regulations 2018 which require

companies to publish details of their Chief

Executive pay ratios were made on 17

July 2018 and will apply in relation to the

financial years of companies beginning on

or after 1 January 2019.

Investment Association (IA)

November 2018

In November 2018 the Investment Association issued an update of its Principles of

Remuneration and an accompanying open letter to Remuneration Committee chairs.

Issues to consider for the 2019 AGM season

It is becoming increasingly important for

companies to acknowledge and address

concerns raised by shareholders. In particular,

where a company has received a significant

vote against either the Remuneration Policy or

Remuneration Report the company is expected

to understand the reasons for the vote and

issue a statement outlining its response.

Level of Remuneration

― Executives should be paid no more than is

necessary to achieve the strategic aims of

the business along with sustainable long-

term value creation.

― Remuneration Committees will be

expected to show restraint in relation to

both fixed pay and variable pay

opportunity, which on aggregate can lead

to a substantial increase in overall

remuneration.



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Investment Association

November 2018

Executive Shareholdings and Post-

Employment Holding Periods

― Executives are encouraged to build up an

appropriate level of shareholding using

their own resources to demonstrate

alignment with shareholders.

― Committees are encouraged to set out

the minimum shareholding requirements,

the time available to meet the

requirements and the consequences of

not achieving the shareholding

requirement.

― The IA notes that the UK Corporate

Governance Code’s policy on post-

employment shareholding requirements

should apply for at least 2 years and be

based on the lower of the shareholding

requirement prior to the executive ceasing

employment and their actual shareholding

on this date. In addition, structures should

be in place to ensure these shareholdings

are maintained.

Non-Executive Shareholdings

― The IA encourages Non-Executive

Directors to own shares in their

companies. Chairs and non-executives

may receive part of their fees in shares

bought at the market price. However,

shareholders consider it inappropriate for

chairs and independent directors to

receive incentive awards geared to the

share price or corporate performance.

Malus and Clawback

― The likelihood of gross misconduct or

misstatement of results being triggered is

remote and in the unlikely event it does

occur, it will prove challenging to highlight

the relevant director as being culpable.

― Remuneration Committees are being

encouraged to widen the list of

circumstances in which malus and

clawback can be used.

― The enforceability of clawback provisions

has long been questioned. Executives

should sign forms at the date of grant

which detail how it will be applied.

Documents must provide a consistent

approach in case they are later

challenged.



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Investment Association

November 2018

Restricted Stock

The IA has expanded its guidance on the use of restricted stock reflecting the growing interest in

this type of arrangement.

Strategic Rationale

― Investors review the appropriateness of a

plan on a case by case basis paying

particular attention to context and

strategic rationale.

― Investors recognise that certain sector

wide factors, such as the impact of

commodity pricing or a cyclical business

model, could make a restricted stock plan

appropriate.

Discretion & underpin

― Remuneration Committees are expected

to be able to exercise discretion on

vesting outcomes to avoid payments for

failure. Committees are therefore being

expected to review all vesting outcomes

of restricted stock plans and explain why

it is appropriate.

― Underpins are used to ensure baseline

performance is reached before the award

can begin to vest.

Holding period

― As with other forms of LTIP the preferred

vesting and holding period should be at

least five years.

― The new post-retirement holding period

should be at least two years.

Previous approach to remuneration

― Before concluding on the appropriateness

of a restricted stock plan, investors will be

reviewing the company’s previous

approach to remuneration and the pay out

levels under any old awards compared

with company performance.

Quantum

― If a company is moving from an LTIP to a

restricted stock plan, the level of discount

applied to the size of award must be at

least 50% when compared to previous

grant levels.



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The UK Corporate Governance Code

July 2018

The Financial Reporting Council published the updated UK Corporate Governance Code in

July 2018 (the Code). The new Code is shorter and sharper than its predecessors but still

sets out the fundamental corporate governance framework for companies listed on the

main market of the London Stock Exchange.

The remuneration section of the Code seeks to address some of the concerns leading to the

public disquiet over executive pay including the complexity of remuneration arrangements,

the role of incentives in driving behaviour and the correlation between executive pay and

the experiences of the wider workforce.

Wider remit for Remuneration Committees

The Code addresses the Remuneration

Committee’s role with respect to the pay and

incentives of senior management and across

the wider workforce.

“The Remuneration Committee should have

delegated responsibility for determining the

policy for executive director remuneration and

setting remuneration for the chair, executive

directors and senior management. It should

review workforce remuneration and related

policies and the alignment of incentives and

rewards with culture, taking these into account

when setting the policy for executive director

remuneration.” (Provision 33).

Discretion

The revised Code also emphasises the role of

the board in exercising independent judgement

and discretion with a new provision requiring

schemes and policies to enable remuneration

outcomes to be overridden; for example,

where the measurement of any performance

condition does not reflect the actual

performance of the company over the period or

the performance of the individual director.

Remuneration schemes should

promote long-term shareholdings

by executive directors that

support alignment with long-term

shareholder interests. Share

awards granted for this purpose

should be released for sale on a

phased basis and be subject to a

total vesting and holding period of

five years or more.

“

“



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The UK Corporate Governance Code

July 2018

Wider remit for Remuneration Committees

(cont.)

LTIP holding periods

The revised Code now recommends extending

total vesting and holding periods for executive

share awards to a minimum of five years to

encourage companies to focus on longer-term

outcomes in setting pay.

Post employment shareholdings

“The Remuneration Committee should

develop a formal policy for post-employment

shareholding requirements encompassing both

unvested and vested shares.” (Provision 36)

Alignment with wider workforce

New reporting requirements have been

introduced including that companies disclose

what workforce engagement has taken place

to explain how executive remuneration aligns

with wider company pay policy. There is a new

requirement (on a ‘comply or explain’ basis)

that the Remuneration Committee chair will

have served for at least twelve months on any

Remuneration Committee before taking on

this role.

Remuneration schemes

should promote long-term

shareholdings by executive

directors that support

alignment with long-term

shareholder interests. Share

awards granted for this

purpose should be released

for sale on a phased basis

and be subject to a total

vesting and holding period of

five years or more.

“

“



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Financial Conduct Authority (FCA) remuneration in

CRD IV firms: final guidance and changes to Handbook

March 2018

In March 2018, the FCA published a policy statement (PS18/7) on staff incentives,

remuneration and performance management in consumer credit. It contains the final text of

a new section 2.11 in its Consumer Credit sourcebook (CONC 2.11) on remuneration and

performance management policies, procedures and practices. These rules, which came into

force on 1st October 2018, apply to firms that are engaged in credit-related regulated

activity and are not subject to any of the existing remuneration codes in the Senior

Management Arrangements, Systems and Controls sourcebook (SYSC) (that is, SYSC 19A

to SYSC 19F). Among other things, the FCA require that firms put in place adequate

arrangements to detect and manage any risk of non-compliance with their regulatory

obligations arising from their remuneration or performance management practices.

At the same time, the FCA also published finalised guidance (FG18/2) on staff incentives,

remuneration and performance management in consumer credit containing examples of good and

bad practice.

The guidance will be of particular interest to firms that make use of the following incentive scheme

features which can increase the risk to consumers:

― Salaries and bonuses based on volume,

profitability or productivity;

― Staff whose pay is largely or entirely

variable;

― Payments that are dependent on reaching

targets or thresholds;

― Commission rates that vary with volume or

by product;

― Incentives linked to value, profitability or

terms of the finance sold;

― Incentives for selling finance that is linked

to the sale of other physical goods;

― Competitions or promotions designed to

increase sales or collections;

― Incentive schemes for managers linked to

team performance; and

― Incentives for sales of non-financial

products that may be purchased with

finance.



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Prudential Regulation Authority (PRA) guidance on

remuneration

October 2018

On 18 October 2018, the PRA published a Dear

Remuneration Committee Chair letter, outlining

an update in the way it supervises compliance

with the Remuneration Part of the PRA

Rulebook.

The PRA has sent versions of the letter to

remuneration proportionality level one UK

deposit-takers and international banks, ahead of

its annual review of firms' remuneration

policies and practices.

With effect from the 2018/19 remuneration

review, the PRA will no longer provide a non-

objection statement to the proposed

communication or distribution of variable

remuneration awards by level one firms. This

change reflects an evolution in the PRA's

management of the annual remuneration

round.

The PRA's oversight over level one firms'

remuneration practices continues to be an

important part of the supervisory toolkit and a

key way of promoting the alignment of

incentives, performance and risk-taking.

However, increasingly, the PRA will seek to

draw on the principles for governance that are

set out in the senior managers and certification

regime (SM&CR). There will be greater

emphasis on how Remuneration Committees

carry out their independent challenge and

oversight role in accordance with the PRA's

Remuneration Rules and how the chairs of

those committees (or, where applicable, other

senior management functions) discharge their

responsibilities under the SM&CR. This change

is in line with a recent FCA communication to

firms.

PRA supervisors will continue to engage with

level one firms throughout the year as part of

its review of firms' remuneration policies,

practices and processes. Where relevant, the

PRA will provide feedback to these firms

following the annual remuneration round, to

highlight any areas of key engagement and

draw attention to issues to be addressed by

the firm. The PRA will also continue to co-

ordinate its remuneration work with the FCA

where appropriate. It expects level one firms to

submit a Remuneration Policy statement and

quantitative data tables three months ahead of

the firm's preferred final feedback date

(previously referred to as the "non-objection

date"), with an update of the figures required at

least two weeks before the final feedback date.



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FCA letter to proportionality level 1 firms on 2018/19

remuneration round

1 November 2018

On 1 November 2018, the FCA published a Dear Remuneration Committee Chair letter

which it has sent to proportionality level 1 firms (i.e. where total assets exceed £50 billion)

regarding the 2018/19 remuneration round.

In the letter, the FCA sets out its approach to

various issues on remuneration:

― Supervisors will discuss how a firm's

Remuneration Policy reinforces a firm's

values, ethics and culture, and promotes

the right behaviour. Attention will be given

to addressing issues previously identified

and gender pay gap inequalities;

― The FCA will continue to review firms'

approaches to the application of ex-post

risk adjustment. The FCA notes that it still

observes firms adjusting awards, but that

the size of an adjustment may not always

match the seriousness of an incident or

misconduct; and

― The FCA will no longer provide a "non-

objection" to a firm communicating and

distributing variable remuneration awards,

but will write to a firm following the

remuneration round, highlighting positive

areas of engagement and any issues to be

addressed.

The annex to the letter sets out findings from

the 2017/18 remuneration round. Points of

interest include:

― In relation to material risk takers (MRTs),

firms are encouraged to maintain a focus

on individuals whose roles can give rise to

risks including those of a prudential,

operational, conduct and reputational

nature; and

― It is good practice for firms to consider

non-financial risks when setting their

bonus pools. Likewise, it remains unclear

in some firms how an individual's

performance assessment translates into

the amount of variable remuneration they

receive.



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, p p p

p “ ” , g

© 2018 KPMG LLP a UK limited liability artnershi and a member firm of the KPMG network of inde endent member

firms affiliated with KPMG International Coo erative ( KPMG International ) a Swiss entity. All ri hts reserved.

©© 22001188 KKPPMMGG LLLLPP,, a a UUKK lliimmiitetedd lliiababiilliity ty ppartnartneershrshiipp anandd a a mmeemmbbeer r fifirmrm oof f ththee KKPPMMGG nneetwotwork rk oof f iinnddeeppeennddeennt t mmeemmbbeer r

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03 Market data overview

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This section provides a summary of total remuneration levels for executive directors

across the FTSE 350, including fixed and variable elements. This section also provides

information on the mix between fixed and variable remuneration and the balance

between short and long term incentives.

Total earnings

The following table summarises the median basic salary, total cash and total earnings

in the year for all Chief Executives, Finance Directors and Other Executive Directors.

Basic Salary

(£'000)

Total cash

(£'000)

Total Earnings

(£'000)

FTSE 100

Chief Executive 905 (871) 1,851 (1,872) 3,897 (3,478)

Finance Director 562 (552) 1,136 (1,134) 2,312 (2,128)

Other Executive Director 568 (546) 1,187 (1,135) 2,497 (1,951)

,

,

,

03 | Market data overview

FTSE 250

Chief Executive 560 (543) 1,037 (1,042) 1,722 (1,496)

Finance Director 363 (359) 675 (652) 1,034 (906)

Other Executive Director 360 (360) 720 (651) 1,189 (941)

The variable components of pay, both short and long term,

continue to form a significant proportion of total earnings and “ continue to pay out at high levels.

“



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Remuneration mix

Of the total variable elements of pay paid out across the FTSE 250, long term incentive payments

have increased relative to short term incentive payments. The position in the FTSE 100 has

remained largely the same.

The chart below shows the mix between fixed and variable remuneration. This is

based on median total earnings received during the year.

FTSE 100 CEO

FTSE 250 CEO

0% 20% 40% 60% 80% 100%

Fixed Variable

The chart below shows the median short term to long term remuneration mix for

Chief Executives.

FTSE 100 CEO

FTSE 250 CEO

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Short-term Long-term



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In accordance with the single figure table disclosure methodology followed in Directors’

Remuneration Reports, deferred awards paid out in future financial years are included as short

term incentives as they are no longer subject to performance.

The charts below show the median remuneration mix for Chief Executives split by

pay elements, as reported in the single figure table.

Chief Executive

Remuneration mix

FTSE 100

24%

30%

40%Other

fixed

pay

Chief Executive

Remuneration mix

FTSE 250

40%

34%

21%

Other

fixed

pay

0% 6% 0% 5%

When compared with last year, incentive award pay

outs as a proportion of total earnings have increased

across the FTSE 350.

“ “ © 2018 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member


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Basic salary

The chart below shows the prevalence of basic salary freezes for the last four years in the

FTSE 350. There is a slight increase in the percentage of Executive Directors who received a

salary freeze this year compared to last year.

Basic salary freezes in the FTSE 350

Chief Finance Other

Executive Director Executive

Director

0%

5%

10%

15%

20%

25%

30%

35%

Percentage of com

panie

s

2018

2017

2016

2015

Salary differentials by reference to role

The table below shows the internal ratio between the salaries of the Finance Director and

Other Executive Director positions as a percentage of the Chief Executive’s salary. These

percentages remain broadly consistent with previous years.

Lower

Quartile Median

Upper

Quartile

FTSE 100

Finance Director 59% 65% 70%

Other Executive Director 56% 66% 80%

FTSE 250

Finance Director 59% 66% 72%

Other Executive Director 57% 67% 74%

Companies continued to exercise restraint in 2018 and salary

increases have remained modest in percentage terms. Almost a

quarter of Chief Executives in the FTSE 350 received no salary

increase. Companies remain cautious in their approach, continuing to

take into account increases across the broader employee population.

“ “



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Annual bonus plans

Across the FTSE 350, total annual bonus payments have increased for all directors.

The charts below show the median total bonus pay outs made in FTSE 100 and

FTSE 250 companies.

FTSE 100

('000s) Total bonus payments

FTSE 250

('000s) Total bonus payments


£1,400

£1,200

£1,000

£800

£600

£400

£200

£0

£700

2018 2018

2017

£1

,2

42

£7

19

£7

39

£1

,1

5

2017

£500

£400

£300

£200

£100

£0

Chief Finance Other Chief Finance Other

Executive Director Executive Executive Director Executive

Director Director

8

£6

75

£6

95

£600

£5

76

£3

44

£3

41

£5

27

£3

21

£3

11

Bonus deferrals

Deferral of at least part of the bonus is standard practice amongst the majority of FTSE 350 companies

and one that is expected by virtually all shareholder and regulatory bodies.

The median maximum bonus deferral within the FTSE 350 is 50%. Please see the Incentives section

for more details.



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Long term incentive plans

The vesting of LTIPs are dependent on a range of factors including the extent to which performance

conditions are achieved and the underlying share prices (both in relation to the number of shares under

an award and the value of the award on vesting).

The charts below show an increase in LTIP vesting for most roles with the exception of Finance

Directors and Other Executive Directors in the FTSE 250.

The charts below show the median actual value of LTIP awards vesting in the year as

compared to 2017.

FTSE 100 ('000s) median actual value

of LTIP awards vesting in the year

£1

,8

75

£9

23

£1

,2

04 £

1,4

55

£8

97

£7

55

£0

£200

£400

£600

£800

£1,000

£1,200

£1,400

£1,600

£1,800

£2,000

2018

2017

£8

05

£4

50

£4

44

£6

87

£4

60

£4

82

£0

£100

£200

£300

£400

£500

£600

£700

£800

£900

FTSE 250 ('000s) median actual value

of LTIP awards vesting in the year

2018

2017

Chief Finance Other Chief Finance Other

Executive Director Executive Executive Director Executive

Director Director



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p “ ” , g’Guide to Directors’ Remuneration | 26




Guide to Directors’ Remuneration | 26firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.



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04 Chief Executive

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04 | Chief Executive

This section provides information on the remuneration for the role of Chief Executive.

This role represents the lead executive director at each company. Actual job titles

included are Chief Executive Officer, Managing Director, Executive Chairman and CEO

and President and CEO.

Total earnings

The following table shows the median basic salary, total cash and total earnings in the

year for FTSE 100 and FTSE 250 companies (2017 data in parentheses).

Chief Executive

Basic Salary

(£'000)

Total cash

(£'000)

Total Earnings

(£'000)

FTSE 100

FTSE 250

905 (871) 1,851 (1,872) 3,897 (3,478)

560 (543) 1,037 (1,042) 1,722 (1,496)

Basic salary increases

The table below shows increases in the FTSE 100 and FTSE 250 for the latest

reported financial year, as well as the previous year.

Chief Executive

Lower

Quartile Median

Upper

Quartile

2018 2017 2018 2017 2018 2017

FTSE 100

FTSE 250

0% 1% 2% 2% 3% 3%

1% 1% 2% 2% 4% 5%

,

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Salary position and pay comparator groups

The assumption that the size of a company is

highly correlated with basic salary levels for

executive directors is supported by the data

below, which shows basic salary levels by

market capitalisation and turnover bands.

Many companies use market capitalisation as a

key criteria when comparing salary levels, but

the volatility in the stock markets has shown

that this can lead to unintended

consequences.

For example, if pay is benchmarked to a group

of peer companies selected by market

capitalisation in one year, subsequent falls in

market capitalisation for the company

concerned will then mean it appears out of line

with current peers.

Turnover is generally a less volatile indicator

and therefore a prudent approach would be to

consider both when looking at salaries and in

assessing whether the data is appropriate.

The tables below show basic salary levels by market capitalisation and

turnover bands.

Basic salary by market capitalisation

Chief Executive

Market

Capitalisation

Lower Quartile

(£'000)

Median

(£'000)

Upper Quartile

(£'000)

FTSE 100

>£15bn 1,027 1,150 1,250

£5bn - £15bn 615 789 864

<£5bn 641 712 792

All FTSE 100 737 905 1,090

>£2bn 548 601 717

FTSE 250

£1bn - £2bn 466 519 601

<£1bn 429 495 563

All FTSE 250 479 560 656

FTSE 350 All FTSE 350 507 615 821

Basic salary by turnover

Chief Executive



Turnover

Lower Quartile

(£'000)

Median

(£'000)

Upper Quartile

(£'000)

FTSE 100

>£15bn 960 1,068 1,224

£5bn - £15bn 801 934 1,083

<£5bn 600 736 808

All FTSE 100 737 905 1,090

FTSE 250

>£1bn 555 603 715

£500m - £1bn 493 530 660

<£500m 427 480 555

All FTSE 250 479 560 656

FTSE 350 All FTSE 350 507 615 821

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04 | Chief Executive

Annual bonus

Around a third of the companies in the FTSE 100 and FTSE 250 paid their Chief Executive a bonus

in excess of 80% of the maximum. The vast majority of companies paid their Chief Executive a

bonus of at least 50% of their maximum opportunity.

Annual bonus by FTSE Index

Chief Executive FTSE 100 FTSE 250

Lower Upper Lower Upper

Qua rtile Median Quartile Quartile Median Quartile

(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)

Maximum bonus opportunity (%

of salary) 150% 200% 200% 125% 150% 155%

Total bonus (% of salary) 108% 134% 173% 79% 102% 128%

Total bonus (% of maximum

bonus) 60% 71% 89% 56% 71% 87%

Total bonus (£'000) 832 1,242 1,739 400 576 808

The chart below shows the distribution of total bonuses (as a percentage of

maximum bonus opportunity) for the FTSE 100 and FTSE 250 companies.

Percentage of maximum annual bonus paid by companies

Pe

rcentage

of m

axim

um

bonus paid

>100%

FTSE 100

FTSE 250

90%-100%

80%-90%

70%-80%

60%-70%

50%-60%

40%-50%

30%-40%

20%-30%

10%-20%

0%-10%

0%

0% 5% 10% 15% 20% 25%

Percentage of companies



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Compared to last year, the median maximum potential award across the FTSE 350 has remained

largely the same, while the median actual gains have increased.

Long term incentive plans by FTSE index

Chief Executive FTSE 100 FTSE 250


Quartile Median Quartile Quartile Median Quartile

(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)

Maximum award (% of salary) 200% 262% 361% 150% 200% 221%

Actual award (% of salary) 200% 250% 350% 147% 180% 202%

Actual award (£'000) 1,547 2,142 3,660 739 1,012 1,351

Actual gains (% of salary) 103% 231% 354% 65% 157% 254%



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05 Finance Director

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05 | Finance Director

This section provides information on the remuneration for the role of Finance Director.

Total earnings



Finance Director

Basic Salary

(£'000)

Total cash

(£'000)

Total Earnings

(£'000)

FTSE 100

FTSE 250

562 (552) 1,136 (1,134) 2,312 (2,128)

363 (359) 675 (652) 1,034 (906)




Finance Director

Lower

Quartile Median

Upper

Quartile

2018 2017 2018 2017 2018 2017

FTSE 100

FTSE 250

2% 1% 3% 2% 3% 3%

1% 2% 2% 3% 5% 4%

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The tables below show basic salary levels by market capitalisation and turnover

bands.


Finance Director

Market

Capitalisation

Lower Quartile

(£'000)

Median

(£'000)

Upper Quartile

(£'000)

FTSE 100

FTSE 250

FTSE 350

>£15bn 672 725 768

£5bn - £15bn 447 513 565

<£5bn 402 453 528

All FTSE 100 461 562 700

>£2bn 343 397 447

£1bn - £2bn 305 340 400

<£1bn 296 354 383

All FTSE 250 317 363 417

All FTSE 350 340 412 515


Finance Director

Turnover

Lower Quartile

(£'000)

Median

(£'000)

Upper Quartile

(£'000)

FTSE 100

FTSE 250

FTSE 350

>£15bn 626 700 759

£5bn - £15bn 501 564 636

<£5bn 415 466 517

All FTSE 100 461 562 700

>£1bn 357 400 451

£500m - £1bn 312 345 416

<£500m 282 324 360

All FTSE 250 317 363 417

All FTSE 350 340 412 515



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05 | Finance Director

Annual bonus

When compared to the previous year, there has been an increase in total annual bonus payments



Finance Director FTSE 100 FTSE 250



(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)


of salary) 150% 180% 200% 125% 150% 150%



bonus) 60% 69% 81% 50% 70% 87%

Total bonus (£'000) 515 719 977 229 344 483

The chart below shows the distribution of total bonuses (as a percentage of maximum

bonus opportunity) for the FTSE 100 and FTSE 250 companies.


Percentage of m

axim

um

bonus paid

>100%

FTSE 100

FTSE 250

90%-100%

80%-90%

70%-80%

60%-70%

50%-60%

40%-50%

30%-40%

20%-30%

10%-20%

0%-10%

0%

0% 5% 10% 15% 20% 25% 30%




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Compared with last year, the median maximum potential award have remained at broadly the

same level across the FTSE 350. The median actual gains in the FTSE 100 have increased whilst

reducing slightly in the FTSE 250.


Finance Directors FTSE 100 FTSE 250



(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)



Actual award (£'000) 797 1,254 1,769 425 589 777




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06 Other Executive Directors

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06 | Other Executive Director

This section provides information on the remuneration for the role of Other Executive

Directors. Other Executive Directors include a variety of roles with different

responsibilities, including functional and divisional directors.

The constituents making up the Other Executive Director population in the FTSE 350 this year

compared with last year consists of a notably different mix of positions making a year on year

comparison less relevant.

Total earnings



Other Executive

Director

Basic Salary

(£'000)

Total cash

(£'000)

Total Earnings

(£'000)

FTSE 100 568 (546) 1,187 (1,135) 2,497 (1,951)

FTSE 250 360 (360) 720 (651) 1,189 (941)




Other Executive Lower Upper

Director Quartile Median Quartile

2018 2017 2018 2017 2018 2017

FTSE 100

FTSE 250

1% 1% 3% 2% 6% 9%

2% 2% 3% 3% 4% 5%

,

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The tables below show basic salary levels by market capitalisation and turnover bands.


Other Executive Directors

Market Lower Quartile Median Upper Quartile

capitalisation (£'000s) (£'000s) (£'000s)

FTSE 100

>£10bn 688 761 806

£5bn-£10bn 398 506 634

<£5bn 369 475 475

All FTSE 100 416 568 753

>£2bn 345 417 454

FTSE 250

£1bn-£2bn 263 316 360

<£1bn 253 278 425

All FTSE 250 276 360 434

FTSE 350 All FTSE 350 343 422 574



Market Lower Quartile Median Upper Quartile

capitalisation (£'000s) (£'000s) (£'000s)

FTSE 100

>£10bn 626 740 791

£5bn-£10bn 530 660 734

<£5bn 369 416 475

All FTSE 100 416 568 753

>£2bn 344 419 463

FTSE 250

£1bn-£2bn 358 394 423

<£1bn 257 278 374

All FTSE 250 276 360 434

FTSE 350 All FTSE 350 343 422 574



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06 | Other Executive Director

Annual bonus

When compared to the previous year, there has been an increase in total annual bonus payments


The vast majority of companies paid their Other Executive Directors a bonus of at least 50% of the

maximum opportunity.


Other Executive Directors FTSE 100 FTSE 250



(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)


of salary) 150% 180% 200% 140% 150% 150%



bonus) 57% 77% 92% 53% 61% 77%

Total bonus (£'000) 562 739 1,122 218 341 499

The chart below shows the distribution of total bonuses (as a percentage of

maximum bonus opportunity) for the FTSE 100 and FTSE 250 companies who have

disclosed the maximum bonus opportunity.


Pe

rcentage

of m

axim

um

bonus paid

>100%

FTSE 100

FTSE 250

90%-100%

80%-90%

70%-80%

60%-70%

50%-60%

40%-50%

30%-40%

20%-30%

10%-20%

0%-10%

0%

0% 5% 10% 15% 20% 25% 30% 35%




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Compared with last year, the median actual gain (as a percentage of salary) in the FTSE 100 has

increased significantly.


Other Executive Directors FTSE 100 FTSE 250


Qu artile Median Q uartile Quartile Median Quartile

(£'000) (£'000) (£'000) (£'000) (£'000) (£'000)



Actual award (£'000) 763 1,137 1,884 329 521 833




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07 Incentives

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07 | Incentives

This section provides an overview of trends in incentives, specifically the structure of

incentives and their performance measures. Market data relating to quantum and pay

outs for each executive director role is contained in the previous sections.

Short and long-term incentive plans continue to attract attention

for their role in driving overall quantum. Remuneration

Committees need to carefully assess the potential outcomes of

proposed plans and to ensure their design adheres to expected

practice on key features such as post vesting holdings periods.

“ “

Annual bonus plan

The most common number of performance conditions used in annual bonus plans across the

FTSE 350 is three.

Number of measures in annual bonus plan

Pe

rcentage

of com

panie

s

40% FTSE 100

FTSE 250

35%

30%

25%

20%

15%

10%

5%

0%

One Two Three Four Five Six or more



Profit

Personal objectives

Cash related

Other non-financial

Revenue

Consumer metric

Other financial targets

Strategic objectives

Return of capital/equity/assets

Health & safety

EPS

Cost

TSR

NAV

FTSE 250

FTSE 100

Performance measures in annual

bonus plans

The most common combination is some form

of profit measure in conjunction with a non-

financial metric and individual personal

objectives.

The most common non-financial metrics differ

by sector and typically relate to strategic

targets, a customer target, an employee metric

or an HSE (Health, safety and environment)

target.

The chart below shows the performance measures typically used in FTSE 100

and FTSE 250 companies.



Performance measures in annual bonus plans

0% 5% 10% 15% 20% 25%

Percentage of performance measures

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07 | Incentives

Deferred annual bonus plans

The median maximum deferral across the A deferred annual bonus plan involves the

FTSE 350 is 50% of bonus which is the same compulsory or voluntary deferral of some or all

level as last year. of an annual bonus into company shares,

which are then restricted for a period of time

(deferred shares).

The chart below shows the length of deferral period used by FTSE 100 and FTSE 250

companies which have disclosed this information. The most common deferral period

remained at 3 years.

Deferral periods

Pe

rcentage

of com

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90% FTSE 100

FTSE 250

80%

70%

60%

50%

40%

30%

20%

10%

0%

One Two Three Four or more



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Performance share plans (PSPs) continue to be the most commonly used form of LTIP. A small minority of

companies in the FTSE 350 have departed with convention and now operate restricted share plans (see

below).


Performance measures

The use of some form of Total Shareholder Return (TSR) measure, either as a single measure or in

conjunction with another metric, continues to be the most popular measure across the FTSE 350.

The following charts show the measures that are currently in use.

8% 6%

7%

16% 22%

7%

11% 13%

Performance Performance 11% share plans share plans

26% FTSE 100 FTSE 250 7%

35%

23%

10%



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07 | Incentives

The following chart shows the number of

measures that are currently in use. Although

there has been increasing focus on simplicity

from the shareholders, the use of multiple

performance measures remained at a similar

level to last year.

Around a fifth of FTSE 100 companies use four

or more performance measures (a slight

decrease on last year).

The following charts show the number of measures that are currently in use.

Number of measures in performance share plans

Pe

rcentage

of com

panie

s

60%

FTSE 100

50% FTSE 250

40%

30%

20%

10%

0%

One Two Three Four or more

Post-vesting holding period

A post-vesting holding period of at least 2 years is now a requirement of the UK Corporate

Governance Code. This year we have continued to see companies in the FTSE 350 introduce or

strengthen their post-vesting holding periods.



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Restricted share plans

Whilst PSPs remain by far the most prevalent

form of LTIP operated by companies in the

FTSE 350, we have noticed that a number of

companies have introduced restricted share

plans as their preferred vehicle. Awards

granted under these plans are not subject to

performance conditions although ‘underpins’

are put in place to ensure awards will not vest

if certain conditions are not met. Whilst the

reasons for introducing restricted share plans

are varied, a common theme is that they avoid

the difficulty associated with determining

appropriate performance conditions or volatility

in share price meaning that PSP awards

measured against share price metrics are

considered to be something of a ‘lottery’. As

with any new plan, those companies who are

considering introducing this type of

arrangement should consult with their

shareholders and give clear reasons for the

commercial rationale for introducing such a

plan.

The number of companies operating restricted

share plans at present is too small to produce

meaningful analysis but we consider this to be

an area of emerging interest, in particular whilst

both overall quantum and complexity of LTIPs

remains under close scrutiny.

“ If a company is moving from an

LTIP to a restricted share

model, the Remuneration

Committee should consider the

appropriate discount to award

levels. This is to reflect that

restricted shares have more

certain outcomes. Members

believe that the discount rate

for moving from the LTIP to

restricted share awards should

be at least 50% and grant levels

should be held at this level in

future and not gradually

increase over time. The exact

level of discount should take

account of the individual

company factors, such as levels

of existing remuneration

potential, and other features of

the restricted share scheme

proposed.

Source: Investment Association Principles of Remuneration

(November 2018)]

“



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07 | Incentives

Post-cessation holding periods

A small number of very large FTSE 100

companies have introduced post-cessation

holding periods during the year. Although too

small in number for any meaningful analysis, it

should be noted that the inclusion of a post-

cessation holding requirement in the UK

Corporate Governance Code means that more

companies are likely to introduce or strengthen

this aspect of their Remuneration Policy in the

future.

The table below shows the median shareholding requirements for Chief Executive

Directors, Finance Directors and Other Executive Directors in the FTSE 100 and FTSE

250 as well as the number of years over which directors are expected to build up their

holdings.

Median shareholding requirements

FTSE 100 FTSE 250

Chief Executive

(% of salary)

2018

2017

300%

250%

200%

200%

Finance Director

(% of salary)

2018

2017

200%

200%

200%

200%


(% of salary)

2018

2017

200%

200%

200%

150%

Median number of years to build shareholding requirements

FTSE 100 FTSE 250

5 5





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08 Pensions

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08 | Pensions

This section provides information on the pension arrangements of executive directors

and the role of pensions in the total remuneration mix.

Shareholders have shown an increased focus on the

disparity of pension arrangements between executive

directors and the broader employee population this

year. However, pension levels remain the same as last

year at around a quarter of basic salary for FTSE 100

Chief Executives.

“ “

Pensions have seen continuous change over the last decade, the outcome of which has been the

steady erosion of traditional pension provisions – either defined benefit or defined contribution at

senior executive level. For those executives who have been increasingly caught by the reducing

lifetime and annual allowances, the employers’ response has been largely to replace the pension

provisions with a cash supplement. For FTSE 100 executive directors this provision is now

equivalent to 25% of basic salary at the median level. This is now under the increased scrutiny of

shareholders – with some calling for employer contributions for executives to be brought into line

with those of the broader employee population.

FTSE 350 pension schemes

The chart below shows the median pension values as a percentage of basic

salary as represented in the single figure table.

Median pension values for all schemes as a percentage of base salary

Pe

rcentage

of com

panie

s

30%

25%

FTSE 100

FTSE 250

20%

15%

10%

5%

0%

Chief Executive Finance Director Other Executive Director



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The following charts show that the use of cash in lieu of pension is prevalent, but

more prominent across the FTSE 100.

FTSE 100 pension arrangements

FTSE 250 pension arrangements

Cash in lieu of pension plans

Defined contribution plans

Prevaln

ce

of com

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)

Defined benefit plans 70%

60%

50%

40%

30%

20%

10%

0%


Cash in lieu of pension plans


60% Defined benefit plans

Prevaln

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of com

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)

50%

40%

30%

20%

10%

0%


Cash in lieu of pensions is the most common

ension arrangement across the FTSE 350,

hile participation in defined benefit plans

ontinues to diminish.

p

w

c

It is worth noting that a number of companies

operate more than one pension arrangement

at executive level, as shown in the table

overleaf.

This is often due to a differing new hire policy

and existing/legacy pension arrangements.

The trend for more than one arrangement is

however downward.



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FTSE 350 use of more than one pension scheme

Use of more than one scheme

FTSE 100

Chief Executive 6%

Finance Director 4%

Other Executive Director 10%

Chief Executive 5%

FTSE 250 Finance Director 9%

Other Executive Director 4%

The following table shows the median values for each type of pension plan in

the FTSE 100 and FTSE 250.

Median pension values for different schemes

Cash in lieu of pension

plans (£'000)

Defined contribution

plans (£'000)

FTSE 100

FTSE 250

Chief Executive 204 217

Finance Director 137 98

Other Executive Director 96 137

Chief Executive 115 75

Finance Director 69 49

Other Executive Director 78 47

The following table shows the median values for each type of pension plan as a

percentage of salary in the FTSE 100 and FTSE 250.



Median pension values for different schemes as a percentage of salary

Cash in lieu of pension

plans (% of salary)


(% of salary)

FTSE 100

FTSE 250

Chief Executive 25% 25%

Finance Director 25% 22%

Other Executive Director 22% 20%

Chief Executive 20% 15%

Finance Director 19% 15%

Other Executive Director 22% 14%



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09 Non-Executive Director

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09 | Non-Executive Director

This section provides information on remuneration for the role of Chairman and Non -

Executive Director.

Fee increases

Over a third of FTSE 350 companies increased fee levels for the Chairman with

a slightly higher proportion of companies increasing fees for other Non-

Executive Directors.

Percentage of companies increasing fees

Non-Executive Chairman Other Non-Executive Directors

FTSE 100 38% 48%

FTSE 250 37% 41%

Fees are not typically reviewed or increased on an annual basis and as such

increases may initially appear to be higher than those for executive directors.

The following table shows the fee increases for the FTSE 100 and FTSE 250

companies which increased fee levels.

Median fee increases



Median

FTSE 100

FTSE 250

Non-Executive Chairman 3%

Other Non-Executive Directors 3%

Non-Executive Chairman 4%

Other Non-Executive Directors 3%

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Deputy Chairman and Senior

Independent Director (SID)

The Chairman is responsible for the leadership of the board, ensuring effectiveness in all

aspects of its role and setting the agenda.

The Chairman has ultimate responsibility for

the board and so has a role distinct from that

of the other Non-Executive Directors.

In some companies this may be close to a full-

time role. Consequently there is typically a

significant fee differential between the

Chairman and other Non-Executive Directors.

As would be expected, those chairing the

largest companies are paid significantly more

than those in smaller companies.

The following tables show the total Non-Executive Chairman fees broken down by

market capitalisation and turnover, inclusive of any committee fees and irrespective of

time commitment.

Chairman fees by market capitalisation.



Market capitalisation

Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

>£10bn 488 625 715

£5bn-£10bn 298 350 411

<£5bn 294 303 470

All FTSE 100 325 425 625

>£2bn 224 273 317

£1bn-£2bn 173 200 250

<£1bn 144 168 191

All FTSE 250 175 230 279

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Chairman fees by turnover

Turnover

Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

>£10bn 475 572 700

£2.5bn-£10bn 318 391 463

<£2.5bn 249 305 378

All FTSE 100 325 425 625

>£2.5bn 221 275 315

£500m-£2.5bn 198 250 300

<£500m 148 175 230

All FTSE 250 175 230 279

Most companies now identify a SID which

generally attracts an additional fee. The SID is

responsible for leading the Non-Executive

Directors in their review of the Chairman’s

performance as well as being available to

shareholders so as to gain a balanced

understanding of the issues and concerns they

may have.

As reported last year, we have seen the

number of Deputy Chairman positions on

boards reduce in recent years, with the SID in a

number of organisations fulfilling duties which

in the past may have been carried out by the

Deputy Chairman.

Based on the information disclosed, where a

company has a Deputy Chairman, the role is

still more likely to attract a higher premium

than the role of the SID. If the two roles are

combined and the Deputy Chairman is also the

SID then it is standard practice that no

additional fee is paid for the SID role.

The table below shows the additional fees paid to SIDs for the FTSE 100 and FTSE

250. It should be noted this is in addition to the basic Non-Executive Directors’ fee.

Deputy Chairman fees

Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

111 125 208

80 100 140

Senior Independent Director additional fees



Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

12 20 30

8 10 12

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Other Non-Executive Directors

The following tables show the fees for Non-Executive Directors who are not classified

as being a Chairman, Deputy Chairman and/or SID.

The figures are broken down by market capitalisation and turnover and are inclusive of

any committee fees and irrespective of time commitment.

Non-Executive Director fees by market capitalisation

Market

capitalisation

Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

>£10bn 74 85 96

£5bn-£10bn 60 63 70

<£5bn 59 65 70

All FTSE 100 62 70 84

>£2bn 53 58 64

£1bn-£2bn 49 51 60

<£1bn 46 50 53

All FTSE 250 49 54 60

Non-Executive Director fees by turnover



Turnover

Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

FTSE 100

FTSE 250

>£10bn 70 80 93

£2.5bn-£10bn 60 64 73

<£2.5bn 59 63 70

All FTSE 100 62 70 84

>£2.5bn 52 58 61

£500m-£2.5bn 50 55 61

<£500m 45 50 58

All FTSE 250 49 54 60

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Over recent years we have seen a continuing increase

in the number of companies paying additional fees for

membership and chairmanship of the main board

committees.

“ “

Committee fee practice

This is to compensate Non-Executive Directors

for the increasing responsibilities and

requirements attributed to their roles. The

revised UK Corporate Governance Code

published in July 2018 and applying to

accounting periods beginning on or after 1

January 2019, has extended the remit of the

Remuneration Committee and has introduced

a requirement that “before appointment as

chair of the Remuneration Committee, the

appointee should have served on a

Remuneration Committee for at least 12

months”. It will be interesting to note what

effect, if any, this has on fees in the future.

Company size again has an influence over the

level of additional fees. The Risk Committee

still commands the highest additional fees for

members. Whilst in prior years there were

significant increases in committee fees, this

year’s data by comparison to last year’s isbroadly consistent.

It should be noted that the Nomination

Committee is often chaired by the company

Chairman, albeit certain companies may

appoint a different Non-Executive Director

based on their own specific circumstances.

Where the Chairman does take on the role, it

would typically not attract additional committee

fees.

The tables below show the fees disclosed for chairing the main committees in FTSE

100 and FTSE 250 companies

FTSE 100 committee chairmanship fee levels



Lower Quartile

(£'000s)

Median

(£'000s)

Upper Quartile

(£'000s)

Remuneration 15 20 30

Audit 16 25 35

Nomination 15 21 30

CSR Committee 13 16 25

Risk Committee

Other

20 30 60

14 23 35

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FTSE 250 committee chairmanship fee levels

Lower Quartile Median Upper Quartile

(£'000s) (£'000s) (£'000s)


Audit 10 10 15

Nomination 6 10 11


Risk Committee 10 15 20

Other 10 12 19

The tables below show the fees disclosed for being a member of the main committees in FTSE

100 and FTSE 250 companies. Half of the FTSE 100 and around a fifth of the FTSE 250

companies pay additional fees for membership of the main board committees.

FTSE 100 committee membership fee levels




(£'000s) (£'000s) (£'000s)


Audit 10 18 25

Nomination 7 10 15


Risk Committee

Other

12 20 30

10 15 24

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FTSE 250 committee membership fee levels


(£'000s) (£'000s) (£'000s)

Remuneration 5 5 10

Audit 5 5 10

Nomination 4 5 6

CSR Committee 5 5 5

Risk Committee

Other

5 10 10

5 6 10

Time commitment

There is insufficient disclosure in companies’

annual reports with respect to the time

commitment required of a Chairman or Non-

Executive Director role to perform any robust

analysis. However, prior experience tells us

that a Chairman role typically demands around

two full days a week. This will vary depending

on the size of the company.

Other Non-Executive Director roles will require

less time commitment and this is reflected in

the reduced fees. However, due to increased

scrutiny of boards and directors, the time

commitment required by a Non-Executive

Director has increased in recent years. The

number of board meetings will vary depending

on company size and complexity. Most Non-

Executive Directors will be chairs or members

of at least one committee as well, and these

meetings will be in addition to the board

meetings.





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10 Diversity

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This section provides a breakdown of Board composition and remuneration information

for executive directors by gender across the FTSE 100 and FTSE 250.

Introduction

The introduction of Gender Pay Gap reporting for any organisation with 250 UK employees or

more in the private, public and voluntary sectors has served to intensify the gender and pay

debate generally, and the board room is not immune from this. This section of the report

deals predominantly with the proportion of men and women in executive director roles, and

remuneration on a broadly comparable role basis.

Board composition

Board

composition

10 | Diversity

92%

8%



Across the executive director population in this

report, only 8.4% (up from 6.8% in 2017) are

currently women. A 2016 independent review

initiated by the Government, and led by Sir

Philip Hampton and the late Dame Helen

Alexander, concluded that a third of FTSE 350

boards should be filled by women by the end

of 2020.

The report also states the need for more pace,

meaning that half of all available appointments

need to go to women to achieve the target,

and a continual focus on the executive pipeline

for current and future executive directors is

required. All stakeholders, including the

investor community and executive search

firms, are encouraged to play their role in

helping companies close the gender gap.

Whilst there has been movement towards this

‘voluntary target’ on board composition as a

whole, progress in the number of women

holding executive director roles is much

slower.

Of the executive director positions occupied by

women, just over a half (51%) are Finance

Directors, just under a third (31%) are Chief

Executives a nd the remainder fall into the

Other Executive Director category.

The 2018 Hampton - Alexander Review,

sponsored by KPMG shows that in October

2018 across the FTSE 100 and FTSE 250 there

are only 26 (10.2%) and 30 (6.43%) women

executive directors respectively.

Board Composition

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Finance

Director

88%

Chief

Executive

94%

6%

12%

Other

Executive

Directors

93%

Remuneration levels

Whilst it is undeniable that there is still a

significant issue with the number of women

making it to the top of the corporate ladder,

given the low number of women holding

executive director roles on FTSE 350 boards, it

is difficult to draw discernible trends from the

data set. The following tables which show

basic salary, bonus pay outs and total earnings

by turnover are presented for information only.

7%



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10 | Diversity

Remuneration levels

The table below shows median basic salary by gender and by turnover bands in the

latest reported financial year.

Basic salary

Turnover Chief

Executive

Finance

Director

Other Executive

Directors

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

FTSE 100

FTSE 250

FTSE 350

>£15bn 1,076 1,008 700 592 757 484

£5bn - £15bn 977 548 548 587 660 -

<5bn 736 748 471 432 431 363

All FTSE 100 922 768 562 537 600 408

>£1bn 608 543 400 396 419 394

£500m - £1bn 528 670 345 345 394 -

<500m 480 456 331 320 291 273

All FTSE 250 560 575 364 328 362 338

All FTSE 350 615 628 414 398 425 400

Annual bonus pay outs

The table below shows median actual bonus pay outs by gender and by turnover

bands in the latest reported financial year.

Basic salary

Turnover Chief

Executive

Finance

Director

Other Executive

Directors

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

FTSE 100

FTSE 250

>£15bn 1,613 1,401 903 834 960 580

£5bn - £15bn 1,001 534 535 458 581 -

<5bn 771 685 578 649 577 341

All FTSE 100 1,136 774 675 573 710 380

>£1bn 685 474 391 319 477 209

£500m - £1bn 511 687 263 506 327 -

<500m 412 195 284 240 285 218

All FTSE 250 538 463 324 243 332 218

FTSE 350 All FTSE 350 660 518 400 333 425 369



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Total earnings

The table below shows median total earnings by gender and by turnover bands in t

latest reported financial year.

he

Total earnings

Turnover Chief

Executive

Finance

Director

Other Executive

Directors

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

Male

(£'000s)

Female

(£'000s)

FTSE 100

FTSE 250

FTSE 350

>£15bn 5,236 4,770 3,276 4,656 3,038 1,514

£5bn - £15bn 4,045 1,583 2,294 1,190 2,126 -

<5bn 3,430 2,210 2,165 1,408 2,476 957

All FTSE 100 4,000 2,084 2,419 1,461 2,569 1,036

>£1bn 1,918 3,876 1,006 883 1,739 885

£500m - £1bn 1,914 2,687 1,046 947 1,206 -

<500m 1,597 740 1,070 718 1,085 955

All FTSE 250 1,744 1,236 1,036 864 1,192 929

All FTSE 350 2,280 1,941 1,333 1,113 1,486 957

Gender pay reporting, equal pay reporting and fairness

While gender pay reporting ultimately aims to

deal with equality of opportunity across a

company by revealing how men and women

are spread across different pay bands within a

company, equal pay focuses on the pay for

men and women doing equal work.

The gender pay gap is of course just one

example of the increased focus on the issue of

‘fairness’ across the UK. The wider diversity

and inclusion debate covers, for example, the

representation of black and minority ethnic

(BAME) people across the national workforce.

In October 2018 the government launched its

consultation on plans to require employers to

disclose how employees from different ethnic

backgrounds are paid.



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, p p p








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11 Methodology & assumptions

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-

,

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, -

11 | Methodology & assumptions

Data sources

Unless otherwise stated, all graphs and tables have been created by KPMG, from data

provided by E-reward (an independent research organisation). The data provided by E-

reward has been further analysed by KPMG, using the methodology outlined below.

FTSE constituents and market capitalisation Other Executive Directors includes any main

figures are as at 31 July 2018 and turnover board position other than the Chief Executive,

figures used for the analysis are as at the Finance Director, Executive Chairman and the

relevant reporting date for each company. Non-Executive Directors. This typically includes

The positions included in the data sample are: operational directors, functional directors, chief

Chief Executive, Finance Director, Other operating officers, and executive deputy

Executive Directors and Non-Executive chairmen.

Directors.

To enable the remuneration components of each position to be analysed they

have been split into the following categories:

Basic salary

Annual salary received over a 12- month

period as shown in the accounts (not

necessarily set at annual review)

Total bonus

Actual annual bonus paid plus any deferred

portion of the annual bonus

Total cash

The sum of basic salary, benefits and

total bonus

Pensions

The value of all pension related benefits

including payments in lieu of retirement

benefits and all retirement benefits in year

from participating in pension schemes

Total earnings

The sum of total cash, the value of any share

based awards vested during the year and

the cash value of pension arrangements.

The final figure may also include some

miscellaneous payments such as special

payments for pensions, one-off bonuses for

particular projects and profitshare

LTIP awards

LTIP awards are considered for the purpose of

the guide to be awards where the

vesting/performance period is longer than one

year and have been categorised in the guide as

performance share plans – a type of long term

incentive in which participants are allocated

free shares or nil cost options or rights to

acquire shares, the vesting of which is subject

to the satisfaction of performance targets over

a period of more than one year.

Median and

quartile points

For the purposes of this guide, median

information has been provided where there are

four data points or more. Inter-quartile ranges

have been provided where there are nine or

more data points.



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Contact us

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