The remuneration of the Group’s executive directors comprises salary, participation in an annual bonus plan (paid partly in cash and partly in deferred shares) and the Group’s Performance Share Plan (PSP), which is a long term incentive plan, plus pension and ancillary benefits.
When setting remuneration for the executive directors, the Committee takes into account the market sector, function, job size, and individual and Company performance. In addition, the pay, employment conditions and salary budgets set for the other employees in the Company are taken into consideration. Data is obtained from a variety of independent sources (including HNBS, Watson Wyatt (now Towers Watson) and Monks Partnership, which is part of PricewaterhouseCoopers, our auditors). Where possible, the practice is to use at least two independent sources of information for each individual role.
The chart illustrates that a significant proportion of both target and stretch pay is performance-related and paid in shares.
![Relative split of salary, bonus and PSP for executive directors at target and stretch performance (%) in line with current policy (bar chart) [Stretch performance: 24% Salary, 29 % Bonus, 47 % PSP vesting*]; [Target performance: 45% Salary, 33% Bonus, 22% PSP vesting*] *Share price growth is ignored](../../../pics/img/060a_en.png "Relative split of salary, bonus and PSP for executive directors at target and stretch performance (%) in line with current policy (bar chart) [Stretch performance: 24% Salary, 29 % Bonus, 47 % PSP vesting*]; [Target performance: 45% Salary, 33% Bonus, 22% PSP vesting*] *Share price growth is ignored")
(Download XLS:)  |
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Summary of key features of executive directors’ remuneration | ||||||
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Element of remuneration package |
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Purpose |
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Policy |
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Summary of how it operates |
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Base salary |
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Help recruit and retain key employees. |
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To pay at around the mid-market level relative to the [FTSE] 100, with particular regard to other relevant financial institutions. |
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Paid monthly in cash. |
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Normally reviewed by the Committee annually and fixed for the 12 months commencing 1 January. | ||||
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Reflect the individual’s experience and role within the Group. | ||||
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Regard given to individual skills and experience. |
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Salary is supplemented with normal benefits available to senior managers including car allowance and medical insurance. Legal & General products can be acquired by executive directors on the terms available to other members of staff. |
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In specific circumstances (for example, a new appointment) may set salaries below mid-market, with a view to reaching mid-market level within two to three years. | ||
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Increases in salary for executive directors broadly follow the salary budgets for the rest of the organisation, unless, for example, salary progression to mid-market is agreed as referred to above. |
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For 2010, increases for the executive directors are in line with the budget set for the general management pay review below Board level (2%) and our policy of salary progression towards mid-market. |
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Annual bonus |
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Incentivise executives to achieve specific, predetermined goals during a one-year period. |
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Maximum bonus potential set by reference to market comparators (currently 125% of base salary). |
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All executive directors have objectives related to Group key performance indicators (KPIs), plus individual (where relevant) divisional and strategic targets. |
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Reward ongoing stewardship and contribution to core values. |
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On-target bonus of 75% of base salary (60% of maximum) for all executive directors. |
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Bonus result is determined by the Committee after year end, based on performance against targets. |
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Deferred proportion of bonus, awarded in shares, provides a retention element. |
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Percentage of bonus deferred and awarded in shares. |
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Normally, 62.5% of the bonus paid in cash and 37.5% paid in deferred shares to be held for three years. |
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The deferred element may be subject to forfeiture if the performance which led to a bonus being paid is found to be incorrect. |
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For 2009, bonuses of between 50% and 100% of base salary were awarded. |
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Performance share plan |
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Incentivise executives to achieve superior returns to shareholders. |
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Awards of conditional shares made annually, with vesting dependent on relative total shareholder return (TSR) measured over the three subsequent years. |
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Vesting condition for half of the award measures the Group’s [TSR] versus the FTSE 100. Vesting condition for the other half measures TSR versus the insurance constituents in the FTSEurofirst 300 plus any FTSE 350 Life Insurance companies not in the FTSEurofirst 300. |
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Align interests of executives and shareholders through building a shareholding. | ||||
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Retain key executives over a three-year performance period. |
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Executive directors normally receive annual grants of 200% of salary. | ||
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For 2010, awards to executive directors have been set at 200% of salary. |
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The two conditions are measured independently. |
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The awards will vest in full if Legal & General is ranked at or above the 20th percentile. One quarter of awards will vest if TSR is at median. No awards vest below median. |
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The Remuneration Committee will also assess whether the TSR out-turn is reflective of the underlying financial performance of the Company and may scale back vesting. |
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Pension |
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Reward sustained contribution. |
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Provide competitive post-retirement benefits. |
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Participation in a Group pension scheme. |
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No compensation for public policy or tax changes. |
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Accrue benefits according to length of service up to retirement. |
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From 2009, pensionable salary for the defined benefit pension plan has been limited to a maximum increase of 2.5% each year. |
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Cash alternative for executive directors opting for enhanced protection above the lifetime allowance. |
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New executive directors receive 15% of base salary into the defined contribution pension plan (they contribute 5%). |
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Share ownership guidelines |
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To align the interests of executive directors and shareholders. |
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The Group Chief Executive is required to build and maintain a shareholding of 200% of base salary and, for other executive directors, 100% of base salary. |
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Executives are expected to build a shareholding through the vesting of shares under the Group’s share incentive plans. Existing shareholdings and shares acquired in the market are also taken into account. |
Salary
The policy is generally to pay salaries around the mid-market level for the individual’s performance within the context of the relevant market for the job. However, when setting salaries, judgement is also exercised by the Committee, having regard to individual experience and responsibility.
Salary is the only pensionable remuneration and it is normally reviewed annually with effect from January.
Accordingly, particularly when a new appointment is made, salary levels may be set at a lower level than the mid-market position, with a view to increasing towards this position over the two to three years following promotion.
For 2010, the salary increases for Tim Breedon and Nigel Wilson have followed the broad budget set for the general management population in the annual pay review of around 2%. The salaries for John Pollock and Mark Gregory reflect their salary progression towards the mid-market position in line with the policy.
Accordingly, the base salaries for the executive directors for the financial year beginning on 1 January 2010 are as follows:
| (Download XLS:) |
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Name |
Salary for 2010 |
% Increase over 2009 |
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Tim Breedon |
£785,000 |
1.9% |
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Nigel Wilson |
£536,000 |
2.0% |
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John Pollock |
£400,000 |
8.0% |
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Mark Gregory |
£360,000 |
16.0% |
Annual bonus
Maximum bonus levels and the proportion payable for on-target performance are considered in the light of market bonus levels for the job in other [FTSE] 100 financial services sector companies and the FTSE 100 as a whole. The maximum bonus payment for the executive directors remains at 125% of salary. The proportion of bonus payable for on-target performance is 60% of the maximum for all the executive directors (that is 75% of salary). 62.5% of any bonus earned will normally be paid in cash, with the balance being paid in shares under the Share Bonus Plan (SBP) described below.
In setting bonus targets, the Committee seeks to link targets to areas of the business in which the executive has particular influence and responsibility, while also seeking to maintain a keen team ethos. The executive directors’ bonuses are based on a variety of targets, including Group [KPIs] (which for 2009 comprised 40% of the total bonus and were common to all executive directors), performance of the business unit for which the individual is responsible (where applicable), and strategic targets. The bonus that resulted from the delivery of these objectives was reviewed by the Committee based on its view of the executive’s overall performance and regulatory compliance. In reviewing results, approach to risk is monitored.
For 2009, the Group KPI targets were met in full. Performance against the other Financial and Strategic targets were partially met and bonus awards ranged from 50% to 100% of salary (out of a maximum bonus potential of 125% of salary).
The bonus structure for the executive directors for 2010 was reviewed and it was felt appropriate to change the weighting for Tim Breedon and Nigel Wilson to place greater emphasis on the Group KPIs. There is no change to maximum bonus potential which remains at 125% of salary. The bonus structure for 2010 is summarised below:
| (Download XLS:) |
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Name |
Group |
Other |
Other |
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Core targets for 2010 |
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Tim Breedon |
60% |
20% |
20% |
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Deliver returns to shareholders. |
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Mark Gregory |
40% |
30% |
30% |
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Pro-actively manage Savings financial performance, continually deliver improvements in standards of products and services to customers, ensure business efficiency. |
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Nigel Wilson |
60% |
20% |
20% |
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Pro-active management of financial performance, manage capital requirements, strengthen the control environment, embed new metrics, mitigate commercial risks. |
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John Pollock |
40% |
30% |
30% |
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Pro-actively manage the Protection and Annuities financial performance, ensure high standards of customer experience and improve business efficiency. |
