Executive directors are entitled to participate in the Group’s PSP. The PSP was approved by shareholders in 2004. In March 2007 the Committee approved the introduction of a specific long term incentive plan for LGIM senior executives (none of whom are executive directors). The PSP remains the sole long term incentive arrangement for all other senior executives.
Under the PSP, awards of conditional shares are made to top managers. The Committee reviews the quantum of awards made each year to ensure that it is in line with the market. The maximum annual award possible in 2011 remains at 200% of salary and, as reported last year, the Company awarded 200% to each executive director in 2010 and has done so again in 2011. However, when making awards, it will also consider wider factors such as company performance in determining whether to grant at this normal policy level.
The number of shares that vest is dependent on Legal & General’s relative [TSR] performance over a three-year period as follows:
(Download XLS:)  |
|
Legal & General’s TSR relative to the comparator group |
Percentage of |
|---|---|
|
Below median |
0% |
|
Median |
25% |
|
Between median and 20th percentile |
25%-100% |
|
20th percentile or above |
100% |
Until 2007, performance was measured solely in relation to the constituents of the FTSE 100. For the awards made in 2008 onwards, two distinct performance measures are used: half is measured relative to the FTSE 100 constituents (as set at a date shortly prior to the grant date), with the balance being measured against the insurance constituents of the FTSEurofirst 300 plus any FTSE 350 Life Insurers not in the FTSEurofirst 300, in sterling terms. Performance under the two elements is assessed independently.
The Committee reviews the measures prior to each award. It continues to believe that the current measures and targets remain appropriate. They endorse consistency in the remuneration policy and provide a clear alignment of interests with shareholders. In addition they ensure a degree of risk management as TSR (through share price) reflects both underlying financial performance and the market’s assessment of the quality and sustainability of those earnings.
Additionally, the Committee assesses whether the underlying performance of the Company is reflective of the [TSR] out-turn. The Committee may exercise its discretion to scale back the vesting of awards if it was felt that the Company’s financial performance did not justify the level of vesting (the Committee may not increase the award). The parameters which the Committee uses in making this assessment include market share, partnerships entered into and maintained, cost constraint, capital management, risk and shareholder perception.
Performance against TSR conditions is independently reviewed by Hewitt New Bridge Street.
In 2011, the Remuneration Committee decided that executive directors should be granted awards of performance shares to the following values: Tim Breedon £1,616,000 Mark Gregory £800,000 John Pollock £823,200 and Nigel Wilson £1,100,000.
Five-year total shareholder return
The chart below shows the value, as at 31 December 2010, of a £100 investment in Legal & General shares on 31 December 2005, compared with £100 invested in the FTSE 100 on the same date. The other points plotted are the values at intervening financial year-ends. The FTSE 100 Index was chosen as the Company is a member of this Index.
Read a textual description of the chart
