Remuneration Committee.

TERMS OF REFERENCE

The Committee’s Terms of Reference are available on our website or on request. The remit of the Committee embraces the remuneration strategy and policy for the whole Company as well as the executive directors. During 2012 the Terms of Reference were revised to clarify the focus of the Committee on:

  • determining the individual remuneration of executive directors and senior management whose roles are linked to the delivery of the Group’s strategy or who are discharging a Head of Control function;
  • undertaking direct oversight on the remuneration of other high earners in the Group;
  • undertaking oversight on an exceptions basis on the remuneration of Code staff and employees in the Control and oversight functions; and
  • determining the framework of the remuneration policy for all other employees in the Group. This continues to include the approval of any new bonus plan or benefit or any material change to an existing bonus plan or benefit, as well as firm-wide base salary and bonus budgets.

The Committee retains the ability to exercise powers under the share plans to claw back or reduce awards where it determines there has been fraud or malice or a breach of Group risk appetite.

MEETINGS IN 2012

The Committee normally meets at least three times per year. During 2012 it met eight times. The additional meetings were principally held to discuss the following key issues :

In addition, a sub group of the Committee met to consider the appointment of a new independent adviser to the Committee (see below).

Regular meetings were held to review and discuss base salary adjustments for 2012, bonus awards in relation to performance in 2011, budgets for the Company 2013 pay review, adjustments to any bonus plans and approval of any share awards in relation to recruitment.

ADVISERS TO THE REMUNERATION COMMITTEE

FIT Remuneration Consultants LLP continued to be the independent advisers to the Remuneration Committee until May 2012. FIT did not supply any other services to the Company.

During 2012, a full tender process was carried out to review the adviser to the Committee. A review of the market identified seven potential companies. One of these was PwC with whom it was agreed it would not be appropriate for them to tender as they are the Group’s independent auditors. A full Request for Information (RFI) was sent out to the other six candidates. Criteria for selection included the fact that the adviser had to be:

  • independent from the business;
  • able to provide market context and be well versed in corporate governance with a strong awareness of shareholder values and understanding of market perception;
  • pragmatic in approach; and
  • able to demonstrate strategic and technical knowledge in all the key areas of concern – all areas of executive remuneration, bonus and LTIP structures, share schemes, LGIM, pensions and corporate governance.

In addition, the candidates were asked to give examples of their approach to Corporate Social Responsibility to ensure their values were aligned with those of the Company.

Following a full tender process, the Committee appointed Kepler Associates Partnership LLP as their independent advisers with Helen Beck as lead adviser. Kepler is also engaged by Legal & General’s Finance team to provide independent accounting valuations of the SAYE and PSP share schemes in accordance with IFRS2. The fee for this work for 2012 was £6,000 excluding VAT. This work is carried out by a separate group within Kepler Associates and is not felt to be in conflict with the work carried out for the Committee.

Kepler Associates are signatories to the Remuneration Consultants’ Group Code of Conduct in relation to Executive Remuneration Consulting in the UK.

During 2012, Kepler Associates have principally assisted the Committee with the remuneration structure for Mark Zinkula on his appointment to the Board and the review of the overall executive directors’ remuneration structure.

ENGAGEMENT WITH SHAREHOLDERS

The Committee seeks to maintain an active and productive dialogue with investors on developments in the remuneration aspects of corporate governance generally and any changes to the Company’s executive pay arrangements in particular.

Committee Members, Attendees and Advice

Remuneration Committee Members

Position

Comments

Rudy Markham

Chairman of the Remuneration Committee

Independent

Nick Prettejohn

Member from 2 November 2010

Independent

Mike Fairey

Member from 1 May 2011

Independent

Stuart Popham

Member from 1 July 2011

Independent

Remuneration Committee Attendees

Position

Comments

John Stewart

Standing attendee by invitation

Independent upon appointment on 1 March 2010

Nigel Wilson

Group Chief Executive

Attends by invitation

Elaine MacLean

Group HR Director

Attends as an executive responsible for advising on the remuneration policy

Rosemary Lemon

Group Head of Reward & Executive Remuneration

Attends as an executive responsible for advising on the remuneration policy

Tim Breedon

Former Group Chief Executive

Attended by invitation until he stood down from the Board on 30 June 2012

Kaye Maguire

Secretariat

Attends as secretary to the Committee

Helen Beck Peter Smith

Kepler Associates Partnership LLP

Attend by invitation as the Committee’s independent adviser

John Lee

FIT Remuneration Consultants

Attended by invitation up to May 2012 as the former independent adviser to the Committee

No person is present during any discussion relating to his or her own remuneration.