Approach to recruitment and termination.

Approach to recruitment and termination.

RECRUITMENT REMUNERATION

STANDARD PROVISION

POLICY AND OTHER PROVISIONS

GENERAL APPROACH

The Committee aims to attract, motivate and retain an executive director with the required expertise to develop and deliver the business strategy, while at the same time ensuring that the remuneration arrangements offered are in the best interests of both the company and its shareholders and paying no more than considered necessary to attract the right calibre of candidate to the role.

In determining the appropriate remuneration arrangements on hiring a new executive director, the Committee will take into account all relevant factors including, but not limited to:

  • the individual’s skills and relevant experience
  • internal relativities
  • local market practice in the jurisdiction from which candidate was recruited
  • logistics and support if a relocation is required
  • appropriate market data; and
  • the individual’s existing remuneration package.
Where possible the Committee endeavours to align the remuneration arrangements of new executive directors with the remuneration outlined in the policy for other executive directors. Any such awards will be within the maximum level of variable remuneration limit set out below.

Where an existing internal candidate is made an executive director, the Committee may continue to honour prior commitments made before joining the Board.

MAXIMUM VARIABLE PAY LEVELS

The maximum level of annual variable pay and long-term incentives which may be awarded to a new executive director will be in line with the policy table i.e. 475% of base salary. This limit excludes buyout awards.

BUY-OUT OF ANY EXISTING REMUNERATION COMPONENTS OR OTHER ARRANGEMENTS

The Committee recognises that, as a consequence of regulatory changes around the globe in the financial services sector, long serving executives in the sector are likely to have accrued significant levels of deferred remuneration which may be lost on a transfer of employment. Accordingly, to aid the recruitment of a new executive director, the Committee may make awards to ‘buy-out’ remuneration arrangements forfeited on leaving a previous employer, taking into consideration relevant factors including, but not limited to:

  • form of the award;
  • any performance conditions attached to those awards;
  • the vesting profile of the awards and likelihood of vesting;
  • relevant regulatory requirements and guidance in place in relation to ‘buy-out’ awards.
‘Buy-out’ awards will typically reflect the terms and the value of the arrangements forgone. Where possible the Committee will use existing share based plans to effect a buy-out. However, in the event these are not an appropriate vehicle, the Remuneration Committee retains the discretion to use the Listing Rules exemption (LR 9.4.2) for the purpose of making an award to ‘buy-out’ remuneration terms forfeited on leaving a previous employer.

RELOCATION AND MOBILITY

Where a new executive director has to relocate to take up the appointment, either within the UK or from overseas, practical and/or financial support may be given in relation to relocation or mobility in line with our internal policies. This may include the cost of any tax that is incurred.

For appointments from overseas, home country benefits may continue to apply.

Note that relocation and mobility support may also apply to the recruitment of a non-executive director (NED).

SHAREHOLDER TRANSPARENCY

The Committee believes that remuneration arrangements should be as transparent as possible. Therefore the Committee will make every effort to explain the rationale for the recruitment arrangements in the Directors’ remuneration report following the recruitment of a new executive director.

RECRUITMENT OF NON-EXECUTIVE DIRECTORS

The Committee will normally align the remuneration arrangements for new non-executive directors with those outlined within the policy table in the Non-executive directors section.

SERVICE CONTRACTS AND TERMINATION AND PAYMENT FOR LOSS OF OFFICE

When determining leaving arrangements for an executive director, the Committee takes into account any pre-established agreements, including the provisions of any incentive plans, typical market practice, statutory and contractual obligations, the performance and conduct of the individual and the commercial justification for any payments.

The following summarises our policy in relation to executive directors’ service contracts and payments in the event of loss of office:

STANDARD PROVISION

POLICY AND OTHER PROVISIONS

NOTICE PERIOD AND TERMINATION PAYMENTS

Standard notice policy is:
12 months’ notice from the company; and
12 months’ notice from the executive director.

Executive directors may be required to work during the notice period or take a period of ‘garden leave’ or may be provided with pay in lieu of notice if not required to work the full notice period.

Payments in lieu of notice:
Our policy for new appointments is that termination payments in lieu of notice would consist solely of base salary and the cost of providing benefits for the outstanding notice period and will be subject to deductions for income tax and National Insurance as appropriate.

Any statutory requirements will be observed.

Our standard practice is to include within executive directors’ contractual terms mitigation provisions as regards payments in lieu of notice.

Current executive directors:
John Pollock has a notice period of six months on either side and would be entitled to an additional six months’ base salary, pension and car allowance entitlement if his employment was terminated by the company (except where termination is for gross misconduct).

Mark Gregory and Nigel Wilson have notice periods of 12 months. However, they have no entitlement to any additional contractual payment on termination of employment. Any payment in lieu of notice will consist solely of base salary and the cost of providing benefits for the outstanding notice period.

Mark Zinkula has a notice period of six months on either side. Any payment in lieu of notice will consist solely of base salary.

CONTRACT COMMENCEMENT DATE

The dates of the executive directors’ service contracts are shown in the table below:

Executive director

Contract
commencement date

Continuous
service date

 

Nigel Wilson

September 2009

September 2009

 

 

John Pollock

November 2003

September 1980

 

 

Mark Gregory

January 2009

August 1998

 

 

Mark Zinkula

September 2012

June 2008

 

 

Copies of the executive directors’ service contracts are available for inspection at the company’s registered office.

EXPIRY DATE

All executive directors are subject to annual re-election.

The contracts for our executive directors are rolling service contracts with no expiry date.

TREATMENT OF OUTSTANDING INCENTIVE AWARDS

Rights to annual variable pay, deferred annual variable pay awards and performance share awards are governed by their respective plan rules.

Annual variable pay
There is no automatic entitlement to an annual bonus in the year of cessation of employment. However, for a ‘good leaver’, the Committee may determine that an executive director will receive a pro-rata bonus in respect of the period of employment during the year of cessation based on an assessment of Group and personal performance.

Deferred annual variable pay awards (awards made in relation to 2014 onwards)
In the event that a participant is a ‘good leaver’ any outstanding unvested deferred annual variable pay award will normally be released at the normal time. Where it considers it appropriate, for example in the circumstances of terminal illness, the Committee reserves the right to accelerate any payment due.

‘Good leaver’ circumstances are leaving due to circumstances such as death, disability, ill-health or injury, redundancy, retirement with company agreement, employing company / business ceasing to be part of the Group, a transfer of the undertaking in which the participant’s employment transfers to a company which is not a member of the Group, or other circumstances at the Committee’s discretion.

For all other leavers outstanding unvested awards lapse.

Awards will generally vest early on a takeover of the company, merger or other corporate reorganisation. Alternatively participants may be allowed or required to exchange their awards for new awards. Where an award vests early in these circumstances, the Committee will determine the level of vesting, having regard to the extent to which the performance condition has been satisfied to the date of vesting (subject to downwards discretion based on underlying performance) and to the fact that the award is vesting early.

Awards made prior to 2015
Subject to the leaver conditions set out above, where a participant is a ‘good leaver’ any outstanding unvested deferred annual variable pay award made prior to 2015 will normally be released at the date of cessation of employment. In the event of a change of control, the Committee may allow awards to vest or will determine that awards are exchanged for new awards.

PSP (awards made from 2014 onwards)
In the event that a participant is a ‘good leaver’ any outstanding unvested PSP award will normally be pro-rated for service from the start of the performance period to cessation and will vest based on performance to the end of the performance period. Awards will usually be released at the normal time. Where it considers it appropriate, for example in the case of terminal illness, the Committee reserves the right to accelerate any payment due.

‘Good leaver’ circumstances are leaving due to death, disability, ill-health or injury, redundancy, retirement with company agreement, employing company/business ceasing to be part of the Group, a transfer of the undertaking in which the participant’s employment transfers to a company which is not a member of the Group, or any other reason at the discretion of the Committee.

For all other leavers outstanding unvested awards lapse.

Awards will generally vest early on a takeover of the company, merger or other corporate reorganisation. Alternatively participants may be allowed or required to exchange their awards for new awards. Where an award vests early in these circumstances, the Committee will determine the level of vesting, having regard to the extent to which the performance condition has been satisfied to the date of vesting (subject to downwards discretion based on underlying performance) and to the fact that the award is vesting early.

Legacy PSP awards
For ‘good leavers’, in line with the plan rules, awards made prior to 2014 will be performance tested at the date of leaving and, to the extent that performance conditions are met, the award will vest on a pro-rata basis, based on service within the performance period.

Good leaver circumstances are leaving due to death, disability, ill-health, redundancy, retirement with company agreement, employing company/business ceasing to be part of the Group, a transfer of the undertaking in which the participant’s employment transfers to a company which is not a member of the Group, or any other reason at the discretion of the Committee.

For all other leavers outstanding unvested awards lapse.

In the event of a change of control, PSP awards will vest to the extent that the performance conditions have been satisfied over the shortened performance period and will be time pro-rated in the same way as awards held by ‘good leavers’.

Legacy LGIM LTIP Award
In the event of being a ‘good leaver’, the legacy LGIM LTIP awards made to Mark Zinkula prior to him becoming a Board member would be tested at the end of their normal performance periods and, to the extent that performance conditions are met, the awards will vest on a pro-rata basis, based on service within the performance period.

Good leaver circumstances are leaving due to death, disability, ill-health, redundancy, retirement with company agreement, employing company / business ceasing to be part of the Group or any other reason at the discretion of the Committee.

For all other leavers outstanding awards lapse.

In the event of a change of control, awards will vest to the extent that the performance conditions have been satisfied over the shortened performance period and will be time pro-rated.

Other awards
Other one-time share awards would vest in line with any commitments made and taking into consideration the reasons for leaving. All employee share plans will vest in line with the plan rules.

OTHER INFORMATION

Legal fees, outplacement costs or other similar costs at the discretion of the Committee may be offered.

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