|
This report sets out the policy and disclosures in relation to
Directors’ remuneration.
The Remuneration Committee (the Committee) is responsible for
determining the remuneration and the terms and conditions of service
of the Executive Directors. During the year, the Committee was made
up of six independent Non-Executive Directors. The membership of
the Committee comprised Mr R D Lapthorne (the Chairman of the Board)
as Chairman, Mr J Fr Odfjell (the Deputy Chairman of the Board),
Mr D H Brydon, Professor E Thorsby, Dr J S Patterson and Mr J F
Rejeange. The Chief Executive attends the meetings of the Committee,
except when his own remuneration is being considered.
In 2001, the Board accepted all the recommendations of the Remuneration
Committee without amendment.
The remuneration of the Non-Executive Directors is reviewed by
the Chief Executive who makes recommendations to the Board. The
Board determines the remuneration of the Non-Executive Directors
within the limits set out in the Articles of Association. The responsibilities
of the role and the level of fees paid in UK organisations of a
similar size and complexity to Amersham are considered in setting
remuneration policy for Non-Executive Directors.
The Report of the auditors on the financial statements covers
the disclosures contained in this report that are specified for
audit by the Financial Services Authority.
Remuneration policy for Executive Directors
In determining the remuneration policy for Executive Directors,
the Committee has considered a number of factors including:
- the importance of attracting, retaining and motivating management
of the appropriate calibre to further the success of the business;
- the linking of reward to both individual and business performance;
and
- ensuring that the interests of the Directors are aligned with
those of the shareholders.
To this end, the Remuneration Committee seeks to pay Executive
Directors base salaries at a median level and incentives (in the
form of bonuses and long term option arrangements) at an upper quartile
level when compared to compensation levels and packages in other
companies of comparable size and complexity, and also in companies
in the same business sector. The total package is aimed to lie between
the median and upper quartile.
In establishing this policy, the Committee obtains advice from
independent consultants, New Bridge Street Consultants.
In 2001, the Remuneration Committee considered a valuation of
all elements of Executive Directors’ remuneration to ensure that
it was aware of the total remuneration within the company and its
selected comparators. This valuation approach included the use of
the Black-Scholes option valuation technique for assessing the value
of long term incentives. The same approach will be used in 2002.
The Remuneration Committee believes that the policy adopted in
its remuneration of Executive Directors and senior managers has
contributed to the sustained financial success and long termgrowth
of the company. This policy has enabled the company to both attract
and keep a high calibre management team – essential for a well run
and growing business. The strong shareholder returns achieved by
the company are a testament to this policy, which reflects best
market practice.
The current elements of the remuneration packages can be summarised
as follows:
Service contracts
In the year under review, Executive Directors were employed on rolling
contracts subject to two years’ notice when given by the company
or one year’s notice if given by the Director. The Committee has
given careful consideration to the case for reducing this two-year
notice period and it has been agreed to reduce the two-year rolling
period to one year. With effect from 1 March 2002 all Executive
Directors will be employed on rolling contracts subject to one year’s
notice if given by the company and six months notice if given by
the Executive Director. Non-Executive Directors do not have service
contracts.
Details of the Directors retiring by rotation at the Annual General
Meeting to be held on 8 May 2002 are given in the Report
of the Directors. Of the Directors retiring, Mr R D Lapthorne
and Mr J Fr Odfjell are members of the Remuneration Committee.
Compensation
No compensation payments were paid to Mr R E Long when he resigned
from the Board on 23 March 2001. He remained an employee of the
company up to 30 June 2001, when he retired. On 1 July 2001, he
entered into a consultancy agreement with the company to provide
consultancy services for an initial period of one year. Details
of payments made under this consultancy agreement are disclosed
in the notes to the Remuneration table in the Remuneration
report.
Base salary and benefits
Base salaries for Executive Directors are reviewed by the Committee,
normally annually, having regard to competitive market practice
and individual performance for the financial year. The Committee
aims to pay Executive Directors median level base salaries.
The principal benefits provided to the Executive Directors are
a fully-expensed car, pension, and life, disability and health insurance
and, where appropriate, relocation expenses.
Annual performance-related bonus
The annual performance-related bonus is dependent upon a number
of factors. The level of bonus is payable on a sliding scale between
0% and 100% of the base salary. Bonus payments totalling £1,125,420
(2000 – £871,906) have been approved, based on the financial performance
measures achieved for 2001 including growth in earnings per share,
cash flow, sales and operating profit, and performance against a
number of personal objectives for each Executive Director.
Share option schemes
The company operates a UK Inland Revenue approved Sharesave (SAYE)
share option scheme which is available to all UK employees, including
Executive Directors. The scheme is subject to a cumulative maximum
investment of £250 per month for each individual. The share option
runs for three, five or seven years. At the end of the chosen option
period the shares may be purchased by the employee at a 20% discount
to the share price at the start of the period. The Plan is due to
be renewed in 2002 and a resolution to this effect shall be put
to the Annual General Meeting together with a resolution seeking
approval for the introduction of an all-employee Inland Revenue
approved Share Incentive Plan. Further details are contained in
the Chairman’s Letter to shareholders to be dated 28 March 2002.
In the US, the company operates a US tax qualified Stock Purchase
Plan which was approved by shareholders at the Annual General Meeting
held in May 2000. The plan is subject to a maximum annual investment
of $25,000 or 10% of pay for each individual. Employees save for
a six month period, at the end of which shares are purchased at
a 15% discount to the share price either at the beginning or the
end of the savings period. This Plan is not available to Executive
Directors.
During the year, options over 1,000 shares each were granted to
all employees in the group, except for the four Executive Directors,
under the company’s ‘Options for All’ programme, to mark the new
corporate identity of the group and to reinforce the ‘one company’
strategy. These options were granted under the rules of the Executive
Share Option Scheme approved by shareholders at the Annual General
Meeting in 2001. The options are not subject to performance conditions
and are normally exercisable after three but not more than six years
from the date of grant. Options were granted on a tax approved basis
as far as possible in those countries where local legislation permitted
– UK, US, Ireland, France and Italy. In addition, in those countries
where it was not tax efficient to grant options over shares or there
were legal constraints, equivalent cash options were granted instead
of conventional share options.
Additionally, tax approved and unapproved Executive Share Option
Schemes are available to Executive Directors and senior managers.
The unapproved schemes permit the grant of equivalent cash options
in respect of participants in those countries where it is not tax
efficient to grant options over shares or there are legal constraints.
For the purpose of hedging a cash option, a corresponding trust
option over new issue shares is granted to the Amersham plc ESOP
Trust. Options to acquire shares in the company are awarded on a
discretionary basis by the Remuneration Committee. Options granted
prior to 2001 are normally exercisable after three but not more
than ten years from the date of grant. Options granted in the US
in 2000 and to senior managers worldwide from 2001 onwards become
exercisable in four equal tranches on the first, second, third and
fourth anniversaries of the date of grant.
Options granted to Executive Directors prior to 2001 under the
terms of the 1993 Executive Share Option Scheme are subject to the
attainment of growth in the company’s earnings per share of at least
6% more than the increase in the Retail Prices Index over any three
consecutive financial years prior to the exercise of the option.
Options granted to Executive Directors from 2001 under the terms
of the 2001 Executive Share Option Scheme are not normally exercisable
until the third anniversary of the date of grant and to the extent
that the performance conditions specified prior to the grant of
the option have been satisfied. For options granted to Executive
Directors in 2001, 50% of each option grant will vest if the company’s
normalised earnings per share growth (as determined by the Remuneration
Committee) matches or exceeds the growth in the Retail Prices Index
plus 3% per annum. The entire option grant will vest if the company’s
normalised earnings per share growth matches or exceeds the growth
in the Retail Prices Index plus 5% per annum. There is proportionate
vesting between 3% and 5%. Performance is always measured from the
end of the financial year prior to the grant of the option. 25%
of the options may vest after one year with a further 25% after
two years and a further 50% after three years. To the extent that
these targets are not achieved by those times, the performance period
will be extended, one financial year at a time. To the extent that
the performance conditions have not been met by the fifth anniversary
of the grant, the option lapses.
Options granted to senior managers worldwide from 2001 are not
subject to performance conditions.
Under the rules of this scheme, the maximum annual grant of options
available to Executive Directors is two times their annual base
salary. In 2001, option grants were made to Executive Directors
at this level. In 2002, it is also proposed to grant Executive Directors
options over shares valued at two times their annual base salary.
The beneficial interests of the Executive Directors in share options
are shown at the end of this report.
The Remuneration report continues on the
next page »
[Page 1 of 3]
|
