Principles of remuneration
The Directors’ Remuneration Policy is based on the following broad principles set by the Committee:
- provide a competitive remuneration package to attract and retain high quality individuals;
- align remuneration to drive the overall objectives of the business;
- align the interests of the executive team and senior management with those of shareholders; and
- provide the foundation for overall reward and remuneration beyond the specific roles falling within the direct remit of the Committee.
Considerations when setting and determining the Directors’ Remuneration Policy
The Remuneration Committee’s primary objective when setting remuneration policy is to align Director remuneration to the long-term success of the Company and to the shareholder experience while also enabling the Company to effectively recruit, motivate and retain key individuals.
To achieve this, the Remuneration Committee (‘Committee’) takes into account the experience, responsibilities, performance and contribution of the individual, as well as levels of remuneration for individuals in comparable roles elsewhere. The Policy places significant emphasis on the need to achieve stretching and rigorously applied performance targets, with a significant proportion of remuneration weighted towards performance-linked variable pay.
As noted further below, the Committee also takes into account the views expressed by shareholders and best practice expectations, and monitors developments in remuneration trends. The Company does not formally consult with employees on remuneration policy. However, when setting the remuneration policy for Executive Directors, the Committee takes into account the overall approach to pay and employment conditions across the Company’s Group.
Consideration of shareholder views
The Committee is committed to maintaining strong relationships and an open dialogue with shareholders and values their views in the process of formulating remuneration policy decisions.
The Committee reviewed the current Policy during 2020 to ascertain whether it was fit for purpose in the context of the Company’s current strategy and developments in corporate governance, best practice and investors’ expectations and determined that it remained broadly fit for purpose but could be better aligned with best practice in a number of areas. The Committee then engaged with shareholders who together held more than 70% of the Company’s shares to seek their views, including on the best practice changes proposed, which helped the Committee determine the new Policy. While a small number of shareholders provided feedback suggesting further changes, the vast majority considered that the new Policy was appropriate and balanced and therefore the Committee did not make any further amendments. The Committee will consider feedback received at the 2021 AGM and beyond as part of its ongoing review of remuneration policy. We are grateful for the time, assistance and support shareholders give us.
Remuneration link to strategy
| Strategic Priority | Policy element | Linkage | |
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Growth
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Group profit before tax (PBT) target in annual bonus and EPS performance measure in LTIP | Profit and related earnings targets and performance measures drive management’s efforts to achieve both organic growth, through new business wins and cost efficiencies, and inorganic growth through acquisitions, ensuring an appropriate focus on margin growth over pure revenue growth | |
| Group free cash flow (FCF) target in annual bonus | Free cash flow targets balance the Group’s capital priorities between re-investing for future growth, maintaining net debt within a target range and paying dividends to shareholders | ||
| ROCE performance measure in LTIP | Return on capital employed validates the quality of capital allocation and ensures that investment for growth is both appropriate and sustainable | ||
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Operational Excellence |
Personal bonus targets linked to operational excellence initiatives Remuneration Committee discretion to reduce bonus and LTIP outcomes for significant negative operational events |
Operational excellence, through creating and implementing best in class operating procedures for:
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Health and Safety and Environment |
FWI, preventable accidents and driver risk score targets in annual bonus Carbon reduction and other environmental performance measures in LTIP Remuneration Committee discretion to reduce bonus and LTIP outcomes for significant negative safety events |
Our ability to get people where they need to go safely and our culture for putting safety first is key to achieving the trust and loyalty of our customers and achieving growth Our use of cleaner and greener vehicles is driving a modal shift away from cars to mass transit and achieving growth |
Executive Directors are required to build up a shareholding to a value equal to 200% of base salary over a five-year period commencing from the later of the approval of the Policy and their date of appointment (and, as this represents a 33.3% incremental increase on the incumbent Group Chief Financial Officer’s pre-existing shareholding guideline, he will have five years from approval of the Policy to build this incremental increased shareholding). Compliance with this requirement is a condition of continued participation in the Company’s LTIP and other equity incentive arrangements.
A shareholding requirement will continue to apply to an Executive Director after the cessation of his/her employment which equates to the lesser of shares which have a value equal to 200% of base salary calculated as at the date of leaving employment and his/her actual shareholding at the date of leaving employment, irrespective of the reason for leaving, save it will not apply where the reason for leaving is in connection with a change of control in the Company.
Only shares derived from the 2021 LTIP awards and other share awards granted after the Policy comes into effect will be included in the post-cessation shareholding requirement. Shares held by an Executive Director prior to the Policy coming into effect, or vesting under an award granted to an Executive Director prior to the Policy coming into effect (other than the 2021 LTIP award), and shares independently acquired by an Executive Director at any time (whether before or after the Policy coming into effect), will not be included.