Remuneration Committee report continued Annual statement continued
Performance related pay – bonus continued The targets for both halves of the 2020/21 financial year, were exceeded, resulting in a total financial bonus for the year of 60%, the maximum for this element. For the 2020/21 financial year, the strategic objectives for both the CEO and CFO were given a weighting of 40% in total. The bonus earned was judged to be 32% for the CEO and 27% for the CFO. The strategic objectives covered three areas: • Broadening the product portfolio: the broad objective was to offer the complete portfolio of products and services tailored to specific customer sectors and to be able to deliver this globally. This was broken down by market with specific revenue objectives for different products (20%) • Sustainability: to act as a responsible corporate citizen to ensure our future. This included objectives with respect to training of future leaders in the Group, diversity targets for recruitment, the development of action plans to improve engagement with underrepresented groups and the assessment of customer and colleague experience (10%) • Specific improvements and efficiencies: these were delivered through strategic programmes with the objective of placing data and process re-engineering at the heart of the business and included the development of global support functions and certain identified key hires, as well as specific global product lines (10%) Further detail on performance against strategic objectives is provided later in the report. For both the CEO and CFO, 35% of the actual bonuses achieved will be deferred into nominal cost share options and will vest after two years. Clawback and malus provisions are also in place for the annual bonus. For 2021/22, the Committee will change the annual bonus weightings back to its more normal weightings of 75% financial and 25% non-financial. For the financial bonus, as in previous years, it will be set within a tight range with bonuses between 15% and 75% of base salary being calculated by linear interpolation. For 2021/22, we will introduce a revenue target component for both the Assurance and Software Resilience businesses to complement the targets on Adjusted operating profit. Strategic targets for 2021/22 For the CEO, the strategic targets will be grouped under the following broad headings: • Integration of Iron Mountain IPM division: this will include specific targets for systems, people, customer and operating model integration (10% in total) • Strategic objectives within the Assurance business: these will include specific targets for the development of the MDR and Remediation businesses (10% in total) • Sustainability objectives: these will include objectives with respect to diversity targets, colleague retention in certain areas, and corporate social responsibility (5% in total) For the CFO, the strategic objectives will be similar but, instead of strategic objectives within the Assurance business, he will have objectives related to the effective configuration and optimisation of our integrated systems to meet the evolving needs of the business. * The Directors consider that Adjusted operating profit less a proforma amortisation charge in respect of certain cloud-based software arrangements is comparable to Adjusted operating profit previously reported. See Strategic Report for further details and a reconciliation between Adjusted operating profit of £39.2m and Adjusted operating profit less a proforma amortisation charge in respect of certain cloud-based software arrangements of £36.2m.
Performance related pay – LTIP The grant of the 2020–23 LTIPs was delayed as a result of extended prohibited periods including those connected to the acquisition of the Iron Mountain IPM division, as a result of which the grants which would ordinarily have been made in the autumn of 2020 were not made until May 2021. The awards will vest subject to demanding EPS, cash and relative TSR targets outlined later in this report. The LTIP outcome for those LTIPs issued in 2018 was an award equivalent to 40% of the maximum award, which in the case of the CEO constituted an award of 78,914 shares, and the CFO constituted an award of 49,779 shares. Our LTIP award for 2021–24 will be granted after our next AGM in November and subject to shareholder approval of the revised Remuneration Policy, the Committee intends to make awards of up to 175% of base salary for the CEO and 150% for the CFO compared to 100% of base salary for both executives as at present. These will vest after three years as long as a number of demanding performance targets are satisfied. As in previous years, 60% of the potential award will be based on the achievement of a demanding EPS target, 30% on the achievement of certain cash targets and 10% on relative TSR targets. We plan to issue LTIPs to the Executive Directors shortly after the 2021 AGM in November 2021. Clawback and malus provisions are in place for the LTIP. In order to further align executives with shareholders, executives are required to retain any LTIP vested shares (net of tax) for a period of two years. After this holding period, all vested shares must also be retained if the shareholding requirement has not been met. In addition, our new post-employment shareholding policy requires executives to retain the lower of the value of their holding on cessation or 200% of salary for the first year following cessation, reducing to 100% of salary for the second year following cessation. It is envisaged that this will be managed through a restricted account maintained by NCC’s registrars and the Company Secretariat. At the AGM in October 2020, 51.53% of shareholders voted in favour of the adoption of the Annual Report on Remuneration. The 2021 Annual Statement and Annual Report on Remuneration will be put to an advisory vote at the AGM on 4 November 2021, providing shareholders with the opportunity to express their support on how the Committee has implemented the Remuneration Policy this year. As always, the Committee remains committed to engagement and transparency and I welcome the opportunity for discussion of the Group’s remuneration with any shareholder, at our AGM or at any other time during the year. During the coming year, we intend to focus on embedding our 2021–24 Remuneration Policy along with continuing to focus on the Committee’s responsibilities under the 2018 UK Corporate Governance Code (the ‘Code’). These include: • Ensuring that the Remuneration Policy continues to support and incentivise the achievement of our strategy and considering the incorporation of ESG measures • Setting the remuneration for the Executive Committee (i.e. the layer of senior management immediately below Board level) and monitoring the success of the Restricted Share Plan • Ensuring that the Committee takes into account workforce remuneration and related policies when setting executive remuneration
Jonathan Brooks Chair, Remuneration Committee 14 September 2021
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NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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