Sara Weller

Chair of the remuneration committee

Current committee members

  • Sara Weller (chair)
  • Dr Catherine Bell
  • Nick Salmon

Biographies of the directors are in the Board of Directors

Dear Shareholder,

I am pleased to introduce the Directors' Remuneration Report for the year ended 31 March 2014, which includes my statement, the directors' remuneration policy which is intended to take effect from the date of our 2014 AGM (subject to shareholder approval), and the annual report on remuneration for the year ended 31 March 2014.

As outlined in last year's report, during 2012/13 the committee undertook an extensive review of executive incentives and consulted widely with shareholders on the changes introduced. We were encouraged that our remuneration report and new Long Term Plan received strong support from shareholders at the 2013 AGM.

Remuneration for the year ended 31 March 2014 reflects strong business performance

We remain committed to ensuring that executive pay is aligned to the company's strategy of delivering long-term shareholder value by providing the best service to customers, at the lowest sustainable cost and in a responsible manner. As a committee we seek to achieve this by strongly linking pay with performance, at both an individual and a company level.

As you will have seen throughout the annual report, the company has had a very successful year. The strong financial and operational performance, and particularly the successful delivery of our capital programme and achievement of key sustainability targets (including achieving 'World Class' status in the Dow Jones Sustainability Index), has resulted in annual bonus payments of around 78 per cent of maximum for the executive directors. As the same bonus measures are used throughout the company, employees at all levels have also benefited from this success, receiving bonuses totalling £16 million for the 2013/14 year.

Strongly linking pay with performance, at both an individual and a company level.

In March 2014 the company's share price reached a 15-year high, and, together with the dividend policy to grow dividends each year by RPI plus two per cent, this resulted in a Total Shareholder Return over the preceding three years of around 50 per cent. The company also delivered excellent results against its operational and capital expenditure targets over the same period. These measures together form the basis of the long-term incentive plan awards that were granted in 2011 and were measured over the three years ending 31 March 2014, and as a result 93.5 per cent of the awards vested.

This will be the first year in which Steve Mogford is eligible for a payout under a long-term incentive plan since he joined the company as CEO in 2011.

Committed to shareholder engagement

Following the introduction of the new regulations on remuneration reporting, during the year the committee consulted further with shareholders on the directors' remuneration policy.

Whilst no substantial changes were made to executive remuneration in 2013/14 or are expected to be made in 2014/15, we continue to welcome feedback from shareholders.

I hope we can continue to receive your support on the remuneration-related votes at the 2014 AGM.

Sara Weller
Chair of the remuneration committee

At a glance summary

Executive directors:

  • Salary increase of 2.5 per cent from 1 September 2013
  • 2013/14 annual bonus outcome of 78.2 per cent of maximum
  • 50 per cent of 2013/14 annual bonus deferred in shares for three years
  • Long-term incentive payout of 93.5 per cent, supported by TSR of 50 per cent over the period 2011/12 to 2013/14
  • Personal shareholdings remain significantly above the 100 per cent of salary minimum guideline
  • No significant changes planned in 2014/15

Quick facts

  • The Code requires that 'the board should establish a remuneration committee of at least three independent non-executive directors'
  • The role of the committee is to set remuneration terms for all executive directors, other senior executives and the Chairman
  • By invitation of the committee, meetings are also attended by the Chairman, CEO, company secretary, business services director, head of reward and the external advisor to the committee
  • Terms of reference –