Directors' Remuneration Report
Role of the Remuneration Committee
The Remuneration Committee is responsible for formulating the Group’s policy for the remuneration of the executive Directors of GKN plc. The Committee reviews the policy annually and recommends any changes to the Board as a whole for formal approval.
Within the framework of the agreed policy, the Committee determines the detailed terms of service of the executive Directors, including basic salary, incentives and benefits, and the terms upon which their service may be terminated. The Committee also determines the fees of the Chairman and is responsible for recommending to the Chief Executive and monitoring the level and structure of remuneration for the most senior managers below Board level.
The Committee is responsible for appointing external independent consultants to advise on executive remuneration matters. Following a review in 2006 the Committee appointed New Bridge Street Consultants (NBSC) as its advisers and they were retained throughout 2007. NBSC provide advice on executive Directors’ remuneration. Since 2006 NBSC have also provided advice to the Group on incentive arrangements for senior executives below Board level. They also continued, during 2007, to provide the total shareholder return monitoring service in connection with the Group’s long term incentive plan and executive share option scheme and a valuation of awards during the year under the Group’s incentive schemes as required for share-based payment valuation purposes under International Financial Reporting Standard 2, roles they have performed for the Group since 2004. In appointing NBSC in 2006, and retaining them in 2007, the Committee ensured there was adequate independence and no conflict of interest between the advice it would be seeking and the work performed elsewhere within the Group by employees of NBSC. NBSC did not provide any other services direct to the Group during the year.
The Committee also receives input from the Group’s Chief Executive when considering the remuneration of other executive Directors.
The Committee consists entirely of independent non-executive Directors and presently comprises Sir Peter Williams (Chairman since 1 January 2006), Helmut Mamsch, Sir Christopher Meyer and John Sheldrick, all of whom served on the committee throughout 2007 together with Sir Ian Gibson. Their biographical details can be found by clicking here. The Company Secretary acts as secretary to the Committee.
The Committee met on nine occasions in 2007 to consider a range of issues including proposals for and payments under the short term variable remuneration scheme; the introduction of a new Profit Growth Incentive Plan for senior executives below Board level in 2007 and the proposed introduction in 2008 of a new earnings per share performance measure in the long term incentive plan; a review of the awards to be made under the Group’s long term incentive arrangements; the terms of service and remuneration levels for new executive Director appointments; the remuneration of the Chief Executive and the Company Secretary and the fees payable to the Chairman; and a review of the remuneration of senior executives immediately below Board level. Members’ attendance at meetings of the Committee in 2007 is set out within the Corporate Governance statement.
The Committee has written terms of reference that outline its authority and responsibilities; these are available upon request and on GKN’s website. The terms, which are reviewed annually under the Board’s performance evaluation procedures described in the Corporate Governance statement, comply with the best practice provisions of the Combined Code on Corporate Governance. (The Board’s statement of overall compliance with the Combined Code is set out in the Corporate Governance statement.)