Executive directors' remuneration for the year ended 31 March 2015

Single total figure of remuneration for executive directors (audited information)

Base salary
£'000
Benefits(1)
£'000
Annual bonus(2)
£'000
Long-term incentives
£'000
Pension(5)
£'000
Other(6)
£'000
Total
£'000
Year ended 31 March2015201420152014201520142015(3)2014(4)201520142015201420152014
Steve Mogford(7)69267526246966871,2878431521493102,8842,378
Russ Houlden(7)437426232344043380462196942301,8231,597
  1. For executive directors, benefits include: a car allowance of £14,000; health, life and income protection insurance; travel costs and communication costs. The 2014 benefits for Steve Mogford were understated by £3,000 in last year's report.
  2. 50 per cent of bonus was deferred into shares for three years under the Deferred Bonus Plan (DBP). See Annual bonus for further details of bonus outcomes.
  3. The performance period for the 2012 Performance Share Plan (PSP) and Matching Share Award Plan (MSAP) awards ended on 31 March 2015 and the awards vested on 19 May 2015. The final vesting of those awards was 97.5 per cent resulting in 128,191 shares vesting for Steve Mogford and 80,087 shares vesting for Russ Houlden. The value of these shares shown in the table above has been calculated using the closing share price on date of vesting, which was 1004 pence per share. See Performance for vested awards for further details.
  4. The performance period for the 2011 PSP and MSAP awards ended on 31 March 2014 and the awards vested on 20 May 2014. The final vesting of those awards was 93.5 per cent, resulting in 98,686 shares vesting for Steve Mogford and 72,724 shares vesting for Russ Houlden. The value of these shares shown in the table above has been calculated using the closing share price on date of vesting, which was 854 pence per share.
  5. Cash allowance of 22 per cent of base salary paid in lieu of pension.
  6. During the year there were extended restrictions in place on buying and selling shares due to the regulatory price review which meant that executive directors were unable to exercise their vested 2011 PSP and MSAP awards before the record date for the August 2014 dividend. In line with the shareholder approved policy (see Directors' remuneration policy (abridged)), the committee considered it appropriate not to penalise employees (including executive directors) for this lost dividend and exercised its discretion to pay a cash payment in lieu of these dividends forgone (on a net-of-tax equivalence basis). The figures in this column also include the value of matching shares under the ShareBuy scheme which vested in the year, valued using the closing share price on the day they vested (the company offers a one-for-five match on partnership shares bought by employees under ShareBuy which cease to become forfeitable one year after they are awarded).
  7. The company recognises that its executive directors may be invited to become non-executive directors of companies outside the company and exposure to such non-executive duties can broaden experience and knowledge, which would be of benefit to the company. Any external appointments are subject to board approval (which would not be given if the proposed appointment was with a competing company, would lead to a material conflict of interest or could have a detrimental effect on a director's performance). Steve Mogford is the senior independent director of Carillion PLC for which he receives and retains an annual fee of £60,200. Russ Houlden is an independent member of the supervisory board, and audit committee chairman of Orange Polska SA for which he receives and retains fees estimated annually at around PLN 323,000 (around £60,000).

Pay and performance

A significant proportion of the executive directors' pay is performance related. Over the last three years, strong operational performance has supported our dividend growth of RPI plus two per cent and driven significant share price growth (our market capitalisation increased from £4.1 billion to £6.4 billion over this period). The committee considers that the remuneration received for the year ended 31 March 2015 fairly recognises the executive directors' contribution in delivering this performance.

The chart below shows that around 70 per cent of executive directors' total remuneration for the year ended 31 March 2015 was delivered in variable pay and 19 per cent related to share price growth and dividends on their vested long-term incentive awards.

Composition of executive directors' remuneration

£'000s

  1. Fixed consists of base salary, benefits and pension.

Base salary

Executive director salaries were increased by 2.5 per cent with effect from 1 September 2014 as shown below. This was in line with the headline increase applied across the wider workforce.

Base salary
£'000
Executive director1 Sept 20141 Sept 2013
Steve Mogford699.0682.0
Russ Houlden441.3430.5

Any base salary increases in the year commencing 1 April 2015 will be in line with policy (see Directors' remuneration policy (abridged)).

Benefits and pensions

No changes are expected to benefits or pensions during the year commencing 1 April 2015 (see Directors' remuneration policy (abridged)).

Annual bonus

Annual bonus in respect of financial year ended 31 March 2015 (audited information)

As highlighted earlier in the report, the company has had another very successful year and this has again been reflected in the level of bonus awards. The overall bonus outcome for the executive directors for the year ended 31 March 2015 was 77.4 per cent of maximum. This compares to the prior year outcome of 78.2 per cent.

The performance measures, targets and outcomes are set out below:

Steve MogfordRuss Houlden
MeasureTargets
Threshold–Stretch
Outcome% of
maximum achieved(1)
Max
%
Actual
%
Max
%
Actual
%
Underlying operating profit(2)£775.6m–£817.3m£811.4m8830.026.530.026.5
Customer service in year
Service incentive mechanism – qualitative(3)4.36–4.434.24010.00.010.00.0
Service incentive mechanism – quantitative107–1009910010.010.010.010.0
Maintaining and enhancing services for customers
Regulatory capital expenditure(4)£822.7m +/- 6% to £822.7m +/- 2%£822.7m
+2.4%
918.07.38.07.3
Time, cost and quality of capital programme (TCQi)(5)95%–99%97.3%588.04.68.04.6
Sustainability of service and corporate responsibility
Serviceability (four measures) Requirement: Stable or ImprovingThreshold: 3 x
stable or improving Stretch: 5 out of 5
5 out
of 5
10020.020.020.020.0
Dow Jones Sustainability Index rating
(one measure)
Requirement: World Class
Bad debt recovery2.2%–1.8%3.1%04.00.04.00.0
Personal objectives10.09.010.09.0
Total as % bonus maximum100.077.4100.077.4
Total as % base salary130.0100.6130.0100.6
Total £'000(6)696440
  1. 25 per cent for threshold performance; 50 per cent for target performance; 100 per cent for stretch performance. Straight-line vesting applies between these points.
  2. Underlying operating profit is subject to a number of adjustments, principally in regard to infrastructure renewals expenditure.
  3. 2014/15 was a pilot year for changes to the service incentive mechanism (SIM) methodology, and so performance in the final year of the 2010-15 period was assessed in line with the revised methodology. The committee set targets using an externally validated benchmark.
  4. Regulatory capital expenditure targets reflect changes in the Construction Output Price Index up to April 2014.
  5. TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required standard. It is expressed as a percentage, with a higher percentage representing better performance.
  6. Under the Deferred Bonus Plan, 50 per cent of the annual bonus will be deferred in shares for three years.
Annual bonus in respect of financial year commencing 1 April 2015

The maximum bonus opportunity for 2015/16 will remain unchanged at 130 per cent of base salary.

As referred to in the remuneration committee chair's annual statement, during the year the committee reviewed the annual bonus measures to ensure that they are aligned to the delivery of the business strategy for the next regulatory period 2015–20 (Ofwat's final determination having been accepted by the company in January 2015).

The performance measures, weightings and targets for the executive directors' annual bonus for the year commencing 1 April 2015 are set out in the table below, along with a description of why the committee considers the measures to be appropriate. Please note that certain targets are considered commercially sensitive, and consequently these will only be disclosed after the end of the 2015/16 financial year in the 2015/16 annual report on remuneration.

MeasureAlignment to strategyTargets
2015/16
Weighting
(%)
Underlying operating profit(1)Key measure of shareholder value.Commercially sensitive30.0
Customer service in year(2)
Service incentive mechanism –
qualitative
Delivering the best service to customers is a strategic objective.

Ofwat can apply financial incentives or penalties depending on our customer service performance.
Commercially sensitive12.0
Service incentive mechanism –
quantitative
Commercially sensitive4.0
Maintaining and enhancing services for customers
Wholesale outcome delivery
incentive composite (3)
Delivering the best service to customers is a strategic objective.

There is a direct financial impact on the company of Ofwat incentives and penalties for delivery/non-delivery of customer promises (see Aligning remuneration to business strategy).
Commercially sensitive20.0
Time, cost and quality of capital
programme (TCQi)(4)
Keeping tight control of our capital programme ensures we can provide a reliable service to our customers at the lowest sustainable cost.73%–98%20.0
Corporate responsibility
Dow Jones Sustainability
Index rating
Ensures that we manage our business in a responsible manner.World Class4.0
Personal objectivesCommercially sensitive10.0
Total as % bonus maximum100.0
  1. Underlying operating profit is subject to a number of adjustments, principally in regard to infrastructure renewals expenditure.
  2. This measures our customer service performance over the bonus year, as reported by Ofwat through their measure of customer service.
  3. A measure of the total net incentive or penalty to be applied by Ofwat for delivery/non-delivery of performance commitments related to our wholesale business during the year.
  4. TCQi is an internal audited calculation which measures the extent to which we deliver our capital projects on time (time), to budget (cost) and to the required standard (quality). It is expressed as a percentage, with a higher percentage representing better performance. For 2015/16 changes have been made to TCQi , including extending coverage to relevant non-regulatory commitments, measuring cost in terms of total expenditure (totex) and giving a greater weighting in the cost element to our biggest capital projects. This resulted in a recalibration of the index. The committee is satisfied that the range of TCQi targets for the 2015/16 annual bonus is appropriate and sufficiently stretching.

Long-term incentives

Summary of long-term incentives for executive directors

The Long Term Plan (LTP) was introduced in 2013 following an extensive review and shareholder consultation. The LTP replaced two long-term incentive plans – the Performance Share Plan (PSP) and the Matching Share Award Plan (MSAP).

The structure of the LTP awards to be granted in 2015 will remain the same as for the 2014 awards, with the exception of a switch to dividend cover as the differentiator of performance under the sustainable dividends performance measure.

A summary of the long-term incentives referred to in this report is set out in the table below:

Year of grantSchemeLevel of awardPerformance (and holding) periodPerformance period end 31 MarchPerformance measuresWeighting of performance measuresTSR comparator group(1)See page
Future awards
2015 (to be granted in June 2015)LTP130% of base salary3 years (plus 2 years)2018
  • Relative TSR
33.3%FTSE 100 (excluding financial services, oil and gas, and mining companies)98
  • Sustainable dividends
33.3%
  • Customer service excellence
33.3%
Ongoing awards
2014LTPAs for 2015As for 20152017As for 2015As for 2015As for 201597
2013LTPAs for 2015As for 20152016As for 2015As for 2015As for 2015
Vested awards
2012PSP70% of base salary3 years2015
  • Relative TSR
50%Weighted index(2): Severn Trent (100), Pennon Group (75), National Grid (25), Scottish and Southern Energy (25), Centrica (25)96
  • Opex outperformance
37.5%
  • Capex
12.5%
2012MSAP54% of annual bonus (up to 1:1 match)3 years2015As for 2012 PSPAs for 2012 PSPAs for 2012 PSP96
  1. For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is independently calculated by New Bridge Street.
  2. Weightings in brackets.
Performance for vested awards
2012 awards with a performance period ending 31 March 2015 (audited information)

The long-term incentive amount included in the single total figure of remuneration in the Annual report on remuneration is in respect of the 2012 Performance Share Plan (PSP) and Matching Share Award Plan (MSAP) awards which vested on 19 May 2015. The overall vesting outcome was 97.5 per cent of maximum which reflects strong total shareholder return (TSR) of 80 per cent over the three-year performance period and excellent operational and capital expenditure performance.

The targets and achievement against those targets are set out in the table below.

 

Performance measures and relative weightingTargets and performance achieved
(measured over the period 1 April 2012 to 31 March 2015, except where indicated)
Vesting
% maximum% of award
Relative total shareholder return (TSR)
(50%)
Targets(1): Stretch: 100% vesting for outperforming the index(2) by 6.3% or more on a multiplicative basis

Threshold: 25% vesting for TSR performance equal to the index

Achievement: Company TSR of 80.2% was significantly above the stretch target of 54.8% (index performance was 45.6%).
100%50%
Opex outperformance versus Ofwat's allowed operating costs
(37.5%)
Targets(1): Stretch: 100% vesting for outperformance of £64.9m or more

Intermediate: 50% vesting for outperformance of £49.7m

Threshold: 25% vesting for outperformance of £0 (i.e. in line with allowed operating costs)

Achievement: Opex outperformance was greater than the stretch target.
100%37.5%
Capex versus Ofwat's allowed capital expenditure allowance measured over the period 2010–15
(12.5%)
Targets(1): Stretch: 100% vesting for capex within +/-1% of Ofwat's allowed capital expenditure allowance

Intermediate: 50% vesting for capex of +/-2% of Ofwat's allowed capital expenditure allowance

Threshold: 25% vesting for capex of +/-3% of Ofwat's allowed capital expenditure allowance

Achievement: Capex was 1.4% less than Ofwat's allowed capital expenditure allowance, which was between the intermediate and stretch targets.
80%10%
Total vesting97.5%
  1. Straight line vesting applies between these points, with nil vesting below threshold performance.
  2. For details of the index companies see Long-term incentives.
2011 awards with a performance period ending 31 March 2014

In last year's report the vesting outcome was disclosed for the 2011 Performance Share Plan (PSP) and Matching Share Award Plan (MSAP) awards which vested on 20 May 2014. At that time the directors considered it commercially sensitive to disclose targets for the opex outperformance and capex outperformance conditions and committed to disclosing the targets in this year's report, after the end of the 2010-15 period.

For the opex outperformance measure (measuring opex outperformance versus Ofwat's allowed operating costs for the period 1 April 2011 to 31 March 2014), outperformance was £77.7 million which was just below the stretch target of £81.3 million (resulting in 88 per cent vesting for this element).

For the capex outperformance measure (measuring capex outperformance versus Ofwat's allowed operating costs for the period 1 April 2011 to 31 March 2014), outperformance was greater than the stretch target of £41.0 million (resulting in 100 per cent vesting for this element).

Performance targets for awards granted in the year
2014 awards with a performance period ending 31 March 2017 (audited information)

Details about the 2014 LTP performance measures and targets are shown in the following table, together with an explanation of how the measures align with the company's strategy:

Performance measures and relative weightingAlignment to strategyTargets(1)
(measured over the period 1 April 2014 to 31 March 2017)
Relative total shareholder return (TSR)
(33.3%)
Direct measure of delivery of shareholder returns, rewarding management for the outperformance of a comparator group of companies
  • Stretch: 100% vesting for TSR of median(2) x 1.15 or more
  • Threshold: 25% vesting for median TSR
Sustainable dividends
(33.3%)
Direct measure of return to shareholders through dividend payments, whilst focusing on the creation of strong earnings that ensure the sustainability of dividends
  • Comprises two elements – dividend growth and dividend cover
  • For the 2014 LTP where the performance period straddles two regulatory periods, dividend cover will operate as an underpin, with dividend growth (over the three-year period) providing the payout range based on threshold (25% vesting), intermediate (75% vesting), and stretch (100% vesting) targets
  • The targets are considered commercially sensitive and so are not disclosed in this report. However, actual targets, performance achieved and awards made will be published retrospectively so that shareholders can fully understand the basis for any payouts
Customer service excellence(3)
(33.3%)
It is a key strategic objective to provide the best service to customers. This is fundamental to delivering our vision of becoming a leading North West service provider and one of the UK's best water and wastewater companies. This measure has a direct financial impact on the company as our regulator can apply financial incentives or penalties depending on our customer service performance
  • Stretch vesting (100%) for upper decile position
  • Intermediate vesting (80%) for upper quartile position
  • Threshold vesting (25%) for median position
  1. Straight line vesting applies between these points, with nil vesting below threshold performance.
  2. For details of the comparator companies see long-term incentives.
  3. Based on Ofwat's customer service measure (currently the service incentive mechanism). Vesting is based on ranking position in the final year compared to the other water and wastewater companies (currently 18 companies including United Utilities).

The committee will have the flexibility to make appropriate adjustments to the performance targets in exceptional circumstances, to ensure that the award achieves its original purpose.

Any vesting is also subject to the committee being satisfied that the company's performance on these measures is consistent with underlying business performance.

Performance targets for future awards
2015 awards with a performance period ending 31 March 2018

The performance targets for the 2015 Long Term Plan (LTP) are expected to be as for the 2014 awards outlined above, with the exception of the sustainable dividend performance measure. Following the announcement by the board in January 2015 of our dividend policy for the regulatory period 2015–20, the measure will switch focus from dividend growth as the differentiator of performance with dividend cover as an underpin, to dividend cover being the differentiator with the delivery of our dividend policy as an underpin.

Executive directors' interests in shares

Executive directors' shareholding (audited information)

To provide further alignment with shareholder interests, in May 2015 the board agreed to increase the shareholding guidelines for executive directors from 100 per cent to 200 per cent of base salary. Executive directors are normally expected to reach this shareholding within five years of appointment. There is also an expectation that they will continue to build a shareholding throughout their period of employment with the company after the guideline is reached.

Details of beneficial interests in the company's ordinary shares as at 31 March 2015 held by each of the executive directors and their connected persons are set out in the table below along with progress against the target shareholding guideline level. The table shows that both Steve Mogford and Russ Houlden have already exceeded the target shareholding.

Shares counting towards shareholding guidelines at
31 March 2015
DirectorNumber of shares required to meet
shareholding guideline
(1)
Number of shares owned outright (including connected persons)Unvested shares not subject to performance
conditions
(2)
Total shares counting towards shareholding guidelines(3)Shareholding as % of base salary at
31 March 2015
(1)
Shareholding guideline
met at 31 March
2015
Unvested shares subject to performance conditions(4)
Steve Mogford(5)146,772171,294199,103276,838377%Yes368,108
Russ Houlden(5)92,66172,895104,770128,442277%Yes231,491
  1. Share price used is the average share price over the three months from 1 January 2015 to 31 March 2015 (952.5 pence per share).
  2. Unvested shares subject to no further performance conditions such as matching shares under the 'ShareBuy' scheme and the matched share investment schemes. Includes shares only subject to malus provisions such as the Deferred Bonus Plan shares in the three-year deferral period and Long Term Plan shares in the two-year holding period.
  3. Includes unvested shares not subject to performance conditions (on a net of tax and national insurance basis), plus the number of shares owned outright.
  4. Includes unvested shares under the Performance Share Plan, Matching Share Award Plan and Long Term Plan.
  5. In the period 1 April 2015 to 20 May 2015, additional shares were acquired by Steve Mogford (36 ordinary shares) and Russ Houlden (36 ordinary shares) in respect of their regular monthly contributions to the 'ShareBuy' scheme. These will be matched by the company on a one-for-five basis. Under the scheme, matching shares vest provided the employee remains employed by the company one year after grant.

Executive directors' share plan interests 1 April 2014 to 31 March 2015 (audited information)

Award dateAwards held at 1 April 2014Granted in yearNotional dividends accrued in year(1)Exercised/
vested in year
Lapsed/forfeited in yearAwards held at 31 March 2015Face value of awards granted in year (£'000)Value of shares on date vested
(£'000)
Steve Mogford
DBP17.6.1351,9872,12954,116
DBP(2)30.6.1438,9981,59740,595343(3)
PSP(4)8.7.1186,69881,0625,6360692(5)
PSP15.6.1273,4273,00876,435
MSAP(4)8.7.1118,85017,6241,2260151(5)
MSAP15.6.1252,8782,16655,044
LTP29.7.13126,6265,187131,813
LTP30.6.14100,6924,124104,816886(6)
MSIS(7)27.5.11100,2444,107104,351
ShareBuy matching shares(8)1.4.14 to 31.3.154241424100
Russ Houlden
DBP17.6.1332,8011,34334,144
DBP(2)30.6.1424,6151,00825,623217(3)
PSP(4)8.7.1153,35149,8833,4680426(5)
PSP15.6.1246,3141,89748,211
MSAP(4)8.7.1124,42922,8411,5880195(5)
MSAP15.6.1232,5961,33533,931
LTP29.7.1379,9133,27383,186
LTP30.6.1463,5602,60366,163560(6)
MSIS(9)1.10.1043,1931,76944,962
ShareBuy matching shares(8)1.4.14 to
31.3.15
4141414100
  1. Note that these are also subject to performance conditions where applicable.
  2. Executive directors were required to defer 50 per cent of their 2013/14 bonus into shares for three years under the DBP. The deferral period will end on 30 June 2017. There were no service or performance conditions attached, however deferred bonuses are subject to malus provisions (see Annual bonus for further information).
  3. The face value of the DBP awards made in 2014 have been calculated using the closing share price on 27 June 2014 (the dealing day prior to date of grant) which was 880.5 pence per share.
  4. 93.5 per cent of the 2011 PSP and MSAP awards vested. See 2011 awards with a performance period ending 31 March 2014 for further detail.
  5. Calculated using the closing share price on date of vesting (20 May 2014) of 854 pence per share.
  6. The face value of the LTP awards made in 2014 has been calculated using the closing share price on 27 June 2014 (the dealing day prior to date of grant) which was 880.5 pence per share. 25 per cent of the award vests for threshold performance and performance is measured over the period 1 April 2014 to 31 March 2017. Details of the performance measures and targets are given in the Performance targets for awards granted in the year.
  7. Full details of the one-off matched share investment scheme award for Steve Mogford, introduced as a necessary part of his terms of appointment, were disclosed in the 2010/11 report. Shares under this scheme will vest on 5 January 2016, subject to him still being employed by the group at that date.
  8. Under ShareBuy, matching shares vest provided the employee remains employed by the company one year after grant. During the year Steve Mogford purchased 204 partnership shares and was awarded 41 matching shares (at an average share price of 870 pence per share). Russ Houlden purchased 205 partnership shares and was awarded 41 matching shares (at an average share price of 870 pence per share).
  9. Full details of the one-off matched share investment scheme award for Russ Houlden, introduced as a necessary part of his terms of appointment, were disclosed in the 2010/11 report. Shares under this scheme will vest on 1 October 2015, subject to him still being employed by the group at that date.
Dates of service contracts
Executive directorsDate of service contract
Steve Mogford5.1.11
Russ Houlden1.10.10

Other information

Chart Index

Performance graph

The chart above shows the company's six-year total shareholder return (TSR) performance against the FTSE 100 index. The index was selected because the company is a member of the FTSE 100 and it is considered to be the most suitable widely published benchmark for this purpose.

Six-year history of CEO's pay

The table below shows the CEO's pay over the same six-year period as the TSR chart above.

Year ended 31 MarchCEOCEO single figure of total remuneration (£'000)Annual bonus as % of maximumLong-term incentive vesting as % of maximum(1)
2015Steve Mogford2,88477.497.5
2014Steve Mogford2,37878.293.5
2013Steve Mogford1,54984.4n/a(2)
2012Steve Mogford1,42172.0n/a(2)
2011Steve Mogford37790.6n/a(2)
2011Philip Green3,07390.828.1(3)
100.0(4)
2010Philip Green1,99289.20(5)
12.5(6)
  1. For performance periods ending 31 March, unless otherwise stated.
  2. Steve Mogford was not a participant in any long-term incentive plans that had performance periods ending during 2011 to 2013. For those who did participate in those plans, the vesting as a percentage of maximum was 37.5 per cent for those vesting in 2012 and 35.3 per cent for those vesting in 2013.
  3. 2008 PSP and MSAP.
  4. The retention period applicable to Philip Green's matched share investment scheme ended on 12 February 2011.
  5. 2007 Performance Share Plan (PSP).
  6. 2007 Matching Share Award Plan (MSAP) .

Percentage change in CEO's remuneration versus the wider workforce

The table below shows how the percentage change in the CEO's salary, benefits and bonus earned in 2013/14 and 2014/15 compares with the percentage change in the average of each of those components for a group of employees.

ItemYear-on-year change CEO (%)(1)Year-on-year change employees (%)(2)
Base salary(3) (4)2.53.0
Taxable benefits8.35.2
Bonus0.1-2.9
  1. See single total figure of remuneration table for more information.
  2. To aid comparison, the group of employees selected by the committee are those who were employed over the complete two-year period.
  3. On 1 September 2014 Steve Mogford received a base salary increase of 2.5 per cent.
  4. Includes promotional increases.

Relative importance of spend on pay

The table below shows the relative importance of spend on pay compared to distributions to shareholders.

2014/20152013/2014% change
Employee costs £m(1)2602523.0%
Dividends paid to shareholders £m2492384.8%
  1. Employee costs includes wages and salaries, social security costs, and post-employment benefits. The 2013/14 figures have been restated to reflect the requirements of IFRS 11 'Joint Arrangements'. See accounting policies for details.

Non-executive directors

Single total figure of remuneration for non-executive directors (audited information)

Fees
£'000
Benefits
£'000
Total
£'000
Year ended 31 March201520142015201420152014
Dr John McAdam28127411282275
Dr Catherine Bell6966117067
Stephen Carter(1)36n/a1n/a37n/a
Mark Clare(2)6925117026
Paul Heiden(3)n/a24n/a1n/a25
Brian May7669117770
Nick Salmon(4)2269202469
Sara Weller7269007269
  1. Stephen Carter joined the board on 1 September 2014.
  2. Mark Clare joined the board on 1 November 2013.
  3. Paul Heiden retired from the board on 26 July 2013.
  4. Nick Salmon retired from the board on 25 July 2014.

Fees

Non-executive director annual fee rates were reviewed and increased with effect from 1 September 2014 as shown below:

Fees
£'000
Role1 Sept 20141 Sept 2013
Base fees: Chairman(1)284.0277.0
Base fees: other non-executive directors(2)61.3559.85
Senior independent non-executive director(2)12.510.0
Chair of audit committee(2)15.015.0
Chair of remuneration committee(2)12.510.0
Chair of corporate responsibility committee(2)8.08.0
  1. Approved by the remuneration committee.
  2. Approved by a separate committee of the board .

Any fee increases in the year commencing 1 April 2015 will be in line with policy (see here in the policy report).

Non-executive directors' shareholding (audited information)

Details of beneficial interests in the company's ordinary shares as at 31 March 2015 held by each of the non-executive directors and their connected persons are set out in the table below.

Number of shares owned outright
(including connected persons) at 31 March 2015
Dr John McAdam1,837
Dr Catherine Bell7,000
Stephen Carter3,000
Mark Clare7,628
Brian May3,000
Sara Weller10,531

Dates first appointed to the board

Non-executive directorsDate first appointed to the board
Dr John McAdam4.2.08
Dr Catherine Bell19.3.07
Stephen Carter1.9.14
Mark Clare1.11.13
Brian May1.9.12
Sara Weller1.3.12

The remuneration committee

Summary terms of reference

The committee's terms of reference were last updated in April 2015 and are available on our website: corporate.unitedutilities.com/corporate-governance

The committee's main responsibilities include:

  • making recommendations to the board on the company's framework of executive remuneration and its cost;
  • approving the individual employment and remuneration terms for executive directors and other senior executives, including: recruitment and severance terms, bonus plans and targets, and the achievement of performance against targets;
  • approving the general employment and remuneration terms for selected senior employees;
  • approving the remuneration of the Chairman;
  • proposing all new long-term incentive schemes for approval of the board, and for recommendation by the board to shareholders; and
  • assisting the board in reporting to shareholders and undertaking appropriate discussions as necessary with institutional investors on aspects of executive remuneration.

Composition of the remuneration committee

MemberMember sinceMember to
Sara Weller (chair since 27.7.12)1.3.12To date
Dr Catherine Bell1.3.11To date
Mark Clare1.9.14To date
Nick Salmon(1)4.4.0525.7.14
  1. Nick Salmon retired from the board on 25 July 2014.

The committee's members have no personal financial interest in the company other than as shareholders and the fees paid to them as non-executive directors.

Advisors to the remuneration committee

By invitation of the committee, meetings are also attended by the Chairman of the company (John McAdam), the CEO (Steve Mogford), the company secretary (Simon Gardiner, who acts as secretary to the committee), the business services director (Sally Cabrini) and the head of reward (Ruth Henshaw), who are consulted on matters discussed by the committee, unless those matters relate to their own remuneration. Advice or information is also sought directly from other employees where the committee feels that such additional contributions will assist the decision-making process.

The committee is authorised to take such internal and external advice as it considers appropriate in connection with carrying out its duties, including the appointment of its own external remuneration advisors.

During the year, the committee was assisted in its work by the following external advisor:

AdvisorAppointed byHow appointedServices provided to the committee in year ended 31 March 2015Fees paid by company for these services in respect of year and basis of charge
New Bridge StreetCommitteeReappointed following committee review in 2013General advice on remuneration matters£81,000 Time/cost basis
Other services provided to the company
  • Benchmarking of roles not under the committee's remit

The independent consultants New Bridge Street (a trading name of Aon Hewitt Limited, an Aon PLC company) are members of the Remuneration Consultants Group and, as such, voluntarily operate under the Code of Conduct in relation to executive remuneration consulting in the UK. The committee is satisfied that the advice they received from external advisors is objective and independent.

In addition, during the year the law firms Eversheds and Addleshaw Goddard provided advice on the company's share schemes to the company.

Key activities of the remuneration committee over the past year

The committee met five times in the year ended 31 March 2015.

Regular activities

  • Approved the 2013/14 directors' remuneration report
  • Reviewed the base salaries of executive directors and other members of the executive team
  • Reviewed the base fee for the Chairman
  • Assessed the achievement of targets for the 2013/14 annual bonus scheme, reviewed progress against the targets for the 2014/15 annual bonus scheme, and set the targets for the 2015/16 annual bonus scheme
  • Assessed the measurement of performance conditions for the long-term incentive awards vesting in 2014, including both Performance Share Plan (PSP) awards and matching shares vesting under the Matching Share Award Plan (MSAP), and set the targets for Long Term Plan (LTP) awards made in 2014
  • Reviewed and approved awards made under the annual bonus scheme, Deferred Bonus Plan (DBP) and LTP
  • Monitored progress against shareholding guidelines for executive directors and other members of the executive team
  • Reviewed the committee's performance during the period
  • Reviewed the committee's terms of reference
  • Considered market trends in executive remuneration, including in the wider utilities sector

Other activities

  • Completed a review of the annual bonus structure and measures for the 2015-20 period
  • Engaged with shareholders regarding the review of the annual bonus scheme

2014 AGM: Statement of voting

At the last Annual General Meeting on 25 July 2014, votes on the directors' remuneration report were cast as follows:

ForAgainstAbstain
Resolution%Number%NumberNumber
Approval of the 2013/14 directors' remuneration report (other than the part containing the directors' remuneration policy)99.39397,476,2890.612,421,9682,701,560
Approval of the directors' remuneration policy effective 25 July 201498.48394,128,7861.526,065,5372,404,464

The directors' remuneration report was approved by the board of directors on 20 May 2015 and signed on its behalf by:

Sara Weller
Chair of the remuneration committee