Variable pay Annual bonus plan (STVRS) Purpose and link to strategy Deferred Bonus Plan (DBP) Sustainable Earnings Plan (SEP)
• To encourage and reward sustained earnings performance in line with the Group’s growth strategy and its objective of creating long-term shareholder value. • To assist with retention of key executives. • Awards comprise a core award and a sustainability award (equal to 20% of the shares in a core award) with vesting based on performance over an initial three-year (core) period and subsequent two-year (sustainability) period. • Subject to performance, 50% of the core award is released after the end of year three; the balance of the core award and the sustainability award are released after the end of year five. • On vesting, the value of dividends accrued on vested shares from date of grant to date of release is delivered in additional shares or cash at the discretion of the Committee. • The Committee reviews the award levels annually and keeps performance targets under review to ensure continued alignment with strategy.
• To drive and reward achievement • Any STVRS payment above a percentage of salary (currently of short-term financial and 65%) is deferred into shares to strategic measures which assist with retention of key support long-term strategic executives and to align their objectives. interests with those of shareholders. • DBP awards are released at the • Award levels and performance end of a two-year deferral measures (including the period. Awards generally lapse proportion relating to strategic in the event of resignation measures and weightings) are during the deferral period. reviewed annually to ensure • On release, a cash amount is alignment with the Group’s paid equivalent to the aggregate financial and long-term strategic dividends per share paid during objectives. the deferral period. • Level of payment is determined by the Committee after the year • A malus provision exists to allow the Committee to adjust end based on performance unvested DBP awards in the against targets. event of material misstatement, • Payments up to a certain material failure of risk percentage of base salary management or serious (currently 65%) are normally reputational damage. made in cash and the balance is deferred into shares under the DBP. The Committee has discretion to make the payment wholly in cash in certain circumstances (for example to a departing Director).
Maximum potential value
• Maximum is 110% of base salary. • No additional opportunity above • Maximum award level under the SEP the STVRS maximum. rules is 200% of base salary (including both the core and sustainability awards). Core awards: • Measured over the initial three-year period based on a stretching EPS growth target. • Vesting at threshold is 25% rising to a maximum of 100%. Sustainability awards: • If the highest level of EPS attained in any year of the core performance period is achieved or exceeded in both years four and five, the sustainability award will vest in full (subject to any reduction made in respect of the core target not being satisfied over the core performance period). • The sustainability target will be assessed for year four and year five separately. • Vesting at threshold is 50% rising to a maximum of 100%. Vesting of core and sustainability awards is subject to an additional test based on the Committee’s assessment of the quality of earnings (as described on page 94).
Performance • Targets are normally applied to a • No additional performance measures (see STVRS) but combination of Group, and measures
where appropriate individual portfolio, financial and strategic measures. A significant proportion of the total award is based on financial measures. Performance is measured over a one-year period. Payments range between 0 and 110% of base salary with 55% of base salary payable for achievement of on-target performance.
release is subject to continued employment.
GKN plc Annual Report and Accounts 2015