REVIEW OF EXECUTIVE REMUNERATION IN 2004 for AstraZeneca (AZN)

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AZN » Topics » REVIEW OF EXECUTIVE REMUNERATION IN 2004

This excerpt taken from the AZN 20-F filed Mar 23, 2006.

REVIEW OF EXECUTIVE REMUNERATION IN 2004
In the 2004 Annual Report we described the review of the Company’s executive remuneration practice that took place in 2004.

As a result of the review, which included consultation with shareholders, a number of changes were proposed, including the introduction of the AstraZeneca Performance Share Plan. These changes were summarised in the Directors’ Remuneration Report for 2004 and details were provided with the 2005 Notice of AGM.

The changes were intended to:

>	Make the overall remuneration of AstraZeneca’s most senior executives more competitive, benchmarking against predominantly UK-based, global companies.

>	Link their reward more closely to the achievement of demanding performance conditions.

>	Increase the variable elements of reward as a proportion of the overall remuneration package, when compared to the fixed reward elements.

The changes were approved by shareholders at the 2005 AGM.

The Company’s revised approach to senior executive reward for Executive Directors and members of the Senior Executive Team (SET) is closely aligned to current best practice and includes:

>	An annual bonus opportunity linked to a wide-ranging assessment of performance, together with a requirement for the SET members to defer a portion of their bonus earned into shares for a period of three years. As a result of the 2004 consultation with shareholders, the basis of determining the annual bonus for the SET members was changed. For 2005 and beyond:

	–	50% is determined by earnings per share.

	–	25% by measures relating to the individual’s particular area of responsibility (or, in the case of the Chief Executive, the average of these individual outcomes for the other members of the SET).

	–	25% by a balance of qualitative and quantitative measures that address the quality of business performance.

The Remuneration Committee reserves the right to modify the bonus outcome if it believes it does not reflect the underlying performance of the business.

>	Performance conditions on exercise of options granted under the AstraZeneca Share Option Plan, with no re-test facility, in line with best practice. (This means that the options lapse if any performance condition is not met when the option first becomes exercisable.)

>	A requirement to hold shares equivalent to one-times annual salary, and to retain the net number of shares acquired under the AstraZeneca Share Option Plan for at least six months after the option is exercised.

>	A performance share plan, based on the Company’s total shareholder return relative to a global industry peer group (see separate section below).

The Board and the Remuneration Committee believe that bringing bonus and long term incentive opportunities closer to the market for other major UK-based, global companies, subject to demanding performance conditions, will appropriately rebalance the proportion of reward, so that variable, performance-related pay is dominant, and that it will significantly improve the Company’s ability to attract and retain executives of the quality necessary to lead AstraZeneca in the future.

This excerpt taken from the AZN 6-K filed Mar 14, 2006.