Remuneration policy for Executive Directors for Imperial_Chemical

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Imperial Chemical Industries (ICI)

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ICI » Topics » Remuneration policy for Executive Directors

These excerpts taken from the ICI 6-K filed Mar 21, 2007.

Remuneration policy for Executive Directors
The Company’s remuneration policy for Executive Directors is determined by the Remuneration Committee and seeks to attract, retain, motivate and reward high calibre individuals, whilst maintaining a clear focus on shareholder value. Furthermore it requires that ICI’s reward plans reflect the scale and the structure of reward available in those organisations with which ICI competes for talent.

Consequently, the remuneration package for Executive Directors is based upon the following principles:

•	there should be a clear link between required performance and achievable reward. Performance-related elements should form a significant proportion of the total package;

•	the total package for on-target performance should be fully competitive in the relevant market;

•	incentives should align the interests of executives and shareholders and reward the creation of long-term value for ICI within a framework which enables risk to be assessed and managed; and

•	there should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

Consequently, the remuneration package for Executive Directors is based upon the following principles:

•	there should be a clear link between required performance and achievable reward. Performance related elements should form a significant proportion of the total package;

•	the total package for on-target performance should be fully competitive in the relevant market;

•	incentives should align the interests of executives and shareholders and reward the creation of long-term value for ICI within a framework which enables risk to be assessed and managed; and

•	there should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

These excerpts taken from the ICI 6-K filed Mar 14, 2006.

Remuneration policy for Executive Directors
The Company’s remuneration policy for Executive Directors seeks to attract, retain, motivate and reward high calibre individuals, whilst maintaining a clear focus on shareholder value. This requires that ICI’s reward plans reflect the scale and the structure of reward available in those organisations with which ICI competes for talent.

To achieve this the remuneration package for Executive Directors is based upon the following principles:

•	Incentives should align the interests of executives and shareholders and reward the creation of long-term value, within a framework which enables risk to be assessed and managed;

•	There should be a clear link between required performance and achievable reward. Performance related elements should form a significant proportion of the total package;

•	The total package for on-target performance should be fully competitive in the relevant market;

•	There should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

Remuneration policy for Executive Directors
The Company’s remuneration policy for Executive Directors is determined by the Remuneration Committee and seeks to attract, retain, motivate and reward high calibre individuals, whilst maintaining a clear focus on shareholder value. This requires that ICI’s reward plans reflect the scale and the structure of reward available in those organisations with which ICI competes for talent.

To achieve this the remuneration package for Executive Directors is based upon the following principles:

•	incentives should align the interests of executives and shareholders and reward the creation of long-term value within a framework which enables risk to be assessed and managed;

•	there should be a clear link between required performance and achievable reward. Performance related elements should form a significant proportion of the total package;

•	the total package for on-target performance should be fully competitive in the relevant market; and

•	there should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

Reward components
Basic salary
Base salaries for all Executive Directors are reviewed each year and adjusted, where necessary, to recognise the individual’s role, performance, position in their salary range and experience, as well as developments in the external executive pay market. During 2005, the Remuneration Committee reviewed the principles relating to the setting of base salaries. The outcome confirmed that ICI’s base salaries should be set within ranges positioned around the mid market level for similar large international companies in the relevant national market (e.g. UK based companies form the comparator group for UK executives). Executive Directors whose base salaries, for historical reasons, are positioned above the market range would, therefore, normally receive no increase in base salary. Market pay data is supplied by independent external advisers appointed by the Remuneration Committee.

Annual Incentive Plan
The Annual Incentive Plan is designed to motivate Executive Directors towards the achievement of the annual financial and strategic goals of the Company and its businesses. The level of annual reward opportunity for target bonus is set around the market median in the relevant national markets. The financial targets are derived from the Company’s planning processes, thereby providing alignment between key annual business targets and reward.

Long-term incentives
ICI’s long-term incentives are designed to focus Executive Directors on sustainable longer-term business performance, strengthening the alignment with shareholders. Long-term incentives are provided through a Performance Growth Plan and an Executive Share Option Plan, with performance conditions tailored to the drivers of the business strategy. Together, these plans are designed to deliver competitive rewards, relative to the appropriate national markets, for improved financial performance, share price appreciation and superior shareholder returns. The Remuneration Committee will participate fully and pro-actively in a review, during 2006, to ensure that the elements comprising ICI’s long-term incentives arrangements continue to deliver the objectives of the policy.

Retirement and other benefits
The nature and scale of the Executive Directors’ benefits packages are positioned around the median of the relevant national market. The major element of the packages is the retirement benefit. Where Executive Directors participated in a defined benefit pension plan prior to October 2000 (UK) or April 2002 (USA) they retain this entitlement. Since October 2000 (UK) and April 2002 (USA) all new employees, including Executive Directors, have retirement benefits provided on a defined contribution basis or receive an equivalent cash allowance, so that the costs to ICI are stable and predictable. Where possible, plans provide flexibility and choice to increase participant commitment, and enable executives to make their own contributions in addition to those made by ICI. In this way, the Company encourages and supports its Executive Directors to play an active role in planning for their own retirement needs. It is ICI’s policy, where this is in line with local practice, to fund for its retirement benefit liabilities.

Personal shareholdings
Executive Directors and senior executives are expected to build up personal shareholdings of ICI Ordinary Shares through the retention of shares acquired via Company share-based plans.

For Executive Directors, the target level of shareholding is as follows:

	Target value of shareholding
Chief Executive	Two times base salary
Executive Directors	One times base salary

These excerpts taken from the ICI 6-K filed Mar 16, 2005.

To achieve this, the remuneration package is based upon the following principles:

•	Incentives should align the interests of executives and shareholders and reward the creation of long-term value within a framework which enables risk to be assessed and managed.

•	There should be a clear link between required performance and achievable reward. Performance related elements should form a significant proportion of the total package.

•	The total package for on-target performance should be fully competitive in the relevant market.

•	There should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

Reward components
Base salary
Base salaries for each Executive Director are reviewed each year and adjusted where necessary to recognise the individual’s role, performance and experience as well as developments in the external executive pay market. Externally, pay is reviewed against the market median for similar positions in large, international companies in the relevant national market.

Annual Incentive Plan
The Annual Incentive Plan motivates Executive Directors towards the achievement of the annual financial and strategic goals of the Company and its businesses. The level of annual reward opportunity for target bonus is set around the market median in the relevant national markets. The financial targets are derived from the Company’s planning processes so providing alignment between critical annual business targets and reward.

The target bonus opportunity for 2005 will be 50% of salary. A maximum opportunity of 100% of salary will be possible for significant over-achievement of the pre-set targets. Targets for 2005 are a mix of delivery of profit, cash flow, sales, return on capital employed and key strategic objectives. The Remuneration Committee retains discretion when determining final awards to take into account broader Company performance as well as the specific targets.

Long-term incentives
ICI’s long-term incentives focus Executive Directors on sustainable longer-term business performance and strengthen the alignment with shareholders. Long-term incentives are provided through a Performance Growth Plan (PGP) and an Executive Share Option Plan. Together, these plans are designed to deliver competitive rewards for improved and sustainable financial performance.

The PGP makes conditional awards of ICI shares to Executive Directors that are linked to performance over a fixed three-year period, measured as follows:

•	for the Chief Executive and Chief Financial Officer, the number of shares earned under the PGP will depend wholly on the Total Shareholder Return (TSR) for ICI relative to the TSRs of a group of competitor and/or comparable companies. TSR is the change in share price plus reinvested dividends;

•	for the other Executive Directors, 50% of their award will be based on the TSR performance of the Company relative to the Peer Group. The other 50% of their award will depend on the Economic Profit performance over three years of the Business for which the Executive Director is responsible. Economic Profit is based on profit after tax less a charge for the use of capital;

•	in addition, the Remuneration Committee must be satisfied that the underlying profit performance of ICI is sufficient to justify the receipt of shares under the PGP, not withstanding the relative TSR achieved.

The maximum conditional award to be made in 2005 will be 100% of base salary (200% in the case of US Directors). For the maximum awards to be paid on the TSR element, performance must be at position three or higher out of the seventeen companies in the Peer Group. For achieving median TSR performance (position nine out of seventeen), 40% of this maximum award will be paid. Awards are pro-rated between positions nine and three. No award will be paid for below median TSR performance. The Economic Profit targets for each International Business are designed to be as demanding as the TSR measure.

The shares required to make awards under the PGP are provided via a trust funded by ICI. There is no dilution of the Company’s issued share capital as the shares are purchased in the market.

The new Share Option Plan, approved by shareholders in 2004, grants options that vest and become exercisable provided demanding Earnings per Share (EPS) performance conditions are met. For the awards to be made in 2005, these targets and corresponding vesting levels will be defined relative to the achievement of specific EPS amounts in 2007. The 2007 EPS required for threshold vesting is 27.1p (a 23.7% increase on 2004 EPS), and the 2007 EPS required for maximum vesting is 31.1p.

If threshold EPS is not achieved in 2007, there will be no retesting of these conditions and the options will lapse. Further details of the vesting arrangements are contained in the full Remuneration Report which is available on request.

Options under the Plan must be held for a minimum of three years from date of grant before they can be exercised and lapse if not exercised within ten years. The shares to meet options exercised will be either bought in the market or provided by a new issue of shares.

Retirement and other benefits
The nature and scale of benefits are positioned around the median of the relevant national market. The major element is the retirement benefit. Except where “defined benefit” plans already exist for current Executive Directors, retirement benefits are provided on a “defined contribution” basis so that the costs to ICI will be stable and predictable. Where possible, plans enable executives to make their own contributions in addition to those made by ICI. It is ICI’s policy, where this is in line with local practice, to fund for its retirement benefit liabilities.

Remuneration policy for Executive Directors
The Company’s ongoing remuneration policy for Executive Directors is determined by the Remuneration Committee and seeks to attract, retain, motivate and reward high calibre individuals, whilst maintaining a clear focus on shareholder value. This requires that ICI’s reward plans reflect the scale and the structure of reward available in those organisations with whom ICI competes for talent.

To achieve this, the remuneration package is based upon the following principles:

•	Incentives should align the interests of executives and shareholders and reward the creation of long-term value within a framework which enables risk to be assessed and managed.

•	There should be a clear link between required performance and achievable reward. Performance related elements should form a significant proportion of the total package.

•	The total package for on-target performance should be fully competitive in the relevant market.

•	There should be flexibility, within clearly defined parameters, to meet critical resource needs and to retain key executives.

The Remuneration Committee seeks to take a prudent and responsible approach when applying this policy.

Reward components
Base salary
Base salaries for each Executive Director are reviewed each year and adjusted where necessary to recognise the individual’s role, performance and experience as well as developments in the external executive pay market. Externally, pay is reviewed against the market median. This data is supplied by independent external advisers appointed by the Remuneration Committee and reflects the market median for similar positions in large, international companies in the relevant national market (e.g. UK based companies form the comparator group for UK executives).

Long-term incentives
ICI’s long-term incentives focus Executive Directors on sustainable longer-term business performance and strengthen the alignment with shareholders. Long-term incentives are provided through a Performance Growth Plan and an Executive Share Option Plan. Together, these plans are designed to deliver competitive rewards, relative to the relevant national market, for improved financial performance, share price appreciation and superior shareholder returns.

Retirement and other benefits
The nature and scale of benefits are positioned around the median of the relevant national market. The major element is the retirement benefit. Where Executive Directors participated in a defined benefit pension plan prior to October 2000 (UK) or April 2002 (USA) they retain this entitlement. Since October 2000 (UK) and April 2002 (USA) all new employees, including Executive Directors, have retirement benefits provided on a defined contribution basis, so that the costs to ICI are stable and predictable. Where possible, plans provide flexibility and choice to increase participant commitment, and enable executives to make their own contributions in addition to those made by ICI. In this way, the Company encourages and supports its Executive Directors to play an active role in planning for their own retirement needs. It is ICI’s policy, where this is in line with local practice, to fund for its retirement benefit liabilities.

For Executive Directors, the target level of shareholding is as follows:

	Target value of shareholding
Chief Executive	Two times base salary
Executive Directors	One times base salary

External directorships
Executive Directors are encouraged to take one external Non-Executive directorship. In order to avoid any conflict of interest all appointments are subject to the approval of the Remuneration Committee and the Board. Directors retain payments received in respect of these appointments.

ICI ANNUAL REPORT AND ACCOUNTS 2004

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44		REMUNERATION REPORT

EXCERPTS ON THIS PAGE:

6-K (2 sections)	Mar 21, 2007

6-K (2 sections)	Mar 14, 2006

6-K (2 sections)	Mar 16, 2005

Imperial Chemical Industries (ICI)

ICI » Topics » Remuneration policy for Executive Directors

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