Remuneration committee

Membership

• 1. The members, including the chairman, of the committee shall be appointed by the board, on the recommendation of the nomination committee and in consultation with the chairman of the remuneration committee. The committee shall consist of not less than three members all of whom shall be independent non-executive directors of the Company. In addition to the independent non-executive directors, the Company chairman may also be a member of the committee if he was considered independent on appointment as chairman, but may not chair the committee.

  A quorum shall be two members. In the absence of the committee chairman, the remaining members present shall elect one of themselves to the chair of the meeting.

Attendance at meetings

• 2. The chairman of the board, the group chief executive, and the group human resources director will normally attend the committee.
• 3. Other board members may attend any meeting of the committee and members of management and any advisers appointed by the committee shall attend, if invited by the committee.
• 4. The group company secretary, or his nominee, shall be the secretary of the committee.

Frequency of meetings

• 5. Meetings shall be held not less than three times each year and at such other times as the chairman of the committee shall require.

Authority

• 6. The committee is authorised by the board to:
  1. Investigate, or cause to be investigated, any activity within its terms of reference;
  2. Obtain at the Company’s expense external legal or independent professional advice from such advisers as the committee shall select, who may at the invitation of the committee attend meetings as necessary;
  3. Seek any information it requires from any employee of the Company in order to perform its duties;
  4. Despatch its business, adjourn and otherwise regulate its meetings as it shall see fit, including approving items of business by the written resolution procedure set out in the Company’s articles of association;
  5. Delegate any of its duties as is appropriate to such persons or person as it thinks fit.
• 7. The committee shall consult with the chairman of the board and the group chief executive regarding its proposals.

Duties

• 8. The duties of the committee shall be to:
  1. Review and make recommendations to the board regarding the Group’s broad policy relating to the total remuneration (and its individual components) paid to the chairman of the board, executive directors and members of senior management. The remuneration of non-executive directors shall be a matter for a recommendation to the board by the chairman and executive members of the board. No director or manager shall be involved in any decisions as to their own remuneration;
  2. Review, and within the broad policy from time to time approved by the board, determine the terms of employment and remuneration packages of the individual executive directors and the executive committee members (on the recommendation of the group chief executive), including the component parts of the package such as pensions, bonus plans, participation in grants and awards under share incentive plans, with a view to ensuring that the executive directors and executive committee members are fairly but responsibly rewarded for their individual contributions;
  3. Review, and within the broad policy from time to time approved by the board, determine the remuneration package of the chairman of the board;
  4. Monitor, and recommend to management, the level and structure of remuneration for the senior management of the Group ie the Senior Management Group 1 (SMG1);
  5. Approve any compensation packages or arrangements following the severance of any executive director’s service contract, with a view to ensuring that the executive is treated fairly but that failure is not rewarded and the duty of the director to mitigate any loss suffered by him or her as a result of the severance is appropriately embodied in the agreed terms;
  6. Review and recommend to the board acceptance of the board’s annual report to shareholders ensuring that all statutory and regulatory disclosure requirements are fulfilled;
  7. Agree a policy for authorising claims for expenses from the group chief executive and the chairman;
  8. Approve Group policies, as determined by the board from time to time, and any material amendments thereto;
  9. Be exclusively responsible for selecting, appointing, and determining the terms of reference of independent remuneration consultants appointed to advise the committee on remuneration policy, levels of remuneration, and any other issues relating to executive directors;
  10. Recommend to the board the establishment of any employee share plans, including material amendments to existing plans, which require the approval of the Company’s shareholders, and in respect of any plans so approved by the board, to approve any non-material amendments thereto;
  11. Exercise all the powers of the board in relation to the operation of any share and incentive plans – particularly the Long Term Incentive Plans, Executive Share Option Plans, and Annual Bonus Plans - including the granting of awards and options, the setting and testing of performance conditions (where appropriate) the exercise of any discretions on behalf of the board allowed under the rules of the plans, and any material amendments to the rules of the plans not requiring the approval of shareholders;
  12. Exercise all the powers of the board in relation to the operation of the Group’s SAYE Share Option Schemes, other similar schemes under which options are granted over the Company’s shares, including the making of invitations, the exercise of any discretions on behalf of the board allowed under the rules of the plans, and any material amendments to the rules of the plans not requiring the approval of shareholders;
  13. Exercise all the powers of the board in relation to the operation of the Group’s All Employee Share Ownership Plan including whether any free shares shall be granted, the exercise of any discretions on behalf of the board allowed under the rules of the plans, and any material amendments to the rules of the plans not requiring the approval of shareholders;
  14. Be available to advise the chairman or the board on any matters relating to remuneration or reward of the executive directors or senior management;
  15. Consider other topics, as from time to time referred to it by the board;
  16. To work with the risk committee to ensure that risk is properly considered in setting the overall remuneration policy for the Group and the remuneration of the executive directors and other senior executives.

Reporting procedures

• 9. The chairman of the committee shall report to the board at regular intervals on the matters it has reviewed making recommendations when requested or when he considers appropriate. The group company secretary shall circulate the minutes of the meetings of the committee to all members of the board.
• 10. The committee members shall undertake a review of the committee’s performance and these terms of reference annually and, if necessary, make recommendations to the board for approval.
• 11. The committee’s duties and activities during the year shall be disclosed in the annual report and accounts.
• 12. The chairman of the committee shall attend the Annual General Meeting of the Company and answer questions, through the chairman of the board, on the remuneration committee’s activities and their responsibilities.