Report of the Board in relation to remuneration policy and practice
continued
10. Directors’ remuneration for the year ended 31 December 2006
10.1 Emoluments
Table 1a below has been prepared in accordance with regulatory requirements in respect of Directors’ remuneration for the year ended 31 December 2006.
Table 1a
| Notes | Salary including fees & further remu- neration | Taxable benefits and allow- ances | Annual cash incentive for 2006 | Deferred share incentive for 2003 | Total year ended 31.12.06 | Comparative total year ended 31.12.05 | Total year ended 31.12.06 excl. the pension allow- ance |
Total year ended 31.12.05 excl. the pension allow- ance |
|
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||
| Chairman | |||||||||
| Dennis Stevenson | 4 | 628 | – | – | – | 628 | 563 | 628 | 563 |
| Executive Directors | |||||||||
| Peter Cummings | 1,2,3,7,8,9 | 547 | 119 | 825 | 16 | 1,507 | – | 1,402 | – |
| Jo Dawson | 2,3,7,8 | 303 | – | 211 | – | 514 | – | 514 | – |
| Benny Higgins | 1,2,3,7,8 | 517 | 104 | 435 | – | 1,056 | – | 952 | – |
| Phil Hodkinson | 1,2,6,7,8,9 | 602 | 127 | 428 | 150 | 1,307 | 1,006 | 1,193 | 1,006 |
| Andy Hornby | 1,2,6,7,8,9 | 787 | 177 | 606 | 180 | 1,750 | 1,298 | 1,597 | 1,298 |
| Colin Matthew | 1,2,8,9 | 567 | 126 | 400 | 150 | 1,243 | 976 | 1,136 | 976 |
| Non-executive Directors | |||||||||
| Charles Dunstone | 5 | 75 | – | – | – | 75 | 66 | 75 | 66 |
| Sir Ron Garrick | 5 | 213 | – | – | – | 213 | 183 | 213 | 183 |
| Anthony Hobson | 5 | 250 | – | – | – | 250 | 204 | 250 | 204 |
| Sir Brian Ivory | 5 | 142 | – | – | – | 142 | 129 | 142 | 129 |
| Karen Jones | 3,5 | 62 | – | – | – | 62 | – | 62 | – |
| Coline McConville | 5 | 111 | – | – | – | 111 | 92 | 111 | 92 |
| Kate Nealon | 5 | 138 | – | – | – | 138 | 105 | 138 | 105 |
| David Shearer | 5 | 109 | – | – | – | 109 | 89 | 109 | 89 |
| Former Directors | |||||||||
| Sir James Crosby | 1,3,6,7,9 | 510 | 104 | 354 | 264 | 1,232 | 1,727 | 1,159 | 1,727 |
| George Mitchell | 3 | – | – | – | – | – | 1,118 | – | 1,118 |
| Mark Tucker | 1,3 | – | – | – | – | – | 340 | – | 197 |
| John Maclean | 3 | – | – | – | – | – | 73 | – | 73 |
| Total | 5,561 | 757 | 3,259 | 760 | 10,337 | 7,969 | 9,681 | 7,826 | |
Notes to Table 1a
Note 1:
The table includes in ‘taxable benefits and allowances’ the non-pensionable cash allowances of 25% of salary, payable monthly, to those Executive Directors who have no service-related accrual of pension benefits. The allowances paid in 2006, which generally relate to nine month periods, were: Sir James Crosby £72,917 (four months), Peter Cummings £105,417, Benny Higgins £104,167 (eight months), Phil Hodkinson £114,479, Andy Hornby £152,708 and Colin Matthew £107,292. The allowance paid in 2005 to Mark Tucker was £142,647 on terms set out in last year’s report. Comparative year end totals excluding the non-pensionable cash allowances are also detailed.
Note 2:
The annual cash incentive amounts, approved by the Committee, relate to performance under the short term incentive plan in 2006 against targets for EPS and ROE and profitability. The target cash incentive was 50% of salary and the maximum cash incentive was 75% of salary. The actual cash incentive outcome for 2006 was 69.65% of salary. Both the target cash incentive level and the actual cash incentive outcome exclude the additional incentive arrangements for Peter Cummings. Annual cash incentive figures exclude potential sharekicker enhancements for any element of the incentive taken in shares. Details of potential sharekicker enhancements from earlier years are set out in Table 5a and Table 5b. The deferred share incentive amounts, approved by the Committee, relate to the release, during 2006, of the additional shares under sharekicker as set out in Table 5a and Table 5b.
Note 3:
Peter Cummings was appointed as an Executive Director on 1 January 2006. His contract, incentives and benefits are in a form comparable to that for existing Executive Directors except that he has an additional short term incentive plan as described in Section 7.3.
Jo Dawson was appointed as an Executive Director on 1 May 2006. Her contract, incentives and benefits are in a form comparable to that for existing Executive Directors.
Benny Higgins was appointed as an Executive Director on 1 May 2006. His contract, incentives and benefits are in a form comparable to that for existing Executive Directors except that he has certain temporary components of his remuneration which compensate for remuneration lost when leaving his previous employer. The table includes an amount of £100,000 (column 3) paid to him when he joined the Group; and includes an amount of £145,000 (column 5) which represents the backdating of his incentive to the start of 2006. Table 6a gives details of other temporary components of his remuneration.
Karen Jones was appointed a Non-executive Director on 24 January 2006.
Sir James Crosby retired as an Executive Director on 31 July 2006. He participated in the first element of the short term incentive plan, as described in Section 7.3, for the first seven months of 2006. He did not participate in the second element of the short term incentive plan, as described in Section 7.3; nor did he participate in the long term incentive plan starting in 2006, as described in Section 7.4. He received no pension enhancement and no termination payment.
George Mitchell, Mark Tucker and John Maclean ceased to be Directors in 2005 based on terms set out in last year’s report.
Note 4:
The fee payment to Dennis Stevenson comprises payments made to him personally in respect of his service as Chairman of the Group of £627,500 (2005 - £562,500).
Note 5:
From 1 May 2005 the basic Board membership fee payable to Non-executive Directors was at a rate of £50,000 p.a. and from 1 May 2006 it was increased to a rate of £57,750 p.a. The basic Board membership fee covers the range of duties and responsibilities associated with Non-executive Directorship, including attending Board meetings and the Annual General Meeting.
The figures shown in the table above also include fees for services on committees of the Board, details of which are set out in the Corporate Governance Report on pages 93 to 98. The levels of fees for some Non-executive Directors reflect the significant time spent by them on such committee duties.
The figures shown in the table above also include fees for services as Directors of subsidiaries and joint ventures; and for services on other committees. The fees in relation to these subsidiaries, joint ventures and other committees were as follows:
Table 1b
| 2006 £000 |
2005 £000 |
|
| Charles Dunstone | 20 | 17 |
| Sir Ron Garrick | - | - |
| Anthony Hobson | 116 | 85 |
| Sir Brian Ivory | 34 | 33 |
| Karen Jones | - | - |
| Coline McConville | 20 | 17 |
| Kate Nealon | 59 | 40 |
| David Shearer | 30 | 26 |
| John Maclean | - | 55 |
| Total | 279 | 273 |
Note 6:
The salaries shown for Sir James Crosby, Phil Hodkinson and Andy Hornby are the amounts of salary they would have received had they not given up £5,718, £5,441 and £4,488, respectively, as additional pension contributions. Short term incentives, long term incentives and pension entitlements have been calculated by reference to salaries prior to the reductions for additional pension contributions.
Note 7:
Certain Executive Directors are non-executive directors of other companies. Their roles and fees were as follows:
Sir James Crosby was a Non-executive Director of ITV plc during 2006 for which he received fees until his retirement from HBOS on 31 July 2006 (which he retained) of £29,167.
Sir James Crosby was a Non-executive Director of the Financial Services Authority during 2006 for which he received fees until his retirement from HBOS on 31 July 2006 of £17,396 which he donated to charity.
Sir James Crosby was a Non-executive Director of St. James’s Place plc during 2006. The fees were paid directly to HBOS and not to him personally. Sir James Crosby resigned as a Non-executive Director on 31 May 2006.
Andy Hornby was a Non-executive Director of GUS plc (until 10 October 2006)/Home Retail Group plc (from 11 October 2006) for which he received fees (which he retains) of £37,225. In addition, the annual rate of share based fee (which he retains) is 2,500 ordinary shares in GUS plc, and an amount of £14,937 (in lieu of ordinary shares in Home Retail Group plc).
Andy Hornby and Jo Dawson were appointed Non-executive Directors of St James’s Place plc on 31 May 2006. The fees are paid directly to HBOS and not to them personally.
Phil Hodkinson was appointed a Non-executive Director of BT Group plc on 1 February 2006 for which he received fees (which he retains) of £48,333. Phil is also a Director of Business in the Community for which he received no fees.
Jo Dawson was appointed to the Association of British Insurers on 12 July 2006. No fees are paid.
Peter Cummings was a Director of The Maggie Keswick Jencks Cancer Caring Centres during 2006. No fees are paid.
Benny Higgins was appointed a Non-executive Director of Sainsbury’s Bank plc on 2 May 2006. No fees are paid.
Benny Higgins was appointed a Non-executive Director of Visa Europe Limited on 12 May 2006 for which he received fees (which he retains) of Euro 10,000.
Note 8:
The annual cash incentives for 2006 may be applied, if participants so choose, to buy shares in March 2007 under the arrangements described in Section 7.4. The deferred share incentives for 2003 are the values of additional shares released in 2006 if participants chose to buy shares in March 2003 with their annual cash incentive under the arrangements described in Section 10.3.2.
Note 9:
Taxable benefits and allowances comprise the benefits in kind values of company cars, healthcare, additional life assurance, concessionary rate mortgages and, where relevant, a contribution towards the cost of providing distant accommodation, away from the Executive Directors’ primary residential area, as well as the amounts referred to in Note 1.
Note 10:
The table does not include any notionally accrued cash incentive amounts relating to the second element of the short term incentive plans described in Section 7.3. The first cycle of this scheme covers 2006-2007 and there is no entitlement to any accrued cash incentive amount relating to performance in 2006.
