Remuneration Policy
Benefits and Contracts
Benefits Policy and Practice
Each Executive Director is provided with benefits, which principally comprise a company car (or cash in lieu), pension arrangements, paid leave, healthcare cover and preferential terms for certain Group products.
The most material benefit for Executive Directors is traditionally a pension. However, for HBOS, service-related pension accrual from and contributions to pension arrangements ceased in April 2006 for those whose pension interest then exceeded the ‘Lifetime Allowance’ – broadly equivalent to a maximum pension of £75,000 p.a.
Participants for whom pension accrual/contributions ceased receive an annual cash allowance of 25% of salary, paid monthly, in lieu. It does not count as salary for the purposes of the incentive schemes.
Contracts and Other Issues
Service contracts apply to the Chairman and to the Executive Directors.
The contract in force at the end of 2007 in respect of the Chairman extends to 30 June 2011. If the contract is terminated by the Group prior to the expiry of the term, compensation up to the equivalent of one year’s fee may be payable. Each Executive Director has a service contract which can be terminated by the Group giving one year’s notice or by the Director giving six months’ notice. If any contract is terminated by the Group, compensation up to the equivalent of one year’s salary may be payable. Executive Directors are expected to make reasonable efforts to mitigate for any loss arising from early termination of their contracts.
Non-executive Directors are appointed for three years and reappointment is not automatic.
The Group recognises that Executive Directors may be invited to become non-executive directors of other companies and that such appointments can broaden their knowledge and experience, to the benefit of the Group. Provided that it does not have any material impact on their Group duties, each Executive Director is generally encouraged to accept one such appointment and to retain any resulting fee. In certain circumstances, an Executive Director may be permitted to accept two such appointments with fees for the second appointment donated to charity.