HBOS Annual Report and Accounts 2004 - Report of the Board in relation to remuneration policy and practice

Report of the Board in relation to
remuneration policy and practice

Appendix 1
Remuneration Committee Terms of Reference
Principal Features

1. Remuneration Committee
The following are the terms of reference of the Remuneration Committee (‘the Committee’) of HBOS plc (‘the Company’) in relation to the Company and HBOS Group (‘the Group’).

2. Membership
The Committee is a committee of the Board of the Company and will comprise at least three Non-executive Directors of the Company, excluding the Chairman of the Company, who are independent of management and free of any business or other relationship which could interfere with the exercise of their independent judgement. The quorum of the Committee is any two Committee members.

3. Attendance
The Committee may invite persons, including the Chairman and the Chief Executive of the Company, to attend meetings where appropriate to assist in the effective discharge of the Committee’s duties.

4. Frequency of meetings
The Committee meets at least four times a year. Any Committee member or the Secretary may call additional meetings as necessary.

5. Authority
The Committee is authorised by the Board to undertake any activity within its terms of reference.

The Committee is authorised by the Board to seek appropriate professional advice and resource inside and outside the Group as and when

it considers this necessary.

6. Principal duties
The Committee:

considers and recommends to the Board remuneration policy for Executive Directors, the HBOS Executive and those in Levels 6, 7 and 8 (salary, incentive schemes, pension plans and other benefits and payments to be made on retirement, resignation or dismissal) and determines the specific remuneration arrangements for Executive Directors, the HBOS Executive and those in Level 8 and other direct executive reports to the Chief Executive;
approves the terms of appointment for and determines the specific remuneration arrangements (including the operation of any appropriate incentive schemes) for the Chairman of the Company;
approves any contract of employment or related contract with any Executive Director or with the Chairman on behalf of the Company;
operates and administers the incentive schemes of the Company for the Chairman, the Executive Directors, the HBOS Executive and those in Levels 6, 7 and 8 and any similar schemes requiring Board approval which may be introduced or approved from time to time;
approves the total cost of the salary review for Executive Directors, the HBOS Executive and others in Levels 6, 7 and 8 and approves the specific salary reviews for Executive Directors and other direct executive reports to the Chief Executive;
periodically has the opportunity to review the overall remuneration of the most highly paid colleagues in the Group;
periodically has the opportunity to review the remuneration policy for all colleagues in the Group;
determines contractual and discretionary payments, if any, to be made on the retirement, resignation or dismissal of Executive Directors and other direct executive reports to the Chief Executive;
does not determine any fees for Non-executive Directors of the Company but otherwise determines the Board fees and the Committee fees to be paid to Non-executive Directors of Group companies;
considers and recommends to the Board the contents of the Board’s annual reports to shareholders on Directors’ remuneration to be included in the Annual Report and Accounts and the Annual Review & Summary Financial Statement;
will be available in the person of the Chairman of the Committee to answer shareholders’ questions about Directors’ remuneration at the Annual General Meeting;
considers the policy and approval process for Executive Directors, the HBOS Executive and others in Levels 6, 7 and 8 taking up external non-executive director appointments; and
considers the policy and monitoring process for all Directors, the HBOS Executive and those in Levels 6, 7 and 8 holding shares in the Company.

7. Minutes
The minutes of meetings of the Committee are to be circulated to all members of the Committee and to nominated recipients within 10 business days of the meeting. The minutes are also to be circulated to members of the Board.

The full Terms of Reference of the Remuneration Committee can be found at http://www.HBOSplc.com/abouthbos/remuneration_committee.asp