Directors' Remuneration Policy
The Remuneration Policy was approved by shareholders at the Annual General Meeting held on 20 October 2017 and became effective from this date. The full Remuneration Policy as approved by shareholders is available at www.dechra.com. We have set out a summary below of those parts of the Remuneration Policy which we consider shareholders will find most useful.
Policy Table for Executive Directors:
|Element||Purpose and link to strategy||Operation||Maximum opportunity||Performance measures|
|Base Salary||Core element of fixed remuneration reflecting the individual's role and experience||Salaries are ordinarily reviewed annually taking into account a number of factors including the value of the individual, their skills and experience and performance|
The Committee also takes into consideration:
- pay increases within the Group more generally; and
- Group organisation, profitability and prevailing market conditions
|Whilst there is no maximum salary, increases will normally be within the range of salary increases awarded (in percentage of salary terms) to other employees in the Group. However, higher increases may be awarded in certain circumstances, such as:|
- on promotion or in the event of an increase in scope of the role or the individual's responsibilities;
- where an individual has been appointed to the Board at a lower than typical market salary to allow for growth in the role, in which case larger increases may be awarded to move salary positioning to a typical market level as the individual gains experience;
- change in size and complexity of the Group; and/or
- significant market movement
Such increases may be implemented over such time period as the Committee deems appropriate
|While no formal performance conditions apply, an individual's performance in role is taken into account in determining any salary increase|
|Retirement Benefits||Provide a competitive means of saving to deliver appropriate income in retirement||The Company operates a Group Stakeholder personal pension scheme|
Tony Griffin participated in a defined benefit pension plan which has been established in the Netherlands. This is a funded career average pay arrangement, where pensionable salary is subject to a €50,000 cap. Pension contributions over this cap are paid into a defined contribution pension plan.
In appropriate circumstances, an Executive Director may receive a salary supplement in lieu of contributions to a pension scheme
|The Company contributes up to 14% of salary to a pension scheme on behalf of the Executive Directors, and/or as a salary supplement in lieu of pension contributions where appropriate||Not applicable|
|Benefits||Provided on a market competitive basis||The Company provides benefits in line with market practice and includes the use of a fully expensed car (or car allowance), medical cover and life assurance scheme|
Other benefits may be provided based on individual circumstances, which may include relocation costs and expatriate allowances
|Whilst the Committee has not set an absolute maximum on the level of benefits Executive Directors may receive, the value is set at a level which the Committee considers to be appropriately positioned taking into account relevant market levels based on the nature and location of the role and individual circumstances||Not applicable|
|Annual Bonus||The executive bonus scheme rewards Executive Directors for achieving financial and strategic targets in the relevant year by reference to operational targets and individual objectives||Targets are reviewed annually and any pay-out is determined by the Committee after the year end based on targets set for the financial period|
The Committee has discretion to amend the pay-out should any formulaic output not reflect the Committee's assessment of overall business performance
Recovery provisions apply, as referred to below
|The maximum bonus opportunity for Executive Directors is 100% of base salary||Operational targets (which may be based on financial or strategic measures) and individual objectives are determined to reflect the Company's strategy|
The personal objectives for:
- the Chief Executive Officer are set by the Chairman;
- other Executive Directors are set by the Chief Executive Officer
The personal objectives are reviewed and endorsed by the Committee
At least 75% of the bonus opportunity is based on financial measures (such as profit before tax)
For financial measures, up to 15% of the maximum is earned for threshold performance, rising to up to 50% of the maximum for target performance and 100% of the maximum for maximum performance
Vesting of the bonus in respect of strategic measures or individual objectives will be between 0% and 100% based on the Committee's assessment of the extent to which the relevant metric or objective has been met
|Long Term Incentive Plan (LTIP)||The LTIP provides a clear link between the remuneration of the Executive Directors and the creation of value for shareholders by rewarding the Executive Directors for the achievement of longer term objectives aligned to shareholders' interests||Under the LTIP 2017, the Committee may grant awards as:|
- conditional shares;
- nil (or nominal cost) options;
- forfeitable shares;
- market value share options with a per share exercise price equal to the market value of a share at the date of grant; or
- cash settled equivalents (or may settle in cash a share award)
Other than in the case of 'Qualifying LTIP awards' as referred to below, market value share options will not be granted to Executive Directors
Awards will usually vest following the assessment of the applicable performance conditions, and will either:
- not be released until the end of a holding period of two years beginning on the vesting date; or
- be released at vesting so that the participant is entitled to acquire shares, but on the basis that he is not able to dispose of those shares (other than as regards sales to cover tax liabilities) until the end of the holding period
An additional payment (in the form of cash or shares) may be made in respect of shares which vest under the LTIP to reflect the value of dividends which would have been paid on those shares during the period beginning with the date of grant and ending with the release date (this payment may assume that dividends had been reinvested in Dechra shares on a cumulative basis)
Market value options may be granted under the LTIP as tax-advantaged Company Share Option Plan (CSOP) options, offering tax savings to the Group and the participant
The Committee may at its discretion structure awards as Qualifying LTIP Awards, consisting of a CSOP option and an ordinary nil-cost LTIP award, with the ordinary award scaled back at exercise to take account of any gain made on exercise of the CSOP option
Recovery provisions apply, as referred to below
|The maximum award level under the LTIP in respect of any financial year is 200% of salary|
If a Qualifying LTIP award is granted, the value of shares subject to the CSOP option will not count towards the limits referred to above, reflecting the provisions for the scale back of the ordinary LTIP award
|Performance measures under the LTIP will be based on financial measures (such as, earnings per share growth, relative total shareholder return, return on capital employed and free cash flow)|
Awards will vest as to 25% for threshold performance, increasing to 100% for maximum performance
|All Employee Share Plans||Provision of the Save As You Earn Scheme (SAYE) to Executive Directors creates staff alignment with the Group and provides a sense of ownership. Executive Directors may participate in such other all employee share plans as may be introduced from time to time||Tax qualifying monthly savings scheme facilitating the purchase of shares at a discount|
Any other all employee share plan would be operated for Executive Directors in accordance with its rules and on the same basis as for other qualifying employees
|The limit on participation and the permitted discount under the SAYE scheme will be those set in accordance with the applicable tax legislation from time to time. The limit on participation under and other relevant terms of any other all employee share plan would be determined in accordance with the plan rules (and, where relevant, applicable legislation) and would be the same for the Executive Directors as for other relevant employees||There are no performance conditions attached to awards under the SAYE|
Policy Table for Non-Executive Directors:
|Element||Purpose and link to strategy||Operation||Maximum opportunity||Performance measures|
|Fees and benefits||To provide fees within a market competitive range reflecting the experience of the individual, responsibilities of the role and the expected time commitment||The Chairman's fees are determined by the Committee and the Non-Executive Directors' fees are determined by the Board following a recommendation from both the Chief Executive Officer and the Chairman|
- are not eligible to participate in any of the Company's share schemes, incentive schemes or pension schemes;
- may be eligible to receive benefits such as travel and other reasonable expenses
|Fees are set taking into account the responsibilities of the role and expected time commitment. Non-Executive Directors are paid a basic fee with additional fees paid for:|
- the chairing of Committees;
- the role of Senior Independent Director; and
- the role of Employee Engagement Designated Non-Executive Director
Where benefits are provided to Non-Executive Directors they will be provided at a level considered to be appropriate taking into account the individual circumstances
Recruitment Remuneration Policy
When hiring a new Executive Director, the Committee will typically align the remuneration package with the above Policy. When determining appropriate remuneration arrangements, the Committee may include other elements of pay which it considers are appropriate. However, this discretion is capped and is subject to the limits referred to below.
- Base salary will be set at a level appropriate to the role and the experience of the Executive Director being appointed. This may include agreement on future increases up to a market rate, in line with increased experience and/or responsibilities, subject to good performance, where it is considered appropriate.
- Pension will only be provided in line with the above Policy.
- The Committee will not offer non-performance related incentive payments (for example a 'guaranteed sign-on bonus').
- Other elements may be included in the following circumstances:
- an interim appointment being made to fill an Executive Director role on a short term basis;
- if exceptional circumstances require that the Chairman or a Non-Executive Director takes on an executive function on a short term basis;
- if an Executive Director is recruited at a time in the year when it would be inappropriate to provide a bonus or long term incentive award for that year as there would not be sufficient time to assess performance. Subject to the limit on variable remuneration set out below, the quantum in respect of the months employed during the year may be transferred to the subsequent year so that reward is provided on a fair and appropriate basis;
- if the Director will be required to relocate in order to take up the position, it is the Company's policy to allow reasonable relocation, travel and subsistence payments. Any such payments will be at the discretion of the Committee.
- The Committee may also alter the performance measures, performance period, vesting period and holding period of the annual bonus or LTIP, subject to the rules of the LTIP, if the Committee determines that the circumstances of the recruitment merit such alteration. The rationale will be clearly explained in the next Directors' Remuneration Report.
- The maximum level of variable remuneration which may be granted (excluding 'buyout' awards as referred to below) is 300% of salary.
The Committee may make payments or awards in respect of hiring an employee to 'buyout' remuneration arrangements forfeited on leaving a previous employer. In doing so, the Committee will take account of relevant factors including any performance conditions attached to the forfeited arrangements and the time over which they would have vested. The Committee will generally seek to structure 'buyout' awards or payments on a comparable basis to the remuneration arrangements forfeited. Any such payments or awards are excluded from the maximum level of variable remuneration referred to above. 'Buyout' awards will ordinarily be granted on the basis that they are subject to forfeiture or 'clawback' in the event of departure within 12 months of joining Dechra, although the Committee will retain discretion not to apply forfeiture or clawback in appropriate circumstances.
Any share awards referred to in this section will be granted as far as possible under Dechra's ordinary share plans. If necessary and subject to the limits referred to above, recruitment awards may be granted outside of these plans as permitted under the Listing Rules which allow for the grant of awards to facilitate, in unusual circumstances, the recruitment of an Executive Director.
Where a position is filled internally, any ongoing remuneration obligations or outstanding variable pay elements shall be allowed to continue in accordance with their terms.
Fees payable to a newly appointed Chairman or Non-Executive Director will be in line with the policy in place at the time of appointment.
Policy on Service Contracts:
Details of the Executive Directors' service contracts and Non-Executive Directors' letters of appointment are set out in the Directors' Remuneration Report.
Whilst the Committee's policy is for the service contract of any newly appointed Executive Director to have a notice period of not more than 12 months, the Committee retains discretion to set an initial notice period of up to 24 months, reducing to 12 months after the initial 12 months of employment.
Remuneration Committee Chairman
2 September 2019