Components of reward
The following table summarises the current, key, fixed and
variable components of reward for executives and employees:
1 Based on headline profit (operating profit before
specific items).
2 Based on profit after interest and tax.
In a tough trading year, BBC Worldwide achieved year-on-year
growth of 13.0% in profit before tax excluding gains on disposals,
and headline profit growth of 7.9%. This result delivered 95.4% of
our stretching profit target, set by the Remuneration Committee at
£159.5m (headline profit), resulting in annual bonus awards of
78.1% of the target bonus opportunity for members of the BBC
Worldwide Executive.
Business growth notwithstanding, the Chief Executive decided
that, in the present economic climate, it would not be appropriate
to accept any increase in his total compensation this year and, to
that end, waived a significant proportion of his remuneration for
the year. Details are shown in the Remuneration table.
The diagram below illustrates the balance between fixed and
variable remuneration as percentages of total direct compensation,
before any deferral into the matching bonus scheme or remuneration
waiver, for the Executive Directors of the BBC Worldwide Board for
the current financial year. It shows that more than 50% of the
Chief Executive's remuneration is dependent on the company's
performance.
Base Salary
In determining base pay, the Committee takes into account the
base pay of organisations with which BBC Worldwide competes for
talent. It also considers individual performance, experience and
competence, the criticality of the role, its value to the business
and affordability.
The Committee reviews salaries annually. Any change in base
salary is usually effective from 1 July.
Annual base salaries of those executive Directors currently
serving on the BBC Worldwide Board as at 1 April 2012:
Annual Incentives
Annual incentives are provided through the BBC Worldwide annual
bonus Scheme in which all staff participate (other than those on
sales schemes). The Chief Executive is eligible to receive a core
bonus of up to 60% of base pay and the Chief Financial Officer is
eligible for a core bonus of up to 40% of base pay. The Chief
Executive's bonus is wholly dependent on the performance of BBC
Worldwide as this is deemed to be the most appropriate indicator of
his own performance. His bonus opportunity and targets are set and
agreed annually by the BBC Executive Remuneration Committee.
In addition, the Scheme rewards senior managers for delivering
financial performance beyond the already stretching targets. This
is self funding and achieved by creating a pool, calculated as a
percentage of profits achieved above the annual bonus target: 80%
of this pool is shared across participating members. All senior
managers (above a defined grade) are eligible to participate in
this element of the scheme. The remaining 20% is awarded on a
discretionary basis for outstanding performance. Both John Smith
and Philip Vincent are eligible to participate in this but no
payments were due under this element of the Scheme in 2011/12.
Long-Term Incentives
Bonus-matching scheme
In previous years up to 2009/10, Executive Directors could
voluntarily invest up to 75% of their annual bonus into the now
closed Long-Term Incentive Plan (LTIP) which would be eligible for
a matching award based on the subsequent performance of the
company. The final award under this plan - relating to the period
2009/10 to 2011/12 - was made in June 2012 and is disclosed in the
Remuneration table.
Although the LTIP has now been replaced, performance in respect
of this final award has been determined in accordance with the
original LTIP criteria. Two measures - profit growth (75%
weighting) and return on sales growth (25% weighting) over a
three-year period - were used to rank BBC Worldwide performance
relative to a comparator group of other international media
companies.
The comparator group (see below) was selected for its mix of
business, industry, size and geographical representation.
Matching was determined on a straight line basis with the top
ranking delivering a 100% match and the bottom ranking resulting in
the forfeit of 50% of the total amount deferred.
Since 2009/10, directors have been able to defer up to 50% of
their annual bonus for three years. The deferred amount is then
eligible for a 25% matching award at the end of three years,
subject to a cumulative return on capital employed (ROCE) threshold
of 40% over the period having been met.
Profit Share Plan
The Company's original Profit Share Plan (PSP), which covers the
five-year period beginning in 2008/09, provided participants with a
share in profits above a set of absolute profit hurdles linked to
the five-year strategic plan. Annual payments commenced after three
years of participation in the plan, with balancing payments made at
the end of the five-year period. For eligible participants, the
payments shown on the Remuneration
table will be made in June 2012. Any payment due for the final
year of the plan will be made in the summer of 2013. Any balancing
payments due will be made in 2014 and 2015.
The revised PSP, also in operation during the year, covers the
three-year period 2011/12 to 2013/14.
Profit after interest and tax is used as the basis for both
plans, as it aligns management's interests with a key measure for
the shareholder. The annual cash PSP payout is capped at 100% of
base pay for each participant.
Pension
Executive members of the Board are eligible to participate in
the BBC Pension Scheme (the Scheme), which provides for pension
benefits on a defined benefit basis. The Scheme, which has a number
of sections, operating on different bases, is now closed to new
entrants and any executives appointed to the Board and who are not
already members of the Scheme will be eligible to participate in
the BBC's defined contribution pension plan.
For an employee who joined the Scheme before 1 November 2006,
the accrual rate is 1/60th of the final pensionable salary for each
year of service, with pensionable salary being base pay only. With
effect from 1 April 2011, future increases in pensionable salary
are limited to a maximum of 1% per annum. For employees in this
group, the normal pensionable age is 60. The contribution rate for
these employees is 7.5% of pensionable salary.
For an employee who joined on or after 1 November 2006 and
before 1 December 2010, the accrual rate is 1.67% of his or her
pensionable pay for each year of service, adjusted in line with
inflation up to retirement. As before, with effect from 1 April
2011, all future increases in pensionable salary are limited to a
maximum of 1% per annum. Participating employees contribute 4% of
their pensionable salary to the Scheme. For employees in this group
the normal pensionable age is 65.
To provide a lower cost and lower risk option for the BBC,
members of the Scheme were given the opportunity to transfer to a
new Career Average Benefits section (CAB2011) for future pension
build-up, and have their accrued pension entitlement to date
deferred into the scheme. This deferred pension would build up
broadly in line with inflation. Under CAB2011 there is no 1% per
annum limit on increases in pensionable salary, and employee
contributions to the Scheme are 6%. The normal pension age is 65.
Transfers had to be made before 31 December 2011.
John Smith participates in the original defined benefit section
of the Scheme and Philip Vincent now participates in the Career
Average Benefits section (CAB2011). Philip Vincent's pensionable
earnings are now subject to a maximum cap of £127,800 (rising to
£135,000 for the 2012/13 tax year). No maximum annual cap is
applicable to John Smith who joined the BBC before 31 May 1989. The
Scheme provides for early retirement on medical grounds and life
assurance of four times life cover pensionable salary up to a
prescribed limit.
Other benefits
In addition to pension, the other main contractual benefits are
a car allowance and private health insurance.
Employment Contracts
The notice periods of Board Directors serving during the year
are detailed in the table above. These are subject to earlier
termination for cause. No payments are made to Directors on
termination other than as contractually required. If termination
arises through redundancy, Board Directors are entitled to one
month's pay for each year of continuing service, subject to a
24-month cap.
Outside Interests
Where there is no potential for conflict of interest, and with
the prior agreement of the Chair, Executive members of the Board
may hold one paid external directorship. Remuneration which arises
from directorships may be retained by the executive. This policy is
to encourage the take-up of external Non-executive appointments as
part of the Board Directors' development as well as bringing
broader business skills to BBC Worldwide.
During the year, John Smith served as a Non-executive Director
of Burberry plc, for which he received a fee of £70,000. It is
recognised that BBC Worldwide's own Non-executive Directors are
likely to have other directorships and the restriction regarding
paid external directorships applying to Executive Directors does
not apply to them.
Non-executive Directors
The BBC Non-executive Directors Zarin Patel and Mark Thompson
(who was appointed Chairman in March 2012) do not, and Nicholas
Eldred (who left the BBC on 31 October 2011) did not, receive
remuneration from BBC Worldwide for the services provided to the
Company. The other Non-executive Directors receive a fee,
determined by the BBC Trust, reflecting the complexity of the role
and the time required to execute it effectively. The fee levels are
set with reference to rates paid by other UK corporations, but at a
level such that the Non-executive Directors are not financially
dependent on BBC Worldwide. Details are provided on the Remuneration table. The fee levels are
reviewed annually on 1 September, the next review being effective
from 1 September 2012.
Robert Webb QC received a fee of £68,750 for his role as
Chairman of the Board of BBC Worldwide. This was in addition to
fees received from the BBC and from BBC Commercial Holdings in
respect of his Non-executive positions on their respective boards.
Further details are available in the BBC Annual Report and Accounts
2011/12.
Charlotte Hogg was appointed as Non-executive Director on 24
September 2010 for a fixed term of two years. Tim Weller was
reappointed on 26 April 2012 for a further two-year term.
Non-executive Directors must maintain a register of all external
interests that might be seen to affect their ability to perform
their independent duties. This register includes declarations of
all positions of employment, directorships and voluntary positions,
as well as interests of close family members if relevant, and is
approved by the BBC Worldwide Board at least annually.
Current fees of Non-executive Directors to whom a fee is payable
from 1 April 2012:
* £35,700 in respect of duties as Non-executive Director plus
£5,100 in respect of duties as Chair of the Audit Committee.
Remuneration Earned in the Year Ended 31
March 2012
2. The Matching payment shown relates to £88,000 of
annual bonus which was invested into the plan in March 2008 and was
matched at 52% in view of the company's performance over the
2008-2011 period.
3. Neil Chugani resigned as a Director on 17 June
2010 following his decision to join Shine Group. It was agreed with
immediate effect that it was no longer appropriate Mr Chugani
should continue to fulfil his operational responsibilities and he
was placed on a period of garden leave until 31 August 2010. The
disclosure reflects his remuneration up to the 31 August
2010.
4. In the context of Pension contributions Neil
Chugani's earnings are subject to a maximum annual limit of
£123,600 per annum (£123,600 for 2009/10) and in accordance with
his contractual terms he was entitled to a cash supplement of 20%
of base pay above the annual limit.
5. Philip Vincent was appointed acting CFO on 17
June 2010 and was formally appointed to the Board as CFO on 1
December 2010. His remuneration detailed in the table above
reflects his remuneration for the period since his appointment to
the Board on a pro-rata basis.
6. The BBC introduced a salary sacrifice
arrangement on 1 June 2008 for Old and New Benefits members who
joined the Pension Scheme before 1 November 2006. This arrangement
is also applicable to all Career Average Benefit members. Those
Directors indicated in the table above participated in the
arrangement. From that date, the terms and conditions of employment
were changed for those employees opting for the salary sacrifice
arrangement and as a result employee pension contributions made via
the salary sacrifice have been treated as employer contributions,
with a corresponding reduction in salary. Base salaries for
Executive Directors have not been adjusted to reflect the impact of
the salary sacrifice. The total salary sacrifice by Executive
Directors was £38,150 (£33,000 2009/10).
7. The BBC Non-executive Directors, Nicholas
Eldred, Zarin Patel and Sharon Baylay, do not receive remuneration
from BBC Worldwide for the services provided to BBC
Worldwide.
8. Ceased to be a Director on 26 November
2010.
9. Ceased to be a Director on 31 October
2010.
10. Ceased to be a Director on 31 December
2010.
11. Appointed on 24 September 2010.
12. Appointed on 26 April 2010.
1 The Chief Executive committed £107,000 or 50% of his
annual bonus into the Deferred Bonus Plan which will vest in March
2015. Annual bonus is stated net of any deferral into the matching
scheme.
2 The Matching payment shown relates to £69,000 of annual
bonus which was invested into the now closed Long Term Incentive
Plan in March 2009 and was matched at 48% in view of the company's
performance over the 2008-2012 period.
3 The BBC introduced a salary sacrifice arrangement on 1
June 2008 for Old and New Benefits members who joined the Pension
Scheme before 1 November 2006. This arrangement is also applicable
to all Career Average Benefit members. Those Directors indicated in
the table above participated in the arrangement. From that date,
the terms and conditions of employment were changed for those
employees opting for the salary sacrifice arrangement and as a
result employee pension contributions made via the salary sacrifice
have been treated as employer contributions, with a corresponding
reduction in salary. Base salaries for Executive Directors have not
been adjusted to reflect the impact of the salary sacrifice. The
total salary sacrifice by Executive Directors was £42,455 (2011:
£38,150).
4 John Smith decided that, in the present economic climate,
it would not be appropriate to accept any increase in his total
compensation this year and, to that end, waived £52,000 of his
earnings.
5 Philip Vincent was appointed as a Director on 1 December
2010. The figure for 2010-11 in the table above outlines his
remuneration only for the four-month period between the date of his
appointment to the Board and year-end.
6 The BBC Non-Executive Directors in the year, Nicholas
Eldred, Zarin Patel and Mark Thompson, did not receive remuneration
from BBC Worldwide for the services provided to BBC
Worldwide.
7 Ceased to be a Director on 31 October 2011.
8 Appointed on 24 September 2010.
9 Appointed on 12 March 2012.
10 Ceased to be a Director on 29 February 2012.
11 Appointed on 26 April 2010.