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Transcript of Governance Remuneration Report - DCC Summary dcc. · PDF fileGovernance 82 DCC plcAnnual...

  • Governance

    82 DCC plcAnnual Report and Accounts 2015

    Remuneration Report

    PerformanceDCC achieved a very strong result in the year to 31 March 2015, with operating profit growth in each of the four divisions and overall Group operating profit from continuing activities being 10.5% ahead of the prior year (11.9% on a constant currency basis). Adjusted earnings per share grew by 9.8% on a continuing basis and it is proposed that the dividend for the year will be increased by 10%.

    Return on capital employed, a key metric for DCC, increased to 18.9% from 16.3% in the prior year, and is again substantially in excess of the Groups cost of capital.

    DCC has generated a total shareholder return of 177.0% over the last five years and 339.6% over the last ten years as demonstrated in the charts on page 83.

    BonusesThe bonuses earned by the executive Directors in respect of the year ended 31 March 2015 are set out on page 93. They primarily reflect the growth of 9.4% in Group adjusted earnings per share in the year and achievement of a range of developmental and personal objectives. The bonuses earned represent approximately 64% of the bonus potential for the year for the executive Directors.

    Long Term Incentive PlanAmendments to Long Term Incentive PlanAt the 2014 Annual General Meeting, shareholders approved a series of amendments to the DCC plc Long Term Incentive Plan 2009 (LTIP) relating to the quantum of awards, the performance conditions, the vesting period and threshold vesting levels. Full details of the amendments were set out in the Remuneration Report in the 2014 Annual Report.

    The awards made to the executive Directors in November 2014, as set out on page 98, were made under the amended LTIP.

    Vesting of LTIP AwardsIn December 2014, the Remuneration Committee determined that 59.4% of the share options granted in November 2011 under the LTIP had vested, based on performance under the TSR and EPS conditions (this was the same as the estimated vesting of 59.4% included in last years Report). Further details on this vesting are set out on page 95.

    IntroductionDear Shareholder,

    As Chairman of DCCs Remuneration Committee, I am pleased to present the Remuneration Report for the year ended 31 March 2015 which has been prepared by the Committee and approved by the Board.

    The responsibilities of the Remuneration Committee are summarised in the table on page 83 and are set out in full in its Terms of Reference, which are available on the DCC website www.dcc.ie.

    DCCs Remuneration Policy seeks to incentivise executive Directors and other senior Group executives to create shareholder value and consequently their remuneration is weighted towards performance related elements with targets incentivising delivery of strategy over the short and long term. The full Remuneration Policy, which was approved by shareholders at the 2014 Annual General Meeting and remains unchanged, is set out on pages 84 to 91.

    The Remuneration Committee comprises three independent non-executive Directors, Leslie Van de Walle (Chairman), David Byrne and Pam Kirby and the Chairman of the Board, John Moloney. The members of the Committee have significant financial and business experience, including in the area of executive remuneration. Further biographical details regarding the members of the Remuneration Committee are set out on pages 70 to 71.

  • Financial Statements

    Supplementary Inform

    ationG

    overnanceStrategic Report

    83DCC plcAnnual Report and Accounts 2015

    Remuneration Policy 2014

    Remuneration Report 2014

    Remuneration Report 2013

    Remuneration Report 2012

    Remuneration Report 2011

    Remuneration Report 2010

    Remuneration Report 2009

    % For % Against

    98.9

    99.2

    98.6

    99.9

    99.8

    99.9

    99.90.1

    0.1

    0.2

    0.1

    1.4

    0.8

    1.1

    AGM Votes

    DCCs TSR Vs the FTSE 350 since 1 April 2010

    100

    50

    0

    200

    150

    300

    250

    2010 2011 2012 2013 2014 2015

    DCCs TSR Vs the FTSE 350 since 1 April 2005

    100

    300

    200

    500

    400

    20102009200820072005 2006 2011 2012 2013 2014 2015

    DCC FTSE 350

    0

    The charts above show the growth of a hypothetical 100 holding in DCC plc shares since 1 April 2010 and 1 April 2005 respectively, relative to the FTSE 350 index.

    The extent of vesting of the share options granted in November 2012 will be determined by the Remuneration Committee in December 2015. It is currently estimated that 100% of the share options granted will vest.

    Further details in relation to the LTIP are set out on page 86.

    Format of Report and Shareholder VotesIn last years report, I noted that in October 2013, the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the UK Regulations) came into effect in the UK. While DCC, as an Irish incorporated company, is not subject to these regulatory requirements, we recognised that they represented best practice in remuneration reporting and, given our listing on the London Stock Exchange, we substantially applied the UK Regulations to the 2014 Remuneration Report on a voluntary basis and have adopted the same approach in respect of this years Report.

    At the 2014 Annual General Meeting, separate resolutions on the Remuneration Policy and on the Annual Report on Remuneration were put to shareholders, on an advisory rather than on a binding basis. Both resolutions were passed by shareholders. The results of the votes are summarised in the chart below and set out in detail in the table on page 100.

    The Annual Report on Remuneration, as set out on pages 92 to 99, will be put to an advisory vote by shareholders at the 2015 Annual General Meeting. As the Remuneration Policy remains unchanged since last year, it is not required, in accordance with the UK Regulations, to be put to shareholders at the 2015 Annual General Meeting.

    It is our intention to operate in line with the approved Policy. We welcome and will consider any shareholder feedback on the Remuneration Policy and Annual Report on Remuneration.

    ConclusionI am satisfied that the Remuneration Committee has implemented the Groups existing remuneration policy in the year ended 31 March 2015 in a manner that properly reflects the performance of the Group in the year.

    On behalf of the Remuneration Committee.

    Leslie Van de WalleChairman, Remuneration Committee18 May 2015

    Role and Responsibilities

    To determine and agree with the Board the policy for the remuneration of the Chief Executive, other executive Directors and certain Group senior executives (as determined by the Committee).

    To determine the remuneration packages of the Chairman, Chief Executive, other executive Directors and senior executives, including salary, bonuses, pension rights and compensation payments.

    To oversee remuneration structures for other Group and subsidiary senior management and to oversee any major changes in employee benefits structures throughout the Group.

    To nominate executives for inclusion in the Companys long term incentive schemes, to grant options or awards under these schemes, to determine whether the criteria for the vesting of options or awards have been met and to make any necessary amendments to the rules of these schemes.

    To ensure that contractual terms on termination or redundancy, and any payments made, are fair to the individual and the Company. To be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any

    remuneration consultants who advise the Committee. To obtain reliable, up to date information about remuneration in other companies of comparable scale and complexity. To agree the policy for authorising claims for expenses from the Directors.

  • Governance

    84 DCC plcAnnual Report and Accounts 2015

    Remuneration Report Continued

    Remuneration Policy ReportDCCs Remuneration Policy (the Policy), which was approved by shareholders at the 2014 Annual General Meeting, was set out in full in the 2014 Annual Report and is reproduced below, subject only to the updating of the Scenarios Charts on page 90 and page and other minor references.

    As an Irish incorporated company, DCC is not required to comply with the UK legislation which requires UK companies to submit their remuneration policies to a binding shareholder vote. However, we recognise the need for our remuneration policies, practices and reporting to reflect best corporate governance practice and therefore we submitted the Policy to an advisory, non-binding vote at the 2014 Annual General Meeting.

    As the Remuneration Policy remains unchanged since last year, it is not required, in accordance with the UK Regulations, to be put to shareholders at the 2015 Annual General Meeting. The Company intends to operate its remuneration arrangements in line with the approved Remuneration Policy.

    The Policy is designed and managed to support a high performance and entrepreneurial culture, taking into account competitive market positioning.

    The Board seeks to align the interests of executive Directors and other senior Group executives with those of shareholders, within the framework set out in the UK Corporate Governance Code. Central to this policy is the Groups belief in long-term, performance based incentivisation and the encouragement of share ownership.

    The basic policy objective is to have overall remuneration reflect performance and contribution, while having basic pay rates and the short term element of incentive payments at the median of a market capitalisation comparator group.