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Remuneration report
Including the statement of remuneration policy for the year ended 31 July 2007
The Board sets the Company’s remuneration policy. The Remuneration Committee makes recommendations to the Board, within its agreed terms of reference (available on the Company’s website, www.wolseley.com) on the Company’s framework of executive remuneration and its cost. It also determines, with agreement with the Board, specific remuneration packages for each of the Executive Directors, the Chairman, the Company Secretary and members of the Executive Committee and Executive Committee Advisory Group. The Chairman and the Executive Directors of the Board determine the remuneration of the Non Executive Directors. The committee is also responsible for the Company’s share incentive schemes for employees. The current members of the committee, all of whom are independent Non Executive Directors within the definition set out in the Code and the Revised Code, are set out in Corporate governance and the Company Secretary acts as its secretary. The committee has access to detailed external research on market data and trends from experienced independent consultants. Since 2003, the committee has sought external advice from New Bridge Street Consultants LLP and has in the past also been provided with advice by Mercer Human Resource Consulting. The Group Chief Executive, the Chairman and the Group HR Director are normally invited to attend the meetings of the committee to respond to specific questions raised by members of the committee. This specifically excludes such matters concerning the details of and any discussions relating to their own personal remuneration. The Chairman will join the committee on 31 October 2007.
The Company has followed the provisions of Schedules A and B of the Code and the Revised Code and has complied with the relevant provisions of the Companies Act 1985, as amended by the Directors’ Remuneration Report Regulations 2002.
The Directors’ report on remuneration has been received and adopted by shareholders at each of the Annual General Meetings held since 2003 and shareholders will again be invited to receive and adopt this report at the Annual General Meeting to be held on 28 November 2007.
With the exception of the description of the performance bonus arrangements, service agreement details, performance graph, disclosure of remuneration to other senior executives, executive share ownership and external directorships, the information set out below in this report, represents the auditable disclosures referred to in the Auditor's report as specified by the UK Listing Authority and under Schedule 7A of the Companies Act 1985.
Policy on remuneration of Executive Directors The Company’s policy continues to be to provide remuneration packages that fairly reward Executive Directors for the contribution they make to the business, having regard to the size and complexity of the Group’s operations and the need to attract, retain and motivate executives of the highest quality. Remuneration packages comprise salary, performance bonuses, share options, long-term incentive awards, benefits in kind and retirement benefit provisions. The Company takes all of these individual elements fully into account in adopting a total approach to remuneration. None of the variable elements of remuneration are pensionable. Each of the packages incorporates performance related elements linking both individual and company performance and strikes a balance between short and long-term elements. These packages are designed to be broadly comparable with those offered by other similar international businesses and reflect competitive practices in the countries and markets in which the Executive Directors operate.
The policy is designed to incentivise the Executive Directors to meet the Company’s financial and strategic objectives, such that a significant proportion of total remuneration is performance related. The committee considers that the targets set for the different elements of performance related remuneration are appropriate and demanding in the context of the Company’s trading environment and the business challenges it faces. The following chart shows the average of total remuneration attributable to salary, target bonus and the estimated value of long-term incentive awards and executive share options granted during the financial year to Executive Directors in office at the date of this Report:
Salaries Basic salaries are determined having regard to individual responsibility and performance and are benchmarked with market data which is derived from a group of companies selected on the basis of comparable size, geographic spread and business focus. Consideration is also given to general pay and employment conditions across the Group. The target salary is set at the median, with the opportunity to go above this level, subject to sustained individual performance. New appointments, and in particular internal promotions, will tend to move to the median over two to three years once their expertise and performance has been proven. The committee reviews the salaries of the Chairman and Executive Directors annually on 1 August, having sought the views of both the Chairman and the Group Chief Executive (other than in the case of their own salaries). The base salaries for the Chairman and Executive Directors for the financial year commencing on 1 August 2007 are as follows: J W Whybrow £350,000; C A S Hornsby $1,450,000; R H Marchbank £480,000; F W Roach $930,000; and S P Webster £540,000.
Benefits in kind These principally comprise car benefits, healthcare insurance and, in the case of Messrs Hornsby, Marchbank and Webster, relocation and housing allowances following their relocations from the USA to the UK (Messrs Hornsby and Marchbank) and from Droitwich to Theale (Mr Webster), where the Company’s head office is located. Mr Webster’s housing allowance ceased with effect from 30 April 2007. In addition, to ensure that senior executives who are US citizens are not disadvantaged as a result of paying both UK and US taxes on their income, there is a mechanism of tax equalisation, which avoids the need to increase salaries to meet any additional tax burden.