The Directors' Remuneration Policy as set out below will be put to a binding shareholder vote at the AGM to be held on 3 June 2019 and will apply for a period of three years from the date of approval. Subject to shareholder approval, the policy replaces the policy approved at the AGM on 5 June 2017.
At the time of writing, the Remuneration Committee is in the process of consulting with major shareholders on the principal terms of the new Remuneration Policy. In the notice to be published in advance of the AGM we will confirm whether any amendments to the policy have been agreed following the consultation exercise and, if so, the resulting changes to the policy as set out below.
The table below sets out each element of remuneration for Executive Directors and how it supports the Company's short and long-term strategic objectives.
The Remuneration Committee is responsible for determining the Remuneration Policy for the Executive Directors, the Chairman and other senior executives for current and future years. In setting the policy, the Committee has sought to ensure that it is sufficiently flexible to take account of future changes in the Company's business environment and in executive remuneration practices. The policy is designed around the following key principles:
- Alignment with the long-term interests of shareholders;
- Competitive remuneration which is set at an appropriate level to attract, retain and motivate executive management of the quality required to help ensure growth and success as the Company enters its next stage of development operating in a listed company environment;
- Strategic alignment, having regard to the risk appetite of the Company and alignment to the Company's long-term strategic goals;
- Encourage and support a high performance culture with appropriate reward for superior performance; and
- Avoid creating incentives that will encourage excessive risk-taking or unsustainable Company performance.
The Remuneration Committee will review annually the remuneration arrangements for the Executive Directors and key senior management, drawing on trends and adjustments made to all employees across the Group and taking into consideration:
- Business strategy over the period;
- Overall corporate performance;
- Market conditions affecting the Company;
- The recruitment market;
- Changing practice in the markets where the Company competes for talent; and
- Changing views of institutional shareholders and their representative bodies.
Changes to the policy
The policy as set out below incorporates a number of changes to the policy approved by shareholders in 2017. These changes are listed below:
- The maximum individual opportunity under the annual bonus scheme has been increased to 125% of basic salary to provide an appropriate level of flexibility over the period covered by the new policy. As set out in the Annual Statement by the Chairman of the Remuneration Committee, bonuses for the Executive Directors for 2019 will be limited to 100% of basic salary.
- We have amended the wording around grant levels under the EIP to avoid any confusion about potential maximum vesting levels. The normal maximum level of EIP grant is confirmed at 225% of basic salary. We no longer refer to 150% vesting levels on base awards.
- In line with standard market practice, we no longer include the specific EIP performance targets within the policy table. The specific targets are disclosed within the Annual Report on Remuneration.
- The amount of an EIP award which vests for threshold performance has been reduced from 66.7% to 25% of an award, which is consistent with standard investor expectations and market practice.
- A post-vesting holding period has been introduced to EIP awards (applying with effect from the EIP awards granted in 2019) such that any shares which vest must be held for a further two-year period. During this period the shares cannot be sold (other than as required for tax purposes).
- We have added wording to the policy to ensure that the Remuneration Committee has the ability to use its discretion to override the formulaic outcomes of incentive schemes.
- Malus and clawback provisions have been reviewed and we have expanded (in the Annual Report on Remuneration) the circumstances in which they apply.
- We have taken the opportunity to review the full policy statement and ensure that the wording is up to date and aligned with expected market practice.
- The section on share ownership guidelines has been streamlined. We make it clear in the Annual Report on Remuneration that the share ownership guidelines are now set at 200% of basic salary for all Executive Directors (previously, the level of ownership guideline varied from 100-200% of salary depending on the individual Director's shareholding).
- The policy reflects amendments to the service agreements for the Executive Directors. Joe Anderson entered into a new service agreement with the Company following his reappointment as CEO which is terminable on 12 months' notice by the Company and six months' notice by the Director. James Rawlingson's service agreement has been amended and is now terminable on 12 months' notice by the Company or the Director.
- For Non-Executive Directors, we have reflected Arix's previous practice of awarding shares up to the value of the annual fee at the time of appointment. This is intended to help create alignment with shareholders and to cover the duration of the Director's time on the Board.
Remuneration policy table
|Element of Remuneration||How it supports the Company's short and long-term strategic objectives||Operation||Opportunity and Performance metrics|
Provide salaries that support the Company to acquire and retain the highly qualified Executive Directors who are needed to develop and implement the Group's strategy.
An Executive Director's basic salary is set on appointment and reviewed annually or when there is a change in position or responsibility.
When determining an appropriate level of salary, the Committee considers:
- individual degree of responsibility;
- the general operational performance of the Group and individual performance (if applicable);
- the economic environment and the sustainable development of the Group;
- remuneration structures in companies that are comparable in terms of business activities, complexity and size;
- any change in scope, role and responsibilities; and
- remuneration practices within the Group.
The Committee ensures that maximum salary levels are positioned with consideration for:
- the need to acquire and retain Executives with the skills and experience to develop and implement the Company's strategy;
- companies that are comparable in terms of business activities, complexity and size to Arix, which we would compete for talent against.
In general, increases for Executive Directors will be in line with the increase for employees.
The Group will set out in the section headed Implementation of Remuneration Policy, in the following financial year, the salaries for that year for each of the Executive Directors.
Provides a benefits package in line with standard market practice to enable the Group to recruit and retain Executive Directors with the experience and expertise to deliver the Group's strategy.
The Executive Directors are eligible to receive private health cover, life assurance, income protection and a company car or car allowance.
The Committee recognises the need to maintain suitable flexibility in the benefits provided to ensure it is able to support the objective of attracting and retaining personnel in order to deliver the Group strategy. Additional benefits may therefore be offered, such as relocation allowances on recruitment and reasonable tax advice and filing support.
The maximum will be set at the cost of providing the benefits described.
Provides a pension provision in line with standard market practice to enable the Company to recruit and retain Executive Directors with the experience and expertise to deliver the Group's strategy.
The Group operates a defined contribution (DC) scheme for UK employees and US employees contribute into the Arix 401(k) pension scheme (which is open to all employees) with a contribution made by Arix alongside an employee's contribution.
The maximum contribution for UK employees into a defined contribution plan or a salary supplement in lieu of pension will be 10% of gross basic salary.
US employees contribute into the Arix 401(k) pension scheme with a matching contribution made by Arix on their contributions up to the US government limits imposed on the 401(k) Plan.
The Group will set out in the Annual Report on Remuneration the pension contributions for the Executive Directors within the above limits. No Executive Directors have a prospective entitlement to a Defined Benefit Pension.
The bonus plan provides a significant incentive to the Executive Directors linked to achievement in delivering goals that are closely aligned with the Company's strategy and the creation of value for shareholders.
In particular, the plan supports the Company's objectives allowing the setting of annual targets based on the business strategy at the time, meaning that a wider range of performance metrics can be used that are relevant and achievable.
The Board will determine the bonus to be delivered following the end of the relevant financial year.
The Committee can require part of any bonus (up to 50% of the maximum bonus earned) to be deferred on a post-tax basis and invested into shares. These shares must be held for a minimum period, normally three years.
The Group will set out in the Remuneration Report in the following financial year the decisions taken around any requirement to invest in shares.
The bonus plan includes malus and clawback provisions which can be used in certain specific circumstances.
The maximum bonus deliverable under the plan will not exceed 125% of a participant's annual base salary.
Bonus targets and weightings are set each year and will take into account the strategic priorities of the business at the time. The Group will set out in the Remuneration Report in the following financial year, the nature of the targets and their weighting for the year.
Details of the performance conditions, targets and their level of satisfaction for the year being reported on will be set out in the Annual Report on Remuneration.
Percentage of bonus maximum earned for levels of performance:
On target: 50%
|Long-Term Incentive Plan ("EIP")|
The purpose of the EIP is to incentivise and reward Executive Directors in relation to long-term performance and achievement of Group Strategy.
This will better align Executive Directors' interests with the long-term interests of the Group and will also act as a retention mechanism.
The Award is designed to incentivise Executive Directors to grow the investment portfolio and value creation by successfully delivering the Group's strategy.
Awards are granted annually to Executive Directors in the form of a conditional share award, nil cost option or restricted share award.
Details of the performance conditions for grants made in the year will be set out in the Annual Report on Remuneration.
These awards will vest after three years subject to:
- the Executive Director's continued employment at the date of vesting; and
- satisfaction of the performance conditions.
The Committee may award dividend equivalents on awards in either shares or cash to the extent that these vest.
With effect from the EIP awards granted in 2019, a post-vesting holding period will apply to awards such that any shares which vest must be held for a further two-year period. During this period the shares cannot be sold (other than as required for tax purposes).
Normal maximum value of 225% of salary p.a. based on the market value at the date of grant set in accordance with the rules of the Plan.
In exceptional circumstances the Committee may grant an award with a maximum of 300% of salary.
The amount payable for threshold performance is 25% of maximum of the award.
EIP awards will be subject to the achievement of challenging performance conditions set by the Remuneration Committee prior to each grant. Awards granted in 2019 will be subject to performance measures based on absolute share price and NAV per share growth.
The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance measures part way through a performance period if there is a significant and material event which causes the Remuneration Committee to believe the original measures, weightings and targets are no longer appropriate. Any changes made and the exceptional circumstances will be clearly disclosed to shareholders in the Annual Report on Remuneration
|Minimum Shareholding Requirement|
The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to these guidelines is a condition of continued participation in the equity incentive arrangements. This policy ensures that the interests of Executive Directors and those of shareholders are closely aligned.
The Committee will determine the relevant shareholding guideline on an annual basis.
|Non-Executive Director Fees|
Provides a level of fees to support recruitment and retention of high- calibre Non-Executive Directors with the necessary experience to advise and assist with establishing and monitoring the Group's strategic objectives.
The Board as a whole is responsible for setting the remuneration of the Non-Executive Directors. The Remuneration Committee is responsible for setting the pay of the Chairman. Non-Executive Directors are paid an annual fee and additional fees for chairmanship of committees.
Fees are normally paid in cash. In addition, to create alignment with shareholders and to cover the duration of their time on the Board, Non-Executive Directors may be issued with shares up to the value of their annual fee at the time of their appointment. The Company may settle any tax incurred in relation to these shares. The shares must be held for the duration of their period on the Board.
Fees are reviewed annually based in line with the review policy for the Executive Directors. With the exception of an EIP award to be made to the Chairman in 2019 (as disclosed in the Annual Statement from the Chairman of the Remuneration Committee), Non-Executive Directors do not participate in any variable remuneration arrangements. Non-Executive Directors may be eligible for benefits such as use of secretarial support or other benefits which may be appropriate for performing their duties.
In general, the level of fee increase for the Non-Executive Directors will be set taking account of any change in responsibility and will take into account the general rise in salaries across the UK workforce.
The Company will pay reasonable business-related expenses incurred by the Non-Executive Directors and may settle any tax incurred in relation to these.
Performance conditions and target-setting
Performance measures applying to the annual bonus plan and the EIP are chosen by the Remuneration Committee on an annual basis taking into account the strategic priorities of the business. The chosen measures and the specific targets are designed to be consistent with the policy principles as set out in the Directors' Remuneration Report. Full details of the performance conditions applying to any year's awards are set out in the Annual Report on Remuneration.
Any historic awards that were granted under any previous share schemes operated by the Group but remain outstanding, remain eligible to vest. See the Annual Report on Remuneration for details of outstanding share awards.
Malus and Clawback
The annual bonus plan and the EIP include malus and clawback provisions. Malus is the adjustment of unpaid bonus awards under the bonus plan and outstanding EIP awards as a result of the occurrence of one or more specific circumstances. The adjustment may result in the value being reduced to nil. Clawback is the recovery of payments or vested awards under the bonus plan and vested EIP awards as a result of the occurrence of one or more specific circumstances. Clawback may apply to all or part of a participant's award and may be effected, among other means, by requiring the transfer of shares, payment of cash or reduction of awards or bonuses.
The circumstances in which malus and clawback could apply are set out in the Annual Report on Remuneration. The table below indicates the timeframe over which malus and clawback are applicable.
Up to the date of payment of a bonus
To the end of the three-year vesting period
Three years following determination of bonus
Two years post vesting
The Committee believes that the rules of the Plans provide sufficient powers to enforce malus and clawback where required.
The Remuneration Committee has discretion in several areas of Policy as set out in this report. The Remuneration Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules. In addition, the Remuneration Committee has discretion to amend the Policy with regard to minor or administrative matters where it would be, in the opinion of the Remuneration Committee, disproportionate to seek or await shareholder approval.
In addition, and as set out in the Annual Statement from the Chairman of the Remuneration Committee, the Committee retains the discretion to override the formulaic outcomes of incentive schemes. The purpose of this discretion is to ensure that the incentive scheme outcomes are consistent with overall Company performance and the experience of shareholders.
The Group's principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive Directors, as set out in the Remuneration policy table above. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred candidate with the appropriate calibre and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short-term or long-term incentive payments as well as giving consideration for the appropriateness of any performance measures associated with an award.
The Group's detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below.
|Remuneration element||Recruitment policy|
|Salary, Benefits and Pension|
These will be set in line with the policy for existing Executive Directors.
Maximum annual participation will be set in line with the Group's policy for existing Executive Directors and will not exceed 125% of salary.
Maximum annual participation will be set in line with the Group's policy for existing Executive Directors and will not exceed 225% of salary in normal circumstances and 300% of salary in exceptional circumstances.
|"Buy Out" of incentives forfeited on cessation of employment|
Where the Committee determines that the individual circumstances of recruitment justifies the provision of a buyout, the equivalent value of any incentives that will be forfeited on cessation of an Executive Director's previous employment will be calculated. This will take into account, among other things, the performance conditions attached to the vesting of these incentives, the likelihood of vesting and the vehicle of awards. The Committee may then grant up to the same value as the lapsed value, where possible, under the Company's incentive plans. To the extent that it was not possible or practical to provide the buyout within the terms of the Company's existing incentive plans, a bespoke arrangement would be used.
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned.
These would be disclosed to shareholders in the remuneration report for the relevant financial year.
The Company's policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current Non-Executive Directors.
Payment for Loss of Office
The Committee will honour Executive Directors' contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There is no agreement between the Company and its Executive Directors providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an Executive Director's office or employment.
|Remuneration element||Treatment on Cessation of Employment|
|Salary, Benefits and Pension|
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Joe Anderson's contract provides that, if terminated by the Company, he will receive a payment in lieu of notice for a minimum of six of the months of his 12-month notice period.
Good Leaver Reason
- Performance conditions will be measured at the bonus measurement date. Bonus will normally be prorated for the period worked during the financial year.
- No bonus payable for year of cessation
The Committee has the following elements of discretion:
- To determine that an executive is a good leaver. It is the Committee's intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders; and
- To determine whether to prorate the bonus to time. The Remuneration Committee's policy is that it will prorate bonus for time. It is the Remuneration Committee's intention to use discretion to not prorate in circumstances where there is an appropriate business case which will be explained in full to shareholders.
- Prorated to time and performance in respect of each subsisting EIP award
- Lapse of any unvested EIP awards.
The Committee has the following elements of discretion:
- To determine that an executive is a good leaver. It is the Committee's intention to only use this discretion in circumstances where there is an appropriate business case which will be explained in full to shareholders;
- To measure performance over the original performance period or at the date of cessation. The Committee will make this determination depending on the type of good leaver reason resulting in the cessation; and
- To determine whether to prorate the maximum number of shares to the time from the date of grant to the date of cessation. The Remuneration Committee's policy is that it will prorate awards for time. It is the Remuneration Committee's intention to use discretion to not prorate in circumstances where there is an appropriate business case which will be explained in full to shareholders.
|Other contractual obligations|
There are no other contractual provisions other than those set out above agreed prior to 27 June 2012, the date at which the new regime of Directors' Remuneration Report obligations applies.
A good leaver reason is defined as cessation in the following circumstances:
- ill health;
- injury or disability;
- employing company ceasing to be a Group company;
- transfer of employment to a company which is not a Group company; and
- at the discretion of the Committee (as described above).
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
Change of Control
|Name of Incentive Plan||Change of Control||Discretion|
Normally prorated to time and performance to the date of the change of control.
The Committee has discretion regarding whether to prorate the bonus to time.
The Committee's policy is that it will prorate the bonus for time. It is the Committee's intention to use its discretion to not prorate in circumstances only where there is an appropriate business case which will be explained in full to shareholders
The number of shares subject to subsisting EIP awards will vest on a change of control, normally prorated to time and performance.
The Committee will determine the proportion of the EIP Award which vests taking into account, among other factors, the period of time the EIP Award has been held by the participant and the extent to which any applicable performance conditions have been satisfied at that time.
The Committee has discretion regarding whether to prorate the EIP Award for time. The Committee's policy is that will prorate the EIP Award for time. It is the Committee's intention to use its discretion to not prorate in circumstances only where there is an appropriate business case which will be explained in full to shareholders.
Service agreements and letters of appointment
The Executive Directors' service agreements are for a rolling term and may be terminated by the Company by giving 12 months' notice.
|Name||Date of service agreement||Notice periods by|
|Notice periods by|
|Joe Anderson||26 March 2019||12||6|
|James Rawlingson||6 September 2016||12||12|
The Non-Executive Directors of the Company do not have service contracts, but are appointed by letters of appointment. Each Non-Executive Director's term of office runs for an initial period of three years unless terminated earlier upon written notice or upon their resignations.
The terms of the Non-Executive Directors' appointments are subject to their re-election by the Company's shareholders at the AGM scheduled to be held on 3 June 2019 and to re-election at any subsequent AGM at which the Non-Executive Directors stand for re-election.
The details of each Non-Executive Director's current term are set out below:
|Name||Date of appointment||Current term|
|Notice periods by Company (months)||Notice periods by Director (months)|
|Jonathan Peacock||8 February 2016||3||3||3|
|Franz Humer||7 June 2016||3||3||3|
|Professor Trevor Jones||8 February 2016||3||3||3|
|Meghan FitzGerald||21 July 2017||3||3||3|
|Giles Kerr||17 October 2017||3||3||3|
|Art Pappas||12 September 2018||3||3||3|
Illustrations of the application of the remuneration policy
LTIP value with 50% share price growth
The charts above illustrate the potential remuneration payable to each of the Executive Directors under different performance scenarios. In all three scenarios the fixed pay elements of the charts are based on 2019 basic salary levels, pension contributions at the standard rate of 7.5% of salary and benefits provision at a broadly similar level to 2018. Minimum performance assumes no bonus payment and no EIP vesting. On-target performance assumes a bonus payment at a level of 50% of maximum and EIP vesting at a level of 55% of the maximum opportunity. Maximum performance assumes a bonus payment at a level of 100% of maximum and EIP vesting at a level of 100% of the maximum opportunity. The EIP maximum opportunity is the level of EIP awards to be made in 2019, i.e. 200% of basic salary for the CEO and 150% of basic salary for the CFO.
In line with the new UK reporting requirements, the Maximum column has been extended to reflect the potential impact of 50% share price appreciation on the shares which vest.
Exceptions to Remuneration Policy for Executive and Non-Executive Directors
Notwithstanding the restrictions set out in the Policy, where the Group has made a commitment to a Director which:
- was in accordance with the then prevailing Remuneration policy at the time the commitment was made; and/or
- was made before the Director became a Director;
the Company will continue to give effect to it, even if it is inconsistent with the policy which is in effect at that time. For example, earlier remuneration policies of the Group may continue to apply in relation to awards under bonus or share incentive plans in operation pre-IPO which were made pre-IPO but which may vest or be exercised, or may have vested and been exercised, post-IPO.
Statement of conditions elsewhere in the Company
The Remuneration Committee considers pay and employment conditions across the Company when reviewing the remuneration of the Executive Directors and other senior employees. In particular, the Remuneration Committee considers the range of base pay increases across the Group. The key components of pay for the Executive Directors are similar to those available to other employees, although the levels of pay for the Directors and their maximum variable opportunity are higher in light of their role and level of responsibilities. While the Company does not directly consult with employees as part of the process of reviewing executive pay and formulating the Remuneration Policy set out in this report, the Company does receive updates from the Executive Directors on their discussions and reviews with senior management and employees.
Consideration of shareholder views
The Company welcomes dialogue with its shareholders; shareholder views are considered when evaluating and setting the remuneration strategy and the Remuneration Committee will consult with key shareholders prior to any significant changes to its Remuneration Policy. The Committee is in the process of consulting its major shareholders on the details of the changes to the policy which are explained in this report.