Annual report on remuneration

Executive directors' remuneration for the year ended 31 March 2016

Single total figure of remuneration for executive directors (audited information)

Base salary
£'000
Benefits
£'000
Annual bonus
£'000
Long-term incentives
£'000
Pension
£'000
Other(2)
£'000
Total
£'000
Year ended 31 March2016201520162015201620152016(1)2015201620152016201520162015
Steve Mogford70769226265016961,4401,2871561520312,8302,884
Russ Houlden446437232331344068880498960231,5681,823
  1. The long-term incentive amount is in respect of the Long Term Plan award which was granted in July 2013 (and which will vest based on performance over the three-year period 1 April 2013 to 31 March 2016) and the executive directors' one-off Matched Share Investment Scheme awards which were granted as part of their terms of appointment and vested during the year. The Long Term Plan amount is estimated as the vesting percentage for the one-third relating to customer service excellence will not be known until later in 2016 and the award will not vest until the end of an additional two-year holding period. The table below shows the breakdown of the amount in the single total figure of remuneration table.

    SchemeExecutive director
    Steve MogfordRuss Houlden
    2013 Long Term Plan412261
    Matched Share Investment Scheme1,028427
    Total (shown in the single total figure of remuneration table)1,440688
  2. The figures in this column represent the value of matching shares under the ShareBuy scheme which vested in the year, valued using the closing share price on the day they vested (the company offers a one-for-five match on partnership shares bought by employees under ShareBuy which cease to become forfeitable one year after they are awarded). For the year ending 31 March 2015, the figures also include the value of a discretionary cash payment which was made in lieu of dividends foregone on vested long-term incentives, due to the extended restrictions which were in place on buying and selling shares.

Base salary

Executive director salaries were increased by 2.0 per cent with effect from 1 September 2015, in line with the headline increase applied across the wider workforce. The committee felt that the increase was supported by satisfactory individual and business performance.

Executive directorBase salary
£'000
1 Sept 20151 Sept 2014
Steve Mogford713.0699.0
Russ Houlden450.0441.3

Benefits

For executive directors, benefits include a car allowance of £14,000; health, life and income protection insurance; travel costs; and communication costs.

No changes are expected to benefits during the year commencing 1 April 2016 (see the policy report).

Annual bonus

Annual bonus in respect of financial year ended 31 March 2016 (audited information)

Bonuses are earned by reference to the financial year and paid in June following the end of the financial year. Fifty per cent of any bonus is deferred into shares for three years under the Deferred Bonus Plan.

The performance measures, targets and outcomes in respect of the executive directors' annual bonus for the year ended 31 March 2016 are set out below. The table on the Aligning remuneration to business strategy summarises how these performance measures are linked to our business strategy.

MeasurePayout
as a
% of
maximum
Steve Mogford
weighting
(% of award)
Outcome
Russ Houlden
weighting
(% of award)
Outcome
Achieved
Threshold
(25%
vesting)
Stretch
(100%
vesting)
Underlying operating profit(1)
£737.3m£787.3m35%30.0%30.0%
£747.3m10.5%10.5%
Customer service in year
Service incentive mechanism – qualitative4.264.4029%12.0%12.0%
4.273.4%3.4%
Service incentive mechanism – quantitative998945%4.0%4.0%
951.8%1.8%
Maintaining and enhancing services for customers
Wholesale outcome delivery incentive composite(£15.6m)£15.5m58%20.0%20.0%
£2.5m11.6%11.6%
Time, cost and quality of capital programme (TCQi)(2)73%98%71%20.0%20.0%
89.9%14.2%14.2%
Corporate responsibility
Dow Jones Sustainability Index ratingWorld Class100%4.0%4.0%
100%4.0%4.0%
Personal objectives
Steve MogfordThe committee's overall assessment of each executive director's performance against their own challenging personal objectives90%10.0%
90%9.0%
Russ Houlden85%10.0%
85%8.5%
Total:
Actual award (% of maximum)54.5%54.0%
Maximum award (% of salary)130%130%
Actual award (% of salary) (£'000 – shown in single figure table)(3)70.8%£501k70.1%£313k
  1. Underlying operating profit is subject to a number of adjustments, principally in regard to infrastructure renewals expenditure. Reflecting the impact on profit for shareholders and the inconvenience to customers caused by the water quality incident in Lancashire, the committee used its discretion to reduce the underlying operating profit figure used for assessing bonus outcome for the executive directors by deducting the £25m costs related to the incident. The figure shown in the table above is the underlying operating profit after the deduction of these costs.
  2. TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required standard. It is expressed as a percentage, with a higher percentage representing better performance.
  3. Under the Deferred Bonus Plan, 50 per cent of the annual bonus will be deferred in shares for three years.

Annual bonus in respect of financial year commencing 1 April 2016

The maximum bonus opportunity for 2016/17 will remain unchanged at 130 per cent of base salary.

The performance measures and weightings for the executive directors' annual bonus for the year commencing 1 April 2016 will be unchanged from those for the year commencing 1 April 2015. The targets for the TCQi and corporate responsibility measure are shown below. Please note that the other targets are considered commercially sensitive, and consequently these will only be disclosed after the end of the 2016/17 financial year in the 2016/17 annual report on remuneration.

Targets
MeasureThreshold
(25% vesting)
Stretch (100%
vesting)
Weighting
(% of award)
Maintaining and enhancing services for customers
Time, cost and quality of capital programme (TCQi)(1)82.0%98.0%20.0%
Corporate responsibility
Dow Jones Sustainability Index ratingWorld Class4.0%
  1. TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required standard. It is expressed as a percentage, with a higher percentage representing better performance.

Haweswater reservoir, Cumbria

Pictured above: Haweswater reservoir, Cumbria

Long-term incentives

Performance for vested awards

2013 Long Term Plan (LTP) awards with a performance period ending 31 March 2016 (audited information)

The 2013 LTP awards were granted in July 2013 and performance was measured over the three-year period 1 April 2013 to 31 March 2016. Executive directors' awards will normally vest in April 2018, following an additional two-year holding period. The unvested shares will remain subject to malus provisions over this two-year holding period.

Note that the final outcome for the customer service excellence measure (which forms 33 per cent of the award) will not be known until Ofwat publishes the combined service incentive mechanism scores for the company and its comparator water companies (expected to be published in late summer 2016). The value of the 2013 LTP awards in the single total figure of remuneration table is therefore estimated and will be restated in next year's report once the final outcome is known.

The table below shows how the long-term incentive amount in respect of the 2013 LTP was calculated:

MeasureAchievedPayout
as a % of
maximum
Steve
Mogford
weighting
(% of
award)
Outcome
Russ
Houlden
weighting
(% of
award)
Outcome
Threshold
(25%
vesting)
Intermediate
(80% vesting)
Stretch
(100%
vesting)
Relative total shareholder return (TSR)

TSR versus median TSR of FTSE 100 companies (excluding financial services, oil & gas, and mining companies)(1)

Measured over the three year performance period

Median TSRMedian TSR × 1.1575.9%33.3%33.3%
Median TSR x 1.1025.3%25.3%
Company TSR of 46.7% was between the threshold TSR of 33.1% and stretch TSR of 53.1%
Sustainable dividends
Dividend growth in year ending 31 March 2016RPI+0%RPI+2%25.0%33.3%33.3%
RPI +0% (2)8.3%8.3%
Underpin 1:✓ MetAt least RPI+2% growth in each of the years ending 31 March 2014 and 31 March 2015
Underpin 2:✓ MetAverage underlying dividend cover of at least 1.1 over the three year performance period
Customer service excellence
Ranking for the year ended 31 March 2016 versus 18 other water companies using Ofwat's service incentive mechanism (SIM) combined scoreMedian
rank
Upper quartile
rank
Upper decile rank0.0%33.3%33.3%
Estimate: Below median0.0%0.0%
Note that this is an estimate as the final outcome will not be known until the combined SIM scores are published later in 2016.
Overall underpin
Overall vesting is subject to the committee being satisfied that the company's performance on these measures is consistent with underlying business performance Assumed met.
Note that the committee will make a final assessment of the company's performance once the combined SIM scores are known.
Estimated vesting (% of award)33.6%33.6%
Number of shares granted120,74676,203
Number of dividend equivalent shares12,4027,826
Number of shares before performance conditions applied133,14884,029
Estimated number of shares after performance conditions applied44,73728,233
Three-month average share price at end of performance period(3)£9.23£9.23
Estimated value at end of performance period (£'000 – shown in single figure table)£412£261
  1. For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is independently calculated by New Bridge Street.
  2. Subject to approval of the final dividend by shareholders at the 2016 AGM.
  3. Average share price over the three-month period 1 January 2016 to 31 March 2016.

Matched Share Investment Scheme (MSIS) awards which vested in the year ending 31 March 2016 (audited information)

When they joined the company in 2010/11, both executive directors received a one-off MSIS award as part of their terms of appointment. They acquired shares in the company at their own expense ('investment shares') which would be matched under the MSIS on a 1:1 basis ('matching shares') provided that they remained employees within the group until the fifth anniversary of their date of joining the company and did not sell their investment shares. Full details of these awards were disclosed in the 2010/11 annual report.

During the year the executive directors reached their fifth anniversaries of joining and the matching shares vested in full. Since they bought their investment shares, shareholders have benefitted from a total shareholder return of around 100 per cent.

The table below shows how the long-term incentive amount in respect of the MSIS was calculated:

Steve MogfordRuss Houlden
Date joined the company05.01.1101.10.10
Date of grant27.05.1116.12.10
Vesting date05.01.1601.10.15
Value of investment shares bought (£'000)£500£210
Number of matching shares granted86,74236,710
Number of dividend equivalent shares22,5229,528
Number of matching shares vested109,26446,238
Closing share price on date of vesting£9.41£9.25
Value of matching shares on vesting (£'000 - shown in single figure table)£1,028£427

Performance targets for awards granted in the year

2015 LTP awards with a performance period ending 31 March 2018 (audited information)

Following the announcement by the board in January 2015 of our dividend policy for the regulatory period 2015–20, the sustainable dividend measure in the LTP switched focus from dividend growth as the differentiator of performance with dividend cover as an underpin, to dividend cover being the differentiator with the delivery of our dividend policy as an underpin.

Details about the 2015 LTP performance measures and targets are shown in the following table. Performance is measured over the three-year period 1 April 2015 to 31 March 2018. The table on Aligning remuneration to business strategy summarises how these performance measures are linked to our business strategy.

MeasureTargetsWeighting
Threshold (25%
vesting)
IntermediateStretch (100%
vesting)
Relative total shareholder return (TSR)

TSR versus median TSR of FTSE 100 companies (excluding financial services, oil and gas, and mining companies).(1)

Measured over the three year performance period

Median TSRMedian TSR
× 1.15
33.3%
Sustainable dividends
Average underlying dividend cover over the three-year performance periodThe targets are considered commercially sensitive and so are not disclosed in this report. However, actual targets, performance achieved and awards made will be published retrospectively so that shareholders can fully understand the basis for any payouts33.3%
Underpin:Dividend growth of at least RPI in each of the years ending 31 March 2016, 31 March 2017 and 31 March 2018
Customer service excellence
Ranking for the year ended 31 March 2018 versus 18 other water companies using Ofwat's Service Incentive Mechanism (SIM) combined scoreMedian rankUpper quartile rank (80% vesting)Upper decile rank33.3%
Overall underpin
Overall vesting is subject to the committee being satisfied that the company's performance on these measures is consistent with underlying business performance
  1. For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is independently calculated by New Bridge Street.

Straight-line vesting applies between the threshold, intermediate and stretch targets, with nil vesting below threshold performance. The committee will have the flexibility to make appropriate adjustments to the performance targets in exceptional circumstances, to ensure that the award achieves its original purpose.

Performance targets for future awards

2016 LTP awards with a performance period ending 31 March 2019

The performance targets for the 2016 Long Term Plan (LTP) are expected to be as for the 2015 awards outlined above, with the exception of the targets for the sustainable dividend performance measure.

Pensions

The executive directors receive a cash allowance of 22 per cent of base salary in lieu of pension. No changes are expected to pensions during the year commencing 1 April 2016.

External appointments

The company recognises that its executive directors may be invited to become non-executive directors of companies outside the company and exposure to such non-executive duties can broaden experience and knowledge, which would be of benefit to the company. Any external appointments are subject to board approval (which would not be given if the proposed appointment was with a competing company, would lead to a material conflict of interest or could have a detrimental effect on a director's performance).

Steve Mogford was a non-executive director of Carillion PLC until 31 December 2015 for which he received an annual fee of £60,000. Russ Houlden is an independent member of the supervisory board, and audit committee chairman, of Orange Polska SA for which he receives and retains fees estimated annually at around £68,000.

Executive directors' interests in shares

Executive directors' shareholding (audited information)

To provide further alignment with shareholder interests, in May 2015 the board agreed to increase the shareholding guidelines for executive directors from 100 per cent to 200 per cent of base salary. Executive directors are normally expected to reach this shareholding within five years of appointment. There is also an expectation that they will continue to build a shareholding throughout their period of employment with the company after the guideline is reached.

Details of beneficial interests in the company's ordinary shares as at 31 March 2016 held by each of the executive directors and their connected persons are set out in the table below along with progress against the target shareholding guideline level. The table shows that both Steve Mogford and Russ Houlden have exceeded the target shareholding.

DirectorShares counting towards shareholding
guidelines at 31 March 2016
Number of
shares required
to meet
shareholding
guideline(1)
Number of shares
owned outright (including connected persons)
Unvested
shares not
subject to
performance
conditions(2)
Total shares
counting
towards
shareholding
guidelines(3)
Shareholding
as % of base
salary at
31 March
2016(1)
Shareholding
guideline met
at 31 March
2016
Unvested
shares subject
to performance
conditions(4)
Steve Mogford(5)154,530297,164135,813369,163478%Yes338,869
Russ Houlden(5)97,52973,19685,726118,649243%Yes213,897
  1. Share price used is the average share price over the three months from 1 January 2016 to 31 March 2016 (922.8 pence per share).
  2. Unvested shares subject to no further performance conditions such as matching shares under the 'ShareBuy' scheme. Includes shares only subject to malus provisions such as the Deferred Bonus Plan shares in the three-year deferral period and Long Term Plan shares in the two-year holding period.
  3. Includes unvested shares not subject to performance conditions (on a net of tax and national insurance basis), plus the number of shares owned outright.
  4. Includes unvested shares under the Long Term Plan.
  5. In the period 1 April 2016 to 25 May 2016, additional shares were acquired by Steve Mogford (32 ordinary shares) and Russ Houlden (31 ordinary shares) in respect of their regular monthly contributions to the 'ShareBuy' scheme. These will be matched by the company on a one-for-five basis. Under the scheme, matching shares vest provided the employee remains employed by the company one year after grant.

Executive directors' share plan interests 1 April 2015 to 31 March 2016 (audited information)

Award dateAwards
held at
1 April
2015
Granted
in year
Notional
dividends
accrued in
year(1)
Exercised/
vested
in year
Lapsed/forfeited
in year
Awards held at
31 March
2016
Face value
of awards
granted
in year
(£'000)
Value of
shares on
date vested
(£'000)
Steve Mogford
DBP17.6.1354,1162,27356,389
DBP(2)30.6.1439,4871,65841,145
DBP(3)16.6.1536,7001,54038,240348(4)
PSP(5)15.6.1276,43574,5241,911748(6)
MSAP(5)15.6.1255,04453,6671,377539(6)
LTP(2)29.7.13127,7815,367133,148
LTP(2)30.6.14101,9554,282106,237
LTP30.6.1598,1841,30099,484909(7)
MSIS (2) (8) 27.5.11106,2483,016109,2641,028(9)
ShareBuy matching shares(10)1.4.15 to
31.3.16
4139413900
TOTAL561,107134,92319,436237,4963,288474,6821,2572,315
Russ Houlden
DBP17.6.1334,1441,43435,578
DBP(2)30.6.1424,9231,04625,969
DBP(3)16.6.1523,16897224,140220(4)
PSP(5)15.6.1248,21147,0051,206472(6)
MSAP(5)15.6.1233,93133,082849332(6)
LTP(2)29.7.1380,6423,38784,029
LTP(2)30.6.1464,3572,70367,060
LTP30.6.1561,98782162,808574(7)
MSIS(11)16.12.1044,9621,27646,238427(12)
ShareBuy matching shares(10)1.4.15 to
31.3.16
4139413900
TOTAL331,21185,19411,639126,3662,055299,6237941,231
  1. Note that these are also subject to performance conditions where applicable.
  2. The awards held at 1 April 2015 have been restated to correct the calculation of cumulative dividend equivalents.
  3. Executive directors were required to defer 50 per cent of their 2014/15 bonus into shares for three years under the DBP. The deferral period will end on 16 June 2018. There were no service or performance conditions attached; however, deferred bonuses are subject to malus provisions (see Directors' remuneration policy (abridged) for further information).
  4. The face value of the DBP awards made in 2015 have been calculated using the closing share price on 15 June 2015 (the dealing day prior to date of grant) which was 948.5 pence per share.
  5. 97.5 per cent of the 2012 PSP and MSAP awards vested.
  6. Calculated using the closing share price on date of vesting (19 May 2015) of 1004 pence per share.
  7. The face value of the LTP awards made in 2015 has been calculated using the closing share price on 29 June 2015 (the dealing day prior to date of grant) which was 925.5 pence per share. 25 per cent of the award vests for threshold performance and performance is measured over the period 1 April 2015 to 31 March 2018. Details of the performance measures and targets are given above.
  8. Matching shares under Steve Mogford's Matched Share Investment Scheme vested on 5 January 2016. See Performance targets for awards granted in the year for further detail.
  9. Calculated using the closing share price on 5 January 2016 which was 940.5 pence per share.
  10. Under ShareBuy, matching shares vest provided the employee remains employed by the company one year after grant. During the year Steve Mogford purchased 194 partnership shares and was awarded 39 matching shares (at an average share price of 927 pence per share). Russ Houlden purchased 195 partnership shares and was awarded 39 matching shares (at an average share price of 922 pence per share).
  11. Matching shares under Russ Houlden's Matched Share Investment Scheme vested on 1 October 2015. See Matched Share Investment Scheme (MSIS) awards which vested in the year ending 31 March 2016 (audited information) for further details.
  12. Calculated using the closing share price on 1 October 2015 which was 924.5 pence per share.

Dates of service contracts

Executive directorsDate of service contract
Steve Mogford5.1.11
Russ Houlden1.10.10

Other information

Performance and CEO remuneration comparison

This graph illustrates the company's performance against the FTSE 100 over the past seven years. The FTSE 100 has been chosen as the appropriate comparator as the company is a member of the FTSE 100 and it is considered to be the most widely published benchmark for this purpose. The table below the TSR chart shares the remuneration data for the CEO over the same seven-year period as the TSR chart.

Performance

Year ending 31 March2010201120122013201420152016
CEO single figure of remuneration (£'000)Steve Mogfordn/a3771,4211,5492,3782,8842,830(1)
Philip Green1,9923,073n/an/an/an/an/a
Annual bonus payment
(% of maximum)
Steve Mogfordn/a90.672.084.478.277.454.5
Philip Green89.290.8n/an/an/an/an/a
Long term incentive vesting (% of maximum)(2)Steve Mogfordn/an/a(3)n/a(3)n/a(3)93.597.533.6(4)
100.0(5)
Philip Green0(6)
12.5(7)
28.1(8)
100.0(9)
  1. This includes £1.028 million in respect of Steve Mogford's one-off Matched Share Investment Scheme which ended on 5 January 2016. See Matched Share Investment Scheme (MSIS) awards which vested in the year ending 31 March 2016 (audited information) for further details.
  2. For performance period ending on 31 March, unless otherwise stated.
  3. Steve Mogford was not a participant in any long-term incentive plans that had performance periods ending during 2011 to 2013. For those who did participate in those plans, the vesting as a percentage of maximum was 37.5 per cent for those vesting in 2012 and 35.3 per cent for those vesting in 2013.
  4. The 2013 Long Term Plan amount vesting percentage is estimated (see Long-term incentives for further details).
  5. The retention period applicable to Steve Mogford's Matched Share Investment Scheme ended on 5 January 2016. See Matched Share Investment Scheme (MSIS) awards which vested in the year ending 31 March 2016 (audited information) for further details.
  6. 2007 Performance Share Plan (PSP).
  7. 2007 Matching Share Award Plan (MSAP).
  8. 2008 PSP and MSAP.
  9. The retention period applicable to Philip Green's Matched Share Investment Scheme ended on 12 February 2011.

Percentage change in CEO's remuneration versus the wider workforce

The table below shows how the percentage change in the CEO's salary, benefits and bonus earned in 2014/15 and 2015/16 compares with the percentage change in the average of each of those components for a group of employees.

ItemYear-on-year change CEO (%)(1)Year-on-year change employees (%)(2)
Base salary(3) (4)2.23.2
Taxable benefits0.11.8
Bonus-28.1-10.3
  1. See single total figure of remuneration table on Single total figure of remuneration for executive directors (audited information) for more information.

  2. To aid comparison, the group of employees selected by the committee are those who were employed over the complete two-year period.
  3. On 1 September 2015 Steve Mogford received a base salary increase of 2.0 per cent.
  4. Includes promotional increases.

Relative importance of spend on pay

The table below shows the relative importance of spend on pay compared to distributions to shareholders.

2015/162014/15% change
Employee costs £m(1)2682603.1%
Dividends paid to shareholders £m2592494.0%
  1. Employee costs includes wages and salaries, social security costs, and post-employment benefits.

Non-executive directors

Single total figure of remuneration for non-executive directors (audited information)

Salary/fees
£'000
Taxable benefits
£'000
Total
£'000
201620152016201520162015
Dr John McAdam28728111288282
Dr Catherine Bell7169117270
Stephen Carter(1)6236016237
Mark Clare7569017570
Brian May7776017777
Nick Salmon(2)n/a22n/a2n/a24
Sara Weller7572007572
  1. Stephen Carter joined the board on 1 September 2014.
  2. Nick Salmon retired from the board on 25 July 2014.

Fees

Non-executive director annual fee rates were reviewed and increased with effect from 1 September 2015 as shown below:

RoleFees
£'000
1 Sept 20151 Sept 2014
Base fees: Chairman(1)290.0284.0
Base fees: other non-executive directors(2)62.6061.35
Senior independent non-executive director(2)12.512.5
Chair of audit and treasury committees(2)15.015.0
Chair of remuneration committee(2)12.512.5
Chair of corporate responsibility committee(2)10.08.0
  1. Approved by the remuneration committee.
  2. Approved by a separate committee of the board.

Non-executive directors' shareholding (audited information)

Details of beneficial interests in the company's ordinary shares as at 31 March 2016 held by each of the non-executive directors and their connected persons are set out in the table below.

Number of shares owned outright (including connected persons) at 31 March 2016 (1)
Dr John McAdam1,837
Dr Catherine Bell7,000
Stephen Carter3,000
Mark Clare7,628
Brian May3,000
Sara Weller10,531
  1. From 1 April 2016 to 25 May 2016 there have been no movements in the shareholdings of the non-executive directors.
Non-executive directorsDate first appointed to the board
Dr John McAdam4.2.08
Dr Catherine Bell19.3.07
Stephen Carter1.9.14
Mark Clare1.11.13
Brian May1.9.12
Sara Weller1.3.12

The remuneration committee

Summary terms of reference

The committee's terms of reference were last reviewed in November 2015 and are available on our website: corporate.unitedutilities.com/corporate-governance

The committee's main responsibilities include:

  • Making recommendations to the board on the company's framework of executive remuneration and its cost
  • Approving the individual employment and remuneration terms for executive directors and other senior executives, including: recruitment and severance terms, bonus plans and targets, and the achievement of performance against targets
  • Approving the general employment and remuneration terms for selected senior employees
  • Approving the remuneration of the Chairman
  • Proposing all new long-term incentive schemes for approval of the board, and for recommendation by the board to shareholders
  • Assisting the board in reporting to shareholders and undertaking appropriate discussions as necessary with institutional investors on aspects of executive remuneration

Composition of the remuneration committee

MemberMember sinceMember to
Sara Weller (chair since 27.7.12)1.3.12To date
Dr Catherine Bell1.3.11To date
Mark Clare1.9.14To date

The committee's members have no personal financial interest in the company other than as shareholders and the fees paid to them as non-executive directors.

Advisors to the remuneration committee

By invitation of the committee, meetings are also attended by the Chairman of the company (Dr John McAdam), the CEO (Steve Mogford), the company secretary (Simon Gardiner, who acts as secretary to the committee), the business services director (Sally Cabrini) and the head of reward (Ruth Henshaw), who are consulted on matters discussed by the committee, unless those matters relate to their own remuneration. Advice or information is also sought directly from other employees where the committee feels that such additional contributions will assist the decision-making process.

The committee is authorised to take such internal and external advice as it considers appropriate in connection with carrying out its duties, including the appointment of its own external remuneration advisors.

During the year, the committee was assisted in its work by the following external advisor:

AdvisorAppointed byHow appointedServices provided to the committee in year ended 31 March 2016Fees paid by company for these services in respect of year and basis of charge
New Bridge StreetCommitteeReappointed following committee review in 2013General advice on remuneration matters£86,000Time/cost basis
Other services provided to the company
  • Benchmarking of roles not under the committee's remit

The independent consultants New Bridge Street (a trading name of Aon Hewitt Limited, an Aon PLC company) are members of the Remuneration Consultants Group and, as such, voluntarily operate under the Code of Conduct in relation to executive remuneration consulting in the UK. The committee is satisfied that the advice they received from external advisors is objective and independent.

In addition, during the year the law firms Eversheds and Slaughter and May provided advice on the company's share schemes to the company.

Key activities of the remuneration committee over the past year

The committee met four times in the year ended 31 March 2016.

Regular activities

  • Approved the 2014/15 directors' remuneration report
  • Reviewed the base salaries of executive directors and other members of the executive team
  • Reviewed the base fee for the Chairman
  • Assessed the achievement of targets for the 2014/15 annual bonus scheme, reviewed progress against the targets for the 2015/16 annual bonus scheme, and set the targets in principle for the 2016/17 annual bonus scheme
  • Set the targets for Long Term Plan (LTP) awards made in 2015
  • Reviewed and approved awards made under the annual bonus scheme, Deferred Bonus Plan (DBP) and LTP
  • Monitored progress against shareholding guidelines for executive directors and other members of the executive team
  • Reviewed the committee's performance during the period
  • Reviewed the committee's terms of reference
  • Considered market trends in executive remuneration, including in the wider utilities sector

Other activities

  • Completed a 'mid-term' review of policy
  • Approved the treatment of unvested share awards for participants impacted by the joint venture agreement with Severn Trent which combines the two companies' non-household water and wastewater retail businesses
  • Approved vesting of MSIS award and DSAS awards
  • Increased shareholding guidelines to 200 per cent of salary for current and new executive directors in May 2015
  • Reviewed the treatment of delisted companies in the LTP TSR comparator group

2015 AGM: Statement of voting

At the last Annual General Meeting on 24 July 2015, votes on the directors' remuneration report were cast as follows:

ResolutionForAgainstAbstain
%Number%NumberNumber
Approval of the 2014/15 directors' remuneration report (other than the part containing the directors' remuneration policy)99.50391,311,2840.501,958,2253,946,108

The directors' remuneration report was approved by the board of directors on 25 May 2016 and signed on its behalf by:

Sara Weller

Chair of the remuneration committee