• Home
• Introduction
• Business review
• Governance
• Financial statements

• Home  > Governance  > Report on directors' remuneration 

• Governance
•  Board of directors
•  Directors' report
•  Corporate governance statement
•  Report on directors' remuneration
•  Statement of directors' responsibilities

Report on directors' remuneration

The remuneration committee: members, role and frequency of meetings

Details of the committee members, the scope of their role and frequency of meetings can be found in the corporate governance statement.

Working with advisers

In making its decisions, the committee consults with the Chairman, the Chief Executive Officer, the Group HR Director and the Global Head of Reward who are invited to attend meetings of the committee as appropriate. The Chief Financial Officer is also consulted in respect of performance conditions attaching to short and long-term incentive arrangements.

The committee has access to independent consultants to ensure that it receives objective advice. In 2007, Deloitte LLP (‘Deloitte’) were appointed by the committee as advisers and they continued to act during the year under review. Deloitte also provided unrelated advisory and tax services to the Group during the year. Kepler Associates (‘Kepler’) were also appointed by the committee in 2007 and, during the year under review, provided advice and valuation data for Experian’s current and proposed executive remuneration arrangements and also provided independent advice on target calibration for the short and long-term incentive plans. Linklaters LLP provided legal advice in respect of share plan design and interpretation.

Remuneration philosophy

Experian’s remuneration philosophy is that reward should be used to drive business performance. In this regard, the remuneration committee aims to have in place a remuneration policy for Experian which is consistent with its business objectives and is designed to:

• pay market-competitive base salary levels;
• provide competitive performance-related compensation which influences performance and helps attract and retain executives by providing the opportunity to earn commensurate rewards for outstanding performance, leading to long-term shareholder value creation;
• apply demanding performance conditions to deliver sustained profitable growth in all our businesses, thereby aligning incentives with shareholders’ interests, setting these conditions with due regard to actual and expected market conditions;
• provide a balanced portfolio of incentives - both cash and share-based - which align both short-term (one year) and longer-term (three year) performance such that sustainable growth and value are delivered for our shareholders;
• drive accountability and transparency and align remuneration with the interests of shareholders; and
• deliver competitive benefits to underpin the other components of the remuneration package.

Consistent with the policy, the committee compares the Experian remuneration arrangements with those of other relevant organisations and companies of similar size and scope to Experian. The remuneration arrangements are also reviewed in light of changing market conditions, which have become increasingly more challenging over the year under review. Performance-related incentives are targeted at upper quartile levels for outstanding performance to produce a highly leveraged package if the Group’s growth objectives are attained. Experian is committed to performance-related pay at all levels within the organisation.

The committee undertook a review of remuneration arrangements during the year. This review concluded that, while the key elements of our arrangements are still aligned with the principles of remuneration policy and long-term strategy, certain changes should be made to better align arrangements with the creation of future shareholder value. The key elements of remuneration arrangements going forward are summarised below.

The remuneration committee is mindful of the current environment and especially the need to link pay closely to performance. In light of current economic conditions and the desire to link executive salaries more closely to policy elsewhere in the organisation, coupled with the committee’s desire to ensure a greater emphasis on variable pay going forward, the committee has decided to freeze base pay levels for the coming year for executive directors and senior management. In the case of the chief executive officer (‘CEO’) this means his base pay will be frozen for a second consecutive year.

The revised arrangements take into account the need to align incentives with market practice and conditions and to strike the right balance between short-term and long-term performance. The proposed incentive arrangements will provide a stronger focus on absolute share price growth (through the use of options and delivery of all long-term incentives in shares), balanced with relative share price growth (in the Performance Share Plan (‘PSP’)) and a balance between internal and external measures of performance. In addition, by encouraging executives to invest in and hold Experian shares through the co-investment plan (‘CIP’) arrangements, their interests will be further aligned with those of our shareholders over the longer term.

The proposed total compensation package has a similar expected value to the arrangements currently in place and is driven by the need to replace the reinvestment plan which was a one off plan and will cease next year.

Further details of how remuneration arrangements will operate going forward are set out below.

2009/10 incentive arrangements for the CEO

In recognition of his personal performance and the continued valuable contribution Don Robert makes to Experian and to continue to incentivise him to create future shareholder value, the remuneration committee proposes to make awards worth 300% of salary in face value under each of the PSP and Executive Share Option Plan (‘ESOP’) in the coming year. These changes will position our CEO’s remuneration highly competitively against UK and US financial services and other US-listed companies of similar size to Experian. The committee believes the approach taken is appropriate for a CEO of Don Robert’s calibre and that it is appropriate for his overall remuneration to be highly variable, with a strong link to the Group’s performance. As such, his base salary during 2009/10 will continue to be frozen at the level set in 2007.

The future level of any awards for the CEO will be determined by the remuneration committee on an annual basis, taking account of the prevailing circumstances at the time. These proposals are within the parameters of the current rules but in line with our commitment to engage with shareholders, the committee consulted with key shareholders on the proposed changes.

Service contracts

Each executive director has a rolling service contract which can be terminated by the Group giving twelve months’ notice. In the event of termination of the director’s contract, any compensation payment is calculated in accordance with normal legal principles, including the application of mitigation to the extent appropriate in the circumstances of the case.

Remuneration of executive directors

Each element of reward is important and has a specific role in achieving the aims of the remuneration philosophy. The combined potential remuneration from annual bonus and share-based incentives outweighs the other elements and is subject to performance conditions, thereby placing much of it at risk. In fair value terms, the proportion of the total remuneration (excluding pension and benefits) of the CEO which is variable is approximately 80% as illustrated.

Fair value of CEO remuneration

The remuneration committee selects performance measures that are designed to be aligned with the Group’s strategic goals and that are transparent to directors and shareholders. Each element of remuneration is designed to support the achievement of different corporate objectives as outlined in the following table.

Fixed remuneration

Base salary and benefits

To assess the appropriate market salary for a role, external remuneration consultants provide benchmark data to the remuneration committee. Executive directors’ salaries are benchmarked against a mid-market level of executive directors from the companies in the FTSE 100 Index and other global comparators, reflecting the markets from which Experian recruits talent. These include, but are not limited to, international companies of a similar size and geographic scope, companies in the financial services and related industries and companies with significant operations in the same markets as Experian (for example, North America). Before making a final decision on individual salary awards, the committee assesses each director’s contribution to the business, to reflect individual performance and experience.

In addition to base salary, executive directors receive certain benefits-in-kind including a car or car allowance, private health cover and life assurance. These are set at market norms for each role.

No executive director received a base salary increase at 1 April 2009. The CEO has not received an increase since 1 April 2007 notwithstanding the Group’s strong performance over this period.

Pensions

The retirement age for directors is 60 under arrangements which broadly provide a pension of two thirds of final salary, ill health and dependants’ pensions in addition to life assurance cover during the period of employment. Incentive payments (such as annual bonuses) are not pensionable.

The Group has had arrangements in place for a number of years which were designed to ensure that UK directors who were affected by the 1989 HM Revenue and Customs earnings cap were placed in broadly the same position as those who were not. With the agreement of the trustees of the pension scheme, the Group decided to retain a notional earnings cap for its existing and future employees, with the exception of new senior executives who are pensioned on full basic salary up to the Lifetime Allowance. The Experian Pension Scheme was closed to new members on 31 December 2008, subject only to exceptions approved by the remuneration committee on a case by case basis.

The Group has put security in place for the unfunded pension entitlements of UK executives affected by the earnings cap, by establishing Secured Unfunded Retirement Benefits Schemes (‘SURBS’). Further details are provided under the disclosure of the arrangements for each director. In the US, Experian provides a Personal Investment Plan (401k) which all US employees, including directors, are able to join. This is a defined contribution arrangement to which participants are able to contribute up to 50% of salary, up to a maximum salary and participant contribution limit established by the IRS each calendar year.

Variable remuneration

Annual bonus plan and co-investment plan

Annual bonuses are awarded for achieving profit growth targets. The committee believes that linking incentives to profit growth helps to reinforce Experian’s growth strategy. During the year, Kepler advised on the calibration of targets using benchmarks that reflect stretching internal and external expectations. Benchmarks include: broker earnings estimates; earnings estimates for competitors; straight-line profit growth consistent with median/upper quartile shareholder returns over the next three to five years; latest projections for the current year; budget; strategic plan; and long-term financial goals.

2008/09 bonus

The maximum bonus opportunity for executive directors is 200% of base salary. However, this level of annual bonus is only payable if Experian’s financial performance surpasses stretching financial targets designed to deliver exceptional results to shareholders.

Experian’s underlying performance continued to be strong in 2008/09 in what was an extremely challenging business environment for both Experian and our clients. The bonuses payable to executive directors in respect of this financial year are representative of this strong performance in uncertain market conditions.

For annual bonuses earned in respect of the 2008/09 financial year, executive directors have been offered their first opportunity since the demerger of Experian and Home Retail Group from GUS plc in October 2006 (‘demerger’) to defer receipt of some or all of their bonus and invest it in Experian shares (‘invested shares’) under the Experian CIP. The number of invested shares acquired on behalf of the executive will be matched with an additional award of shares (‘matching shares’) on a 1:1 basis. The release of these matching shares to participants will be subject to the achievement of a performance condition, being growth in profit before tax (‘PBT’) of 3% per annum on average for the three financial years beginning with the 2009/10 financial year. The committee believes that PBT is an appropriate measure as it is aligned with Experian’s core growth strategy. The release of invested shares and matching shares will be deferred for three years. If an executive resigns during the three-year period he/she will forfeit the right to the matching shares and the associated dividends. The executive would be entitled to retain any invested shares.

2009/10 bonus

The maximum bonus which may be earned by executive directors in the coming year will remain at 200% of base salary. Deferral of annual bonus into the CIP will continue to be voluntary, but it is intended that a minimum of 50% of any earned bonus must be deferred by any executive who chooses to participate in the plan.

Deferral of up to 100% of earned bonus will still be possible. In addition, it is intended to increase the maximum match under the CIP from 1:1 to up to 2:1. The CIP is used as part of a suite of long-term incentive arrangements and the increase in potential match has been factored into market-based remuneration benchmarking that has been carried out on behalf of the committee. The fair value of total remuneration, including the increased match, remains within competitive levels.

The match of 1:1 will be awarded for the achievement of a target level of growth in PBT, increasing on a straight line basis to up to a 2:1 match for the achievement of stretching levels of performance. The final targets will be determined shortly before the awards are made in June 2010 and will be fully disclosed at the appropriate time. However, the committee undertakes to ensure that any targets, whilst they must be seen as achievable to retain and motivate executives during the deferral period, must be sufficiently stretching to deliver significant shareholder value.

Experian performance share plan (‘Experian PSP’)

The Experian PSP was approved by GUS plc shareholders at the Extraordinary General Meeting (‘EGM’) held on 29 August 2006. An initial award was made to participants, including the executive directors, on 11 October 2006. Performance shares are ‘free’ Experian shares for which no exercise price is payable. Shares are allocated subject to a performance condition which is measured over a three-year performance period with a five-year vesting period. Dividend equivalents accrue on these awards.

For the above demerger awards granted in October 2006, the performance condition is in two separate parts; 50% of the award is subject to achievement against a sliding scale of growth in PBT, which the committee considers to be an appropriate measure as this represents one of the key drivers of the business. The threshold for vesting is growth in PBT of 7% per annum at which 25% of this part of the award will vest, rising on a straight-line basis to 100% of this part of the award vesting if PBT grows at a rate of 14% per annum.

The remaining 50% of the award will vest according to the performance of Experian’s total shareholder return (‘TSR’) (defined as share price movement plus reinvested dividends) relative to the following group of peer companies as set at the award date:

Acxiom
Alliance Data Systems
Bisys Group
Capita Group
Choicepoint
Dun & Bradstreet
Equifax
Fair Isaac
Fidelity National Financial
Fimalac
First American
First Data
Fiserv
Global Payments
Harte-Hanks
IAC/Interactive Corp
Moodys
Reuters Group
Thomson
Total System Services

This bespoke comparator group consists of Experian’s main competitors in the business areas and countries in which the Group operates. This part of the award will not vest if Experian’s TSR is below the median return for the comparator group. Once Experian achieves median performance, 25% of this portion of the award may vest, rising on a straight-line basis to 100% of this part of the award vesting for upper quartile performance or better.

Performance conditions for future awards under the Experian performance share plan will be decided in advance of grant. For awards to be made in 2009/10, it is intended that 75% of any award will be subject to a growth in PBT performance condition and 25% will be subject to a relative TSR performance condition. This is to ensure that greater line of sight exists between participating executives and the performance measures employed. For the element of an award which is subject to the PBT performance condition, 25% will vest for growth in PBT of 4% per annum on average rising to 100% vesting for growth in PBT of 8% per annum on average, which is expected to be broadly equivalent to median and upper quartile performance respectively. For the TSR element of the awards, vesting will be according to the percentage extent to which Experian’s TSR outperforms the TSR of the FTSE 100 Index. 25% of the award would vest at threshold, rising to 100% where Experian outperforms the FTSE 100 Index by at least 25% over the three-year performance period. This equates to approximately 7.7% per annum. In addition, vesting of these awards will be subject to satisfactory return on capital employed (‘ROCE’) performance.

Experian share option plan

The Experian share option plan was approved by GUS plc shareholders at the EGM held on 29 August 2006. This plan seeks to align shareholder and participant interests through share price growth and the employment of a stretching performance condition. For awards to be granted to executive directors in the next financial year, options will vest subject to the achievement of a stretching performance condition, being growth in earnings per share (‘EPS’). 25% of an award will vest for EPS growth of 4% per annum rising to 100% vesting for EPS growth of 8% per annum. In addition, vesting of these awards will be subject to satisfactory ROCE performance.

For each of the long-term incentive plans, external consultants will be used to calculate whether, and the extent to which, the performance conditions have been met.

Experian Sharesave

All executive directors and employees of Experian and any participating subsidiaries in which sharesave or a local equivalent is operated are eligible to participate if they are employed by Experian at a qualifying date. Sharesave provides an opportunity for employees to save a regular monthly amount, over either three or five years which, at the end of the savings period, may be used to purchase Experian shares under option for up to 20% below market value at the date of grant.

Performance graph

The committee has chosen to illustrate the ‘TSR’ for GUS plc until demerger and Experian plc against the FTSE 100 Index for the period since listing on 11 October 2006 to 31 March 2009. The FTSE 100 Index is the most appropriate index against which TSR should be measured, as it is a widely used and understood index of leading UK companies.

The above graphs show that, at 31 March 2009, a hypothetical £100 invested in GUS and subsequently, Experian would have generated a total return of £180 compared with a return of £83 if invested in the FTSE on 31 March 2001 and a total return of £120 compared with a return of £105 if invested on 31 March 2004.

With respect to Responsible Investment Disclosure, the committee is satisfied that environmental, social and governance risks are not raised by the incentive structure for senior management and do not inadvertently motivate irresponsible behaviour.

Meeting obligations under share-based incentives

Obligations under Experian’s employee share plans may be met using either shares purchased in the market or, except for rolled-over awards under certain GUS schemes, newly issued shares. The approach during the year has been to use a combination of newly issued shares and shares previously purchased by the employee trusts. Following a recent review it has been decided that for the time being all awards will be satisfied by the purchase of shares or from shares previously purchased by the employee trusts. The policy will remain under regular review.

Shareholding guideline

The committee believes that it is important that executives should build a significant shareholding to align their interests with those of shareholders. Therefore, the committee has established guidelines under which the CEO should hold the equivalent of two times his base salary in Experian plc shares and other executive directors, one times their base salary, including shares held under the CIP and the reinvestment plan. Each of the executive directors meets these guidelines.

Non-executive directors’ remuneration policy

The Board’s policy on non-executive directors’ remuneration is that:

• Fees should reflect individual responsibilities and membership of Board committees;
• Remuneration should be in line with recognised best practice and sufficient to attract, motivate and retain high calibre non-executives;
• Remuneration should be a combination of cash fees (paid quarterly) and Experian shares (bought annually in the first quarter of the financial year until the non-executive director’s individual shareholding requirement is met, (see below));
• The use of Experian shares in the package helps align the interests of non-executive directors with those of shareholders;
• Non-executive directors do not receive any benefits in kind with the exception of the Chairman who has the use of a company car and private healthcare.

The fees of non-executive directors will next be reviewed in late 2009. Fees are reviewed in the light of market practice in FTSE 100 companies and anticipated number of days worked, tasks and responsibilities. The fees which applied for the year under review and which have not been increased since November 2006 are given in the table below.

Experian requires its non-executive directors to build up a holding in the company’s shares equal to their annual fee. One quarter of their annual fee is used to purchase shares in the company each year until they reach this holding. Any tax liability arising from these arrangements is the responsibility of the individual director; such shares are included in the table of directors’ interests. Non-executive directors do not participate in executive share plans or other employee share arrangements. Non-executives do not have service contracts but each has a letter of appointment. No non-executive director’s letter of appointment provides for any termination payment. Each appointment is for a renewable three-year term but may be terminated by either party on one month’s written notice.

The information set out in the remainder of this report has been subject to audit.

Annual remuneration

The following table shows an analysis of the emoluments of the individual directors for the year ended 31 March 2009. Annual bonuses shown relate to the year ended 31 March 2009.

The following shares were purchased for the non-executive directors on 2 July 2008 in line with the shareholding guidelines for non-executive directors described above. The non-executive directors not listed below already meet the shareholding guidelines. The value reported below is included within the remuneration reported in the above table.

Share options

Details of options granted to directors under the GUS executive share option schemes are set out in the table below:

All options in the above table were originally granted under the GUS executive share option schemes. Options which were granted before 2005 were exchanged for equivalent options over Experian plc shares on demerger. Unvested options granted in 2005 and 2006 (other than options granted under the GUS 1998 Approved Executive Share Option Scheme) were automatically exchanged for equivalent options over Experian plc shares. The performance condition for options granted in 2005 and 2006 is based on the growth of Experian’s earnings per share in excess of the UK Retail Price Index from the date of demerger.

The market price of Experian plc shares at the end of the financial year was 436.75p; the highest and lowest prices during the financial year were 453.25p and 274.75p respectively.

Performance share plans

In May 2005 and June 2006, executive directors received a share award under the GUS PSP with a face value of one times salary. On demerger, these awards were automatically rolled over into Experian shares. As approved by GUS plc shareholders at the EGM held on 29 August 2006, awards equivalent to two times salary were made to executive directors on demerger in October 2006 under the Experian performance share plan. Both awards are outlined below. For awards granted under the rolled over GUS performance share plan, the performance condition is based on TSR against the comparator group adopted by Experian. Rolled over awards will not vest if Experian’s TSR is below the median return for the comparator group. For these rolled over awards only, once Experian achieves median performance, 40% of the award may vest, rising on a straight-line basis to 100% of the award vesting for upper quartile performance or better.

GUS co-investment plans and Experian reinvestment plans

Awards to directors under the 2004 and 2005 cycles of the GUS co-investment plan and North America co-investment plan were reinvested in awards under the Experian reinvestment plan and North America reinvestment plan at demerger. Awards under the 2006 cycle were automatically rolled over into equivalent awards over Experian shares under the rules of the GUS co-investment plan. Release of matching shares under the Experian reinvestment plan is subject to the achievement of performance conditions (see note 3 to the table below), the retention of reinvested awards and continued employment. No further awards will be made under the reinvestment plan. Matching shares awarded under the GUS co-investment plans will be released subject to continued employment.

Executive directors’ annual pension

Don Robert is provided with benefits through a Supplementary Executive Retirement Plan (‘SERP’) which is a defined benefit arrangement in the US. The figures below are in respect of his SERP entitlement. He also participated in a US defined contribution arrangement during the year and the employer contributions to this arrangement were $8,507 (2008: $3,692).

Paul Brooks is a member of the registered Experian UK pension scheme. His benefits are restricted by an earnings cap. However, benefits in excess of this cap are provided for through the Experian Limited SURBS. The pension figures below reflect both his registered and non-registered entitlement.

The table below provides the disclosure of the above directors’ pension entitlements in respect of benefits from registered schemes and non-registered arrangements.

Directors’ service contracts

In accordance with Don Robert’s service agreement with Experian Services Corporation (‘ESC’) dated 7 August 2006, if his employment is terminated by ESC without cause he is entitled to the following severance payments: continued payment of monthly salary for 12 months from the termination date; 12 months’ participation in welfare benefit plans in which he participated during his employment; and an annual bonus based on a 100% achievement of objectives payable in equal monthly instalments for 12 months. The same amounts are payable by ESC if Don Robert terminates the contract: (i) following material breach by ESC; or (ii) for Good Reason following a change of control of ESC. Good Reason means, during the six month period following a change of control, a material and substantial adverse reduction or change in Don Robert’s position.

Don Robert’s service agreement also provides for the following payments to be made if the agreement terminates in the event of Don Robert’s death (in addition to payments due but unpaid before death): a pro rata annual bonus for the bonus year to the termination date based on ESC’s performance in that bonus year; and a lump sum equal to 12 months’ base salary to be paid no later than 90 days after the date of death. If the employment is terminated due to Don Robert’s disability he is entitled to the bonus as described immediately above (in addition to payments due but unpaid before the termination). Any deferred compensation obligations with respect to Don Robert will be governed in accordance with the relevant plan rules. This is consistent with US employment practice.

In his service agreement dated 2 April 2007, upon termination of employment, at the absolute discretion of Experian Limited, Paul Brooks may be paid base salary alone, pension contributions and benefits in kind (excluding bonus or incentive payments unless the company in its absolute discretion determines otherwise) in lieu of six months’ notice (where notice is given by Paul Brooks) or 12 months’ notice (where notice is given by Experian Limited).

Save for the benefits described above, the service contract of each of the executive directors does not provide for any benefits on the termination of employment.

Combined Code

The constitution and operation of the remuneration committee are in accordance with the principles of good governance and the Combined Code on Corporate Governance published by the UK Financial Reporting Council.

Directors’ interests

The interests of the directors (and their connected persons) in the ordinary shares of the Group are shown below. Share options granted to directors, awards under the performance share plan and the contingent interests in matching shares under the co-investment and reinvestment plans are shown in the relevant tables. The directors have no interests in the debentures of the Group or in any shares or debentures of the Group’s subsidiaries.

On behalf of the remuneration committee
Charles Brown
Company Secretary
19 May 2009

Back to top

Accessibility | Feedback