This part of the Directors' Remuneration Report sets out implementation of the Directors' remuneration for 2017.
Summary of Changes for Executive Directors
This table briefly summarises the proposals for the Directors' remuneration arrangements for 2017 when compared to the arrangements for the period.
|Base Salary and Benefits||Pension||AIP||Long-Term Incentives||All-Employee Schemes|
|Base salary will be subject to annual review.||No changes proposed.||No change to the maximum opportunity, measures or structure of 2017 AIP.||No change to the maximum opportunity for the 2017 LTIP awards.|
A change to one of the platform business targets.
|Ongoing participation in the SIP.|
Base Salary and Benefits
The Remuneration Committee expects to finalise its annual review of the Executive Directors' base salaries later in 2017, in line with the timing of pay reviews for all of the Group's employees.
The benefits in kind offered to the Executive Directors are expected to remain unchanged.
No changes are proposed to the pension contributions for Executive Directors for 2017, which are expected to remain at the levels provided in the current period.
The Remuneration Committee approved the implementation of an AIP for the Executive Directors applicable to the 2016/17 financial year. This plan broadly reflects the framework of the 2016 AIP and is line with the 2014 Directors' Remuneration Policy.
The bonus potential for the Executive Directors is 100% and for the Chief Executive Officer is 125% of base salary for "maximum" performance, which is the same as the 2016 AIP.
The weighting of objectives in the 2017 AIP is the same as the 2016 plan, with 35% for a Gross Sales A target, 35% for a Group EBITDA A target and 30% for performance measured against role-specific objectives. The Gross Sales A target relates to the Group's Gross Sales (Retail) A and does not include any income or benefits from the Morrisons operation. The rationale for setting these performance measures has not changed from 2016. For an explanation, see the Annual Report on Remuneration.
The actual performance targets are not disclosed due to their commercial sensitivity on the basis that if disclosed it would likely damage the Company's commercial interests. The Company will disclose achievement against the targets after the end of the performance period, provided such disclosure is not considered commercially sensitive at the time.
2017 LTIP Awards
The Remuneration Committee approved the making of awards under the LTIP for the Executive Directors for the 2016/2017 financial year. The amount of the LTIP awards is based on a percentage of salary, expected to be in line with the percentages agreed for the 2016 LTIP awards and in line with the 2014 Directors' Remuneration Policy.
As with the 2016 LTIP awards, the Remuneration Committee proposes to make 2017 LTIP award grants subject to earnings before tax and Revenue performance conditions in respect of the retail business for the 2018/2019 financial year. The other two performance targets relate to the platform business. The first of these is linked to the operational efficiency of the platform solution for the 2018/2019 financial year. The second of the platform business targets will be focused on expanding the Ocado Smart Platform business and specifically generating sales of the Ocado Smart Platform. This target replaces the performance target used for the 2015 and 2016 LTIP awards concerning the cost efficiency of the platform solution. This change to the LTIP performance targets reflects the Board's focus on rewarding the delivery of both a broader platform solution that includes store pick fulfilment and sales of the platform solution to new customers, while continuing to incentive improvements in operational efficiency. Each performance condition will have a 25% weighting.
No LTIP award will vest unless a "threshold" level of performance condition has been achieved. At "threshold" performance for a performance target, 6.25% of an LTIP award will vest and at "maximum" performance, 25% of an LTIP award will vest. Full vesting will occur where exceptional performance levels have been achieved and significant shareholder value created.
The actual performance targets are not disclosed due to their commercial sensitivity on the basis that if disclosed it would likely damage the Company's commercial interests. The Company will disclose achievement against targets after the end of the performance period, provided such disclosure is not considered commercially sensitive at the time.
The Executive Directors are expected to continue their participation in the SIP scheme in 2017.
Changes for Non-Executive Directors and Chairman
The review of remuneration of the Non-Executive Directors and the Chairman will be finalised in line with the timing of pay reviews for all of the Group's employees.
Shareholder Approval and Votes at AGM
The 2016 Directors' Remuneration Report will be subject to a shareholder vote at the AGM. Entitlement of a Director to remuneration is not made conditional on this resolution being passed.
The Remuneration Committee Chairman is committed to ongoing shareholder dialogue on Directors' remuneration and takes an active interest in voting outcomes. In the event of a substantial vote against a resolution in relation to the Directors' Remuneration Report, the Directors' Remuneration Policy or a new share scheme, the Company would seek to understand the reasons for any such vote and would detail in the announcement of the results of voting any actions it intends to take to understand the reasons behind the vote result and also note this in the next annual report. The Remuneration Committee considers that a vote against that exceeds 20% should be considered significant and requires explanation.
The table below sets out the actual voting in respect of resolutions regarding remuneration at the three previous annual general meetings.
|Resolution Text||Votes For||% For||Votes Against||% Against||Total Votes||Votes Withheld|
|Approve the 2015 Directors' Remuneration Report||314,587,371||91.48||29,304,819||8.52||345,048,769||1,156,579|
|Approve the 2014 Directors' Remuneration Report||377,215,710||80.61||90,709,506||19.39||476,384,487||8,459,271|
|Approve the 2013 Directors' Remuneration Report||399,764,910||80.04||99,701,426||19.96||499,693,161||226,825|
|Approve the Ocado Growth Incentive Plan||365,970,183||73.24||133,721,017||26.76||499,693,271||2,071|
|Approve the 2014 ESOS||481,882,997||97.10||14,373,969||2.90||499,692,971||3,436,005|
Basis of Preparation and Audit Review
This report is a Directors' Remuneration Report for the 52 weeks ended 27 November 2016, prepared for the purposes of satisfying section 420(1) and section 421(2A) of the Companies Act. It has been drawn up in accordance with the Companies Act and the Code, the Regulations, the Listing Rules and the Disclosure Guidance and Transparency Rules.
In accordance with section 497 of the Companies Act and the Regulations, certain parts of this Directors' Remuneration Report (where indicated) have been audited by the Company's auditors, PricewaterhouseCoopers LLP.
A copy of this Directors' Remuneration Report will be available on the Company's corporate website.
This Directors' Remuneration Report is approved by the Board and signed on its behalf by:
Chairman of the Remuneration Committee
Ocado Group plc
31 January 2017
A See Alternative Performance Measures