Following a review of base salary levels at the end of 2012, base salaries were increased by 3% from 1st January 2013 in line with an increase granted
to the management population. Following this increase, base salary levels for each of the Executive Directors continues to be below midmarket levels
for similarly sized listed companies. The increase in David Newnes’ base salary is to reflect his previous salary being significantly below benchmark
and also reflects the strong performance of the Estate Agency Division in 2012 as well as the Board’s expectations for this Division in 2013.
Benefits are comprised of a car allowance/company car and private healthcare and in respect of Simon Embley, a taxable travel allowance of £15,000
(2011: £11,250).
Pension
The Executive Directors are members of a money purchase pension scheme. LSL matches Executive Directors’ contributions of up to 5% of base
salary. Details of actual LSL contributions for 2011 are presented in the table of Directors’ Remuneration on page 46.
Governance
Directors’ Report and Business Review
Annual Bonus
Executive Directors participate in a performance-related bonus scheme. The maximum bonus continues to be capped at 100% of base salary for
Executive Directors.
For 2012, the structure of the annual bonus remained broadly similar to 2011 with sliding scale performance targets based on LSL’s budgeted
Group Underlying Operating Profit (after the payment of any bonuses) for 80% of the potential with the remaining 20% of the potential based on
challenging strategic targets. Details of actual performance against the targets and therefore bonuses payable for the year ended 31st December
2012 are set out in the emoluments table on page 45.
The bonus arrangements which will be operated for 2013 will be based on the same structure to that operated in 2012 with the same split between
performance and challenging strategic targets.
Long term incentive Plan (excluding cSoP) (LtiP)
The LTIP continues to be LSL’s primary long term incentive arrangement. Awards under the LTIP are typically structured as nil or nominal cost options
which will normally vest three years from grant, subject to performance conditions and continued service. LTIP awards are granted to Executive
Directors and selected other senior managers on the following basis:
• Awards granted to the Chief Executive Officer are currently made over shares worth 100% of salary, with awards granted to other Executive
Directors made over shares worth 50% of salary.
• Under the LTIP, awards are limited to 100% of salary (although the rules state that grants in excess of 100% of salary may be made in exceptional
circumstances).
• Awards will be subject to a range of normalised earnings per share growth targets (for 70% of an award) and a total shareholder return (TSR)
condition (for 30% of an award), each applying to separate parts of an award and measured over a period of three years.
• For the 2012 awards:
– 25% of the EPS part of the award will vest for Adjusted Basic EPS growth of 8% p.a. increasing pro-rata to full vesting of this part of the award for
Adjusted Basic EPS growth of 12% p.a..
– 35% of the TSR part of the award will vest if LSL’s TSR is equal to the TSR of the median company increasing pro-rata to full vesting of this part of the award
for top quartile performance as measured against the constituents of the FTSE 250 (excluding investment trusts). In addition to the TSR performance
condition, the Remuneration Committee must also be satisfied that there has been an improvement in LSL’s underlying financial performance.
Similar performance targets are expected to be operated for 2013. The Remuneration Committee is comfortable that the blend of EPS and TSR
targets and 70:30 weighting provides a good balance between incentivising and rewarding good financial performance on the one hand whilst, on
the other hand, providing a strong and direct alignment with the interests of institutional shareholders by rewarding stock market outperformance.
company Share ownership Plan (cSoP)
The Group operates a CSOP (an equity-settled share-based remuneration scheme) for certain employees, which is operated by way of an addendum
to the rules of the LTIP. Under the CSOP, the options vest if the individual remains an employee of the Group after a three year period, unless the
individual has left under certain ‘good leaver’ terms in which case the options may vest earlier and providing the performance condition of 10%
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