Year ended 31 December 2008
Remuneration committee and policy
Introduction
This report has been prepared in accordance with the requirements of the Directors’ Remuneration Report Regulations 2002, which set out requirements for the disclosure of Directors’ remuneration and also in accordance with the requirements of the Listing Rules of the Financial Services Authority.
The Regulations require the auditors to report to the Company’s members on the ‘auditable part’ of the Directors’ remuneration report and to state whether, in their opinion, the part of the report that has been subject to audit has been properly prepared in accordance with the Companies Act 1985 (as amended by the Directors’ Remuneration Report Regulations 2002). The report is therefore divided into separate sections to disclose the audited and unaudited information.
Unaudited information
Remuneration Committee
The members of the Remuneration Committee are Clare Spottiswoode (Chairman), David Bamford, Steven McTiernan, Pat Plunkett, David Williams and Ann Grant (who was appointed on joining the Board on 15 May 2008). The Committee met six times during the year.
The main responsibilities of the Committee include:
- Determining and agreeing with the Board the remuneration policy for the Chief Executive Officer, Chairman, Executive Directors and senior executives;
- Approving the design of, and determining targets for, an annual performance-related pay scheme for the Executive Directors and senior executives;
- Reviewing the design of share incentive plans for approval by the Board and shareholders and determining the annual award policy to Executive Directors and senior executives under existing plans; and
- Within the terms of the agreed policy, determining the remainder of the remuneration packages (principally comprising salary and pension) for each Executive Director and senior executive.
The full terms of reference for the Committee are available on the Company’s website.
Committee’s advisers
The Committee invites individuals to attend meetings to provide advice in order to enable it to make informed decisions. These individuals include Aidan Heavey, Chief Executive Officer and Gordon Headley, Chief HR Officer. No Director takes part in any decision directly affecting his own remuneration. The Company Chairman, Pat Plunkett, also absents himself during discussion relating to his own fees. The Committee has appointed Hewitt New Bridge Street (HNBS) as its independent remuneration advisers. They also provide technical advice to the Group in connection with the operation of its share incentive arrangements. A statement outlining the business relationship with HNBS can be viewed on the Investor Relations section of the Group’s website. The Committee also consults with the Company’s major investors and investor representative groups as appropriate.
Remuneration policy
The Group’s policy is to maintain levels of remuneration so as to attract, motivate and retain Executive Directors and senior executives of the highest calibre who can contribute their experience to the Group’s operations. The elements of the remuneration package for Executive Directors and senior management are base salary, annual bonus, taxable benefits, pension payments and participation in the Group’s share incentive arrangements. A significant element of the potential remuneration package is, therefore, performance-linked.
When determining the total remuneration of the Executive Directors and senior management, the Committee predominately takes into account the remuneration practices adopted by UK listed companies of a similar market capitalisation and overseas complexity to Tullow. Practice within other oil and gas companies is also considered although the availability of relevant data is limited due to there being few other UK listed companies in the sector of a comparable size to Tullow. Finally, in setting the remuneration policy for the Executive Directors, regard is also given to pay practices elsewhere in the Group.
The key elements of the remuneration package for the Executive Directors, are set out here.
