Report of the Directors

Remuneration Report

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The Management Development and Remuneration Committee – Members, Terms of Reference and Meeting Structure

The Management Development and Remuneration Committee is a committee of the board and comprises all the independent non-executive directors of the company as set out in the Board of Directors section and the group Chairman.

The members of the MDRC during the year were:

The MDRC’s terms of reference are summarised in the Corporate Governance Report and include determination on behalf of the board of fair remuneration for the Chief Executive, the other executive directors and the group Chairman (in which case the group Chairman does not participate). Non-executive directors’ remuneration is determined by the board, within the limits prescribed by the company’s Articles of Association. Non-executive remuneration consists of fees, which are set following advice taken from independent consultants and are reviewed at regular intervals.

In addition, the MDRC assists the board in ensuring that the company has well developed plans for management succession, including the recruitment and development of senior management, along with appropriate remuneration policies to ensure that management are retained and motivated. The MDRC also receives recommendations from the Chief Executive on the remuneration of those reporting to him as well as advice from the Group Director, Human Resources. The Group Director, Human Resources acts as secretary to the MDRC.

The full terms of reference of the MDRC are available on our website in the Investor Relations / Corporate Governance section.

In determining the remuneration structure, the MDRC appoints and receives advice from independent remuneration consultants on the pay and incentive arrangements prevailing in comparably sized industrial companies in each country in which Johnson Matthey has operations. During the year, such advice was received from the Hay Group, which also provided advice on job evaluation, and from PricewaterhouseCoopers LLP.

All advisors are appointed independently by the MDRC. It regularly reviews the advisers it uses and periodically retenders. Fees for services associated with the development and implementation of remuneration policy incurred during the year were:

Advisor £
Hay Group 67,905
PricewaterhouseCoopers LLP 9,000

The Hay Group’s fees also include fees for the provision of information on international pay data and trends. These data are used in the development of regional and national pay policies in countries where Johnson Matthey operates.

PricewaterhouseCoopers LLP also provide advice and tax compliance services to the company in relation to the administration of expatriates and internationally mobile employees. Additionally, PricewaterhouseCoopers LLP provide other tax advice, tax audit work, completion of overseas tax returns, advice on set up of new overseas operations, some overseas payroll services and reviews of some financial controls. The fees associated with the provision of these international services are not included in the above figures.

A statement regarding the use of remuneration consultants for the year ended 31st March 2013 is available on our website in the Investor Relations / Corporate Governance section.

Key Topics Covered at MDRC Meetings

The MDRC meets at least three times per year. The principal activities are set out in the terms of reference and the timetable for specific reviews and approval processes is set out below.

Meeting Annual agenda items Other agenda items
May Review of CEC and senior managers’ salary increases
Review of executive directors’ salary and bonus
Review of pay within the group
Approval of the Remuneration Report
May or July Approval of executive directors’ salary and bonus
Approval of LTIP allocation
Approval of LTIP vesting
Review of other senior managers’ salary increases and bonus payments
Chairman’s fees
(every three years)
November Management development and succession planning
Review of the share incentive plan
Update on remuneration issues
Review of remuneration policy
March Preliminary review of draft Remuneration Report
Approval of bonus scheme rules
Review of the share incentive plan

In addition, the MDRC will normally carry out a major review of the structure of executive remuneration every three years, or more frequently when circumstances require it.

In 2012/13 the committee met on four occasions, on 31st May 2012, 24th July 2012, 19th November 2012 and on 27th March 2013.

Attendance at the meetings is recorded in the Corporate Governance Report.

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