Report of the Directors
Governance

Remuneration Report

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Addendum – Other Historical and Statutory Information

Johnson Matthey and FTSE 100 Total Shareholder Return Rebased to 100

The graph to the right charts total cumulative shareholder return of the company for the five year period from 31st March 2008 to 31st March 2013 against the FTSE 100 as the most appropriate comparator group, rebased to 100 at 1st April 2008.

As at 31st March 2013, Johnson Matthey was ranked 70th by market capitalisation in the FTSE 100.

Historical Data Regarding Chief Executive’s Remuneration

The table below sets out the total remuneration of the Chief Executive over the last five years.

Chief Executive Single Figure of Remuneration

  2008/09
£’000
2009/10
£’000
2010/11
£’000
2011/12
£’000
2012/13
£’000
Salary 680 700 733 768 794
Bonus 105 700 750 867
LTIP / share options 620 614 1,469 1,666
Benefits 24 21 21 22 22
Payment in lieu of pension 170 175 183 192 199
Total 1,599 1,596 2,301 3,318 2,681

The above data are calculated according to the same methodology as applied in the single figure table above.

Summary Statement of Directors’ Emoluments

The table below is a further summary of directors’ pay, including necessary information as required under Schedule 8 of the Companies Act 2006.

Summary Statement of Directors’ Emoluments 2012/13

  Date of
service
agreement
Date of
appointment
Base
salary
£’000
Payment
in lieu of
pension1
£’000
Annual
cash
bonus
£’000
Annual
deferred
bonus2
£’000
Benefits
£’000
Total
excluding
pension
£’000
Total
prior year
excluding
pension
£’000
Executive                  
Neil Carson3 1.8.99 1.8.99 794 199 22 1,015 1,849
Robert MacLeod4 3.2.09 22.6.09 431 108 19 558 931
Larry Pentz5 1.1.06 1.8.03 409 47 181 637 891
Bill Sandford 21.7.09 21.7.09 369 92 17 478 791
Total     2,003 446 239 2,688 4,462
  Date of
letter of
appointment
Date of
appointment
Fees
£’000
Total
excluding
pension
£’000
Total
prior year
excluding
pension
£’000
Non-executive6          
Tim Stevenson (Chairman) 10.1.11 29.3.11 300 300 225
Alan Ferguson 10.1.11 13.1.11 657 65 57
Sir Thomas Harris8 22.1.09 1.4.09 18 18 50
Colin Matthews9 4.10.12 4.10.12 27 27
Michael Roney 29.3.07 1.6.07 6810 68 56
Dorothy Thompson 22.5.07 1.9.07 55 55 50
Directors who retired in 2011/12     127
Total     533 533 565

The aggregate amount of remuneration receivable by executive directors and non-executive directors totalled £3,221,000 (2012 £5,027,000).

Notes

1
Neil Carson, Bill Sandford and Robert MacLeod no longer accrue pensionable service in the Johnson Matthey Employees Pension Scheme (JMEPS). ­­Messrs Carson and Sandford ceased pensionable service on 31st March 2006 and Mr MacLeod ceased pensionable service on 31st March 2011. They all now receive an annual cash payment in lieu of pension equal to 25% of base salary. ­­Larry Pentz accrued pension in JMEPS during the year up to the Annual Allowance and then opted out and started to receive a cash supplement in lieu of pension. From 1st January 2013 this cash supplement increased to 25% of base salary. These cash payments are taxable under the PAYE system.
2
This is the element of the annual bonus which is payable as shares but is deferred for three years.
3
Neil Carson is a non-executive director of AMEC plc. His fees for the year in respect of this non-executive directorship were £56,125. This amount is excluded from the table above and retained by him.
4
Robert MacLeod is a non-executive director of Aggreko plc. His fees for the year in respect of this non-executive directorship were £72,500. This amount is excluded from the table above and retained by him.
5
Larry Pentz is a non-executive director of Victrex plc. His fees for the year in respect of this non-executive directorship were £49,612. This amount is excluded from the table above and retained by him.
6
Non-executive fees (other than for the Chairman) were reviewed on 1st April 2012 for the period from 1st April 2012 to 31st March 2015. The fees are £55,000 per annum, with the fee for chairmanship of the Audit Committee being £10,000 per annum and the MDRC / Senior Independent Director being £13,000 per annum. The Chairman and the non-executive directors do not receive any pension benefits, LTIP allocations or bonus payments.
7
Includes £10,000 per annum for chairmanship of the Audit Committee.
8
Retired on 27th July 2012.
9
Appointed on 4th October 2012.
10
Includes £13,000 per annum for being the Senior Independent Director and for chairmanship of the Management Development and Remuneration Committee.

Share Options

The LTIP is now the company’s single means for the provision of long term awards and from 2007 replaced the granting of share options under the Johnson Matthey 2001 Share Option Scheme (the 2001 Scheme). From 2001 to 2006 options were granted each year under the 2001 Scheme. There have been no option grants since 2006. Options were granted at the market value of the company’s shares at the time of grant and were subject to performance targets over a three year period. Options may be exercised upon satisfaction of the relevant performance targets. Approximately 800 employees were granted options under the 2001 Scheme each year.

Options granted from 2004 to 2006

Grants made in 2004, 2005 and 2006 were subject to a three year performance target of EPS growth of UK RPI plus 3% per annum. If the performance target was not met at the end of the three year performance period, the options lapsed as there was no retesting of the performance target. In addition, to reduce the cost calculated under the International Financial Reporting Standard 2 – ‘Share-based Payment’, gains made on the exercise of options are capped at 100% of the grant price.

The MDRC had the discretion to award grants greater than 100% of base annual salary. Grants which were made above this threshold were, however, subject to increasingly stretching performance targets. Grants between 100% and 125% of base annual salary were subject to EPS growth of UK RPI plus 4% per annum and grants between 125% and 150% of basic annual salary were subject to EPS growth of UK RPI plus 5% per annum. The executive directors were granted options equal to 150% of basic annual salary. All the options, other than those granted in 2006 which were subject to EPS growth of UK RPI plus 5% per annum, have met their performance targets. The 2006 options which did not meet their performance targets have lapsed.

Options granted prior to 2004

Prior to 2004, options granted to the executive directors under the 2001 Scheme were up to a maximum of 100% of basic annual salary each year. Such options were subject to a performance target of EPS growth of UK RPI plus 4% per annum over any three consecutive years during the life of the option. The performance target was subject to annual retesting until the lapse of the options on the tenth anniversary of grant. All of these options have met their performance targets.

Directors’ Interests

The interests of the directors (including those of their connected persons) in the ordinary shares of the company disclosed in accordance with the Financial Conduct Authority’s Listing Rules, were:

1

Ordinary Shares

  31st May
20131
31st March
20131
31st March
20121
Tim Stevenson 5,250 5,250 5,500
Neil Carson 213,274 213,243 188,804
Alan Ferguson 2,200 2,200 1,000
Robert MacLeod 16,102 16,072 3,604
Colin Matthews 2,000 2,000 2
Larry Pentz 25,270 25,270 25,789
Michael Roney 2,863 2,863 3,000
Bill Sandford 14,657 14,627 9,165
Dorothy Thompson 9,278 9,278 9,721
1
Disclosures as at 31st March 2012 are of ordinary shares of 100 pence each. Following the company’s share capital consolidation on 6th August 2012 (as referred to in the Other Statutory Information section), the disclosures as at 31st March and 31st May 2013 are of ordinary shares of 10416/21 pence each.
2
At date of appointment.

All of the above interests of the directors and their connected persons were beneficial. The executive directors are also deemed to be interested in shares held by an employee share ownership trust (see note 30).

2

Share Options

As at 31st March 2013, individual holdings by the directors under the company’s executive share option schemes were as set out below. Options are not granted to non-executive directors.

  Date of
grant
Ordinary
shares
under option
Exercise
price
(pence)
Date from
which
exercisable
Expiry
date
Total
number of
ordinary shares
under option
Neil Carson 17.7.03 33,407 898 17.7.06 17.7.13 33,407
(2012 92,888)
Larry Pentz          
(2012 45,950)
Bill Sandford          
(2012 3,774)

Between 1st April 2012 and 31st March 2013 the following options were exercised by directors:

  Date of
grant
Date of
exercise
Options
exercised
Exercise
price
(pence)
Market price
on exercise
(pence)
Neil Carson 26.7.06 14.9.12 59,481 1,282 2,564
Larry Pentz 17.7.03 16.8.12 17,185 898 2,290
  26.7.06 17.9.12 28,765 1,282 2,564
Bill Sandford 26.7.06 14.8.12 3,774 1,282 2,279

Gains made on exercise of options by the directors during the year totalled £1,408,160 (2012 £2,113,928). The closing market price of the company’s shares at 28th March 2013 was 2,300 pence. The highest and lowest closing market prices during the year ended 31st March 2013 were 2,573 pence and 2,081 pence respectively.

3

LTIP Allocations

Number of allocated shares:

  As at
31st March
2012
Allocations
during
the year
Market price
at date of
allocation
(pence)
Released
during
the year
Lapsed
during
the year
As at
31st March
2013
Neil Carson 213,100 62,737 2,241 71,611 204,226
Robert MacLeod 116,448 27,222 2,241 55,072 88,598
Larry Pentz 89,975 26,100 2,241 31,116 84,959
Bill Sandford 77,644 23,427 2,241 25,575 75,496

On 25th July 2012 shares allocated in 2009 under the LTIP were released to participants. The compound annual growth in the company’s underlying EPS over the three year performance period, commencing in the year of allocation, resulted in a release of 100% of the allocated shares and the following gains:

  Number of
shares
released
Share price
when released
(pence)
Gain
(£)
Neil Carson 71,611 2,051 1,468,537
Robert MacLeod 55,072 2,051 1,129,369
Larry Pentz 31,116 2,051 638,100
Bill Sandford 25,575 2,051 524,470
4

Deferred Bonus Awards

  As at
31st March
2012
Number of
shares
awarded
Market price
at date of
allocation
(pence)
Vested
during
the year
As at
31st March
2013
Neil Carson 12,902 2,241 12,902
Robert MacLeod 3,499 2,241 3,499
Larry Pentz 3,355 2,241 3,355
Bill Sandford 2,968 2,241 2,968
5

Pension Benefits

Disclosure of directors’ pension benefits has been made under the requirements of the Financial Conduct Authority’s Listing Rules and in accordance with the Companies Act 2006. ­­The information below sets out the disclosures under the two sets of requirements.

  Age as at
31st March
2013
Total accrued
pension as at
31st March
20121
£’000 pa
Total accrued
pension as at
31st March
20131
£’000 pa
Change in
accrued
pension after
allowing for
inflation
£’000 pa
Transfer
value as at
31st March
20122
£’000
Transfer
value as at
31st March
20132
£’000
Directors’
contributions3
£’000
Change in
transfer
value less
directors’
contributions
£’000
Neil Carson4 55 365 378 5 7,665 8,350 685
Robert MacLeod4 48 9 9 106 119 13
Larry Pentz5,6 57 116 70 (46) 1,702 768 (934)
Bill Sandford4 59 185 194 5 4,390 4,848 458

Notes

1
The total accrued pension represents the pension earned while in pensionable service and would be paid annually on normal retirement. The element of the pension earned before 31st March 2010 would be subject to an actuarial reduction if retirement is before age 60, and in the case of Robert MacLeod all of the pension will be reduced if taken before age 65. There is no additional pension benefit payable to any director in the event of early retirement.
2
The transfer values shown for UK based pension benefits have been calculated in accordance with the Occupational Pension Schemes (Transfer Value) Regulations 1996. For US based pension benefits the transfer values have been determined using the same assumptions as those used for accounting disclosures. No allowance has been made in the transfer values for any discretionary benefits as there is no practice of awarding such benefits.
3
As no director is in a contributory pension scheme no contributions have been paid. Any voluntary contributions paid by executive directors are not shown except where these are matched by the company.
4
Messrs Carson and Sandford ceased pensionable service on 31st March 2006 and Mr MacLeod ceased pensionable service on 31st March 2011. They all now receive an annual cash payment in lieu of pension equal to 25% of base salary.
5
Larry Pentz is a US citizen and became a member of the UK pension scheme (JMEPS) on 1st January 2006, but ceased pensionable service on 31st October 2012 and started to receive a cash payment in lieu of pension. From 1st January 2013 this cash supplement was 25% of basic salary. Prior to joining JMEPS Mr Pentz was a member of the US Johnson Matthey Inc. Salaried Employees Pension Plan (a non-contributory defined benefit arrangement) and also of a US savings plan (401k). He also has benefits in a US Supplemental Executive Retirement Plan (SERP). The pension values reported above are the aggregate for his separate membership of the UK and US pension schemes and the SERP. US entitlements have been converted to sterling by reference to exchange rates on 31st March 2012 and 31st March 2013. The sterling amounts have changed over the year as a result of exchange rate movements. Of the change in the accrued benefit and transfer value £3,588 and £39,127, respectively, is due to currency movements.
6
Larry Pentz elected to transfer the value of his accrued UK pension benefits to a personal pension arrangement on 30th November 2012. The accrued UK pension and subsequent transfer value amount at 30th November was £53,609 p.a. and £1,400,425 respectively, including £204,425 of additional voluntary contributions (AVCs). This transfer has been taken into account in the numbers shown, such that the accrued pension and transfer values shown as at 31st March 2013 are in respect of his US pension benefits only.

The Remuneration Report was approved by the Board of Directors on 5th June 2013 and signed on its behalf by:

Michael Roney
Chairman of the Management Development and Remuneration Committee

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