Remuneration
Ian Grice
Chairman of the Remuneration Committee
On behalf of the Board, I am pleased to present the report on remuneration for 2011, for which the Board will be seeking approval from shareholders at the Annual General Meeting.
Diploma PLC's remuneration policy continues to be focused on attracting, retaining and motivating the executive talent required for the delivery of the Group's growth strategy in a competitive international market, while ensuring that remuneration is linked to the long-term performance of the Group.
The Committee pays attention to the evolution of best corporate governance practice in the design of its remuneration framework and believes that the Group's overall remuneration policy continues to be appropriate.
There continues to be a strong emphasis on performance related awards and the Committee took the opportunity to enhance this element of remuneration in adopting replacement long-term incentive arrangements earlier this financial year.
The Committee was satisfied that the previous Long Term Incentive Plan ("LTIP") which was due to expire in 2011, had been very effective in driving performance and that it provided an appropriate incentive for achieving upper quartile performance versus peers; however the Committee took the view that there should be some tougher targets, but also an incentive to deliver performance beyond this level.
The Committee, having taken advice from its independent advisers, Kepler Associates, decided to adopt a new Performance Share Plan ("PSP") with a structure similar to the previous LTIP, with performance measured against earnings per share ("EPS") and total shareholder return ("TSR"). However it was felt appropriate to introduce tougher EPS targets and to link the TSR target to an absolute return above the median performance of the FTSE 250 Index.
The Committee also decided to introduce a Share Matching Plan ("SMP") to expand the range of performance which is incentivised and to further align the interests of Executive Directors with those of shareholders, by requiring Executive Directors to invest further in the Company's shares.
Having consulted with shareholders on these proposals, the Committee was pleased to receive approval from shareholders for the new PSP and SMP, collectively the "new LTIP", earlier this year at the Annual General Meeting.
There have been no further changes made to the Company's remuneration policies during this current year.
Ian Grice
Chairman of the Remuneration Committee