REMUNERATION OVERVIEW - Marks & Spencer
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REMUNERATION
REMUNERATION OVERVIEW
INTRODUCTION The Committee spent a considerable
“The Committee On behalf of the Board, I am pleased
amount of time this year reviewing the
current remuneration framework,
to present our 2019/20 Remuneration
ensures that the Report. We also present our proposed
structures, measures and targets.
This was all undertaken in the context
pay framework is Remuneration Policy (Policy). In line with
regulations, we are seeking shareholder
of the ever-changing political and retail
trading landscape and more recently in
appropriately flexible, support and approval for our
Remuneration Policy at the 2020 AGM.
light of the ongoing Covid-19 pandemic.
The Committee consulted with our major
to act in shareholders’ A summary of the proposed changes shareholders (representing almost 50%
to the approved Remuneration Policy
best interests in is set out below and on pages 74-80
of our total shares in issue) to discuss our
proposal and response in respect of
of this report.
unpredictable executive pay arrangements. Additionally,
we also approached a number of
The Remuneration Report provides a
circumstances.” comprehensive picture of the structure shareholder representative bodies given
and scale of our remuneration framework, many of our stakeholders engage their
Andrew Fisher, Chair of the its alignment with the business strategy services. The Committee reviewed
Remuneration Committee and the rest of the workforce, as well as and discussed all the responses and
the decisions made by the Committee feedback provided and have developed a
as a result of business performance for remuneration framework that we believe,
this year and the intended arrangements based on what we currently know,
for 2020/21. will support the business over the
next three years and is aligned with
BOARD CHANGES investor expectations.
Following the departure of Humphrey The Committee believes that our
Singer in December, we were delighted Remuneration Policy continues to provide
to appoint Eoin Tonge as CFO. Details appropriate flexibility, ensuring that any
of Humphrey’s leaving arrangements, payments made in the implementation
along with recruitment details for Eoin, of the Policy are in the best interests of
can be found on page 89 of this report. both the Company and our shareholders.
The overall framework is considered to
The Committee was pleased that we remain appropriate but based on investor
secured the appointment of Eoin Tonge feedback some minor amendments are
in line with our simplified pay framework. proposed and described below.
He will, however, receive mobility
allowances for a set period of time. USE OF DISCRETION
In addition, we are pleased to appoint Recent world events have highlighted
Katie Bickerstaffe as our new Chief the importance of having a flexible policy
Strategy and Transformation Officer together with appropriate permissible
and see her become an executive member discretions to ensure that we can continue
of the Company. Katie was previously a to run M&S successfully. For complete
IN THIS SECTION non-executive director of the Company transparency, we are more explicitly
and a member of the Remuneration outlining the discretions already in place
REMUNERATION Committee, for which I would like to thank to ensure the Committee is able to act
Remuneration overview p66-p71 Katie for all her help and support. In line in the best interests of the business and
Remuneration in context p72-p73
with our standard practice Katie did not our shareholders in unknown and
participate in Committee discussions that unpredictable circumstances.
Remuneration policy p74-p80
could be construed as her influencing her
own future remuneration arrangements. The Committee has the ability to apply
ANNUAL REPORT ON
malus, clawback and responsible
REMUNERATION
REMUNERATION FRAMEWORK application of discretion to override
Remuneration structure p81 CONSIDERATIONS formulaic outcomes of the incentive
Total single figure remuneration p81 schemes to ensure that pay outcomes
Shareholder engagement and feedback are appropriate in the wider business and
Salary and benefits p82
The Board is committed to ensuring that economic climate beyond the relevant
Annual Bonus Scheme p83-p84
our remuneration framework supports our performance measures. During the year,
Performance Share Plan p84-p85 strategy, and provides a balance between the Committee discussed the breadth of
Directors’ share interests p86-p87 motivating and challenging our senior provisions in place and agreed that these
Changes to Board membership p89 leaders to deliver our business priorities provide the Committee with sufficient
Non-executive directors’ and also driving the long-term sustainable capacity to act appropriately in
remuneration p90 success of M&S. unforeseen circumstances. The clawback
Remuneration Committee remit p91 provisions which have been in place since
66 Marks and Spencer Group plc
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pm2017 allow the Committee a number remuneration, the strategic direction of formally removing this cash payment for
of circumstances during the life of the Company, and the interests of our all new executive director appointments.
the binding policy beyond financial shareholders, we propose to introduce In order to remove any policy differential
misstatement; these are explicitly strategic measures into the PSP. In direct between incumbent and new executive
disclosed on page 76. response to shareholder feedback, the directors, Steve Rowe has agreed to forgo
plan will retain a portion based upon Total his contractual arrangements for this
During the year the Committee did not
Shareholder Return (TSR) performance. pension cash alternative. Steve’s pension
apply any discretion to the variable pay
supplement will be reduced to zero
outcomes of the bonus and Performance We propose to increase the shareholding
over the next three years. Steve will
Share Plan (PSP). The Committee agreed requirement for all executive directors
remain eligible to participate in the
that the final vesting of the PSP was to 200% of salary. The CEO’s requirement
pension scheme on the same terms as
reflective of the last three years of will remain at 250% of salary. To further
all other colleagues as has long been
M&S’s performance and that the Policy align executives with shareholders and
M&S’s practice.
operated as intended. the longer-term success of the business,
we will be introducing a post-cessation Shareholders approved the current
KEY AMENDMENTS TO shareholding guideline. Executives Remuneration Policy at the AGM in 2017.
REMUNERATION POLICY will be expected to continue to hold their As such, the Company is required to seek
shareholding requirement for two years approval for the new policy at the AGM
The PSP will continue to be the primary post exiting the business. to be held on 3 July 2020. Pages 74-80
long-term incentive plan for executives.
provide the full details of the proposed
We will maintain the overall construct of Having already reduced our pension cash
policy. For transparency, the table below
the plan, with the typical award being alternative for new executive directors at
sets out an overview of the key areas of
250% of salary against a maximum of our last policy review, and in line with the
the Policy.
300% of salary. However, to ensure more pay arrangements offered to executive
relevant alignment between senior directors joining since that time, we are
GOVERNANCE
Base salary Benefits Pension benefits Annual Bonus Performance Shareholding Non-executive
Scheme Share Plan requirement directors (including
Chairman)
Main features of current policy
–– Increases –– Benefits –– Directors may –– Maximum –– Maximum award –– The CEO is –– Fees reviewed
awarded are provided at a rate participate in opportunity of of 300% of salary. required to hold annually.
normally in line commensurate M&S’s defined 200% of salary. 250% of salary
–– Performance –– Comprise basic
with those with the market contribution in shares. For all
–– 50% of total bonus measured against fee plus additional
elsewhere in and currently arrangement on other executive
deferred into financial targets fee for extra
the business. include a car or the same terms as directors,
shares for over a three-year responsibility
Adjustments in cash allowance, other colleagues, the current
three years. period. of Board or
excess of this may a driver, and life or receive a cash requirement is
Committee
be made where the assurance plus supplement in –– Measured –– Performance 150% of salary.
Chairman or Senior
Committee deems other benefits lieu of pension against Adjusted conditions
Independent
it appropriate. provided to all contributions. Group Profit may include
Director.
colleagues, Cash alternative Before Tax (PBT) quantifiable
–– Salaries will be
including maximum is (currently 70% non-financial/ –– Fees will be
compared against
colleague currently 20% of award) and strategic compared against
appropriately sized
discount. of salary for individual measures, with appropriately
listed companies.
other executive objectives. financial measures sized companies.
directors (25% comprising at
–– Clawback –– In addition, the
for CEO). least 50% of
and malus Chairman may be
awards.
provisions apply. entitled to the use
–– A two-year of a car and driver.
holding period
–– In line with our
post vesting.
other colleagues,
–– Clawback the Chairman and
and malus non-executive
provisions apply. directors are
entitled to receive
colleague discount.
Policy change
–– No change. –– No change. –– Removal of –– No change. –– No change. –– The shareholding –– No change.
pension cash requirement is
supplements increasing from
for any future 150% to 200% for
directors. all other executive
directors.
–– Reduction of
the CEO’s –– Directors are
cash pension required to
supplement to continue to hold
zero over next their shareholding
three years. requirement
(or their actual
shareholding on
leaving if lower)
for two years after
leaving M&S.
Annual Report & Financial Statements 2020 67
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pmREMUNERATION OVERVIEW CONTINUED
STRATEGIC ALIGNMENT OF PAY
The focus at M&S continues to be on remuneration. This strength of alignment The Committee will continue to
transformation, so the measures and will enable the Committee to ensure thoroughly review the pay structures
targets used in M&S’s incentive schemes, pay arrangements help to accelerate and incentive arrangements for the
specifically those of the Performance transformation and fulfill M&S’s potential senior leadership team to ensure strong
Share Plan and Annual Bonus Scheme, for long-term sustainable profitable alignment between the delivery of
align with the KPIs and strategic priorities growth, despite the prolonged impact business performance and the associated
being used across the business. The of Covid-19 in the current trading remuneration arrangements as the
illustration below demonstrates this environment and likely subsequent business continues along this accelerated
strong linkage between the KPIs and financial performance. transformation journey to emerge
strategic priorities with executive stronger and more competitive.
STRATEGIC ALIGNMENT OF REMUNERATION FRAMEWORK WITH KPIS
Annual Bonus
Performance Scheme (ABS)
KPI/Strategic Priority As measured by Share Plan (PSP) (when operating)
KPI Adjusted Earnings Per Share (EPS) Financial Results
See KPIs Return On Capital Employed (ROCE)
on p26
Group PBT Before Adjusting Items (PBT)
Strategic What we are learning from the crisis
Priority What will never be the same again
See Accelerating the transformation programme
Strategic
Priorities
on p7
2019/20 PERFORMANCE
ADJUSTED EARNINGS PER SHARE RETURN ON CAPITAL EMPLOYED GROUP PBT BEFORE ADJUSTING ITEMS
16.7p 12.7% £403.1m
Adjusted EPS in 2019/20 was 16.7p. This was below Average three-year ROCE performance was 12.7%. Group PBT was below the threshold for
the 26.8p threshold required for any vesting As a result, 11.2% out of a maximum of 33% of the bonus payments to be made under the
under this element of the 2017 PSP award. 2017 PSP will vest under this element. 2019/20 Annual Bonus Scheme.
68 Marks and Spencer Group plc
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pmCONTEXT OF BUSINESS As shown earlier in this Annual Report, not limited to, supporting every colleague
PERFORMANCE while there were some financial needing to either self-isolate or shield
improvements within the business, themselves to do so on full pay, and
During the year, M&S made good this did not translate to improvements rewarding M&S’s hardworking frontline
progress in further implementing its in the core key performance indicators store and e-commerce distribution
transformation. With improvements on page 68. As such, payments under both colleagues with an additional short-term
made to range, value and customer the Annual Bonus Scheme and 15% pay award.
communication, the Food business PSP were impacted by M&S’s overall
outperformed the market and improved performance during the year. SINGLE FIGURE AND INCENTIVE
its financial performance in several SCHEME OUTCOMES
aspects such as sales and operating profit. WIDER WORKFORCE PAY
In addition, significant strides were taken ARRANGEMENTS The graph below summarises the total
to deliver the strategy to bring M&S food payments made to executive directors in
online via the investment in Ocado The Committee received regular and 2019/20, illustrating the figures detailed in
Retail Limited. While several Clothing & varied updates during the year relating the single figure chart set out later in this
Home departments improved their to M&S’s pay arrangements. In addition to report on page 81.
performance, ultimately total revenue those already outlined in the Committee’s
The total pay for the CEO was c.20% lower
for this area of the business was down. remit available on the M&S website,
this year, reflecting lower PSP outcomes
detailed discussions ranged from hourly
As referenced earlier in this Annual and the reduction in share price during
pay for store colleagues to colleague
Report, the impact of Covid-19 has been the year.
participation in last year’s rights issue.
significant. In the short-term, M&S has
The 2017 PSP will vest at 11.2% in June 2020
responded rapidly to the changing trading Further, we welcome the collaboration
for the three-year performance period up
landscape making financial decisions to with the Business Involvement Group
to 28 March 2020. Page 85 of this report
secure the future of the business. In the at the Committee meeting in receiving
provides further detail on the specifics
long-term the business must, as described direct feedback on colleagues’ views. This
of the targets set and the respective
earlier in this Annual Report, harness the dialogue ensures a close link between the
GOVERNANCE
achievement under each measure, which
learnings from this crisis to return M&S to pay philosophies at the most senior levels
are also summarised in the illustration
profitable, sustainable performance. with those for the broader population.
overleaf. The remit of the Committee is
As demonstrated on page 68 and To demonstrate the Committee’s to ensure that targets set are stretching
referenced throughout this Remuneration keen interest in wider workforce pay yet achievable, rewarding the delivery
Report, there is a strong alignment arrangements within M&S, we have this of sustainable, ambitious long-term
between M&S’s key financial performance year expanded our disclosure on these performance. Vesting under the PSP
indicators and the measures within the specific areas; see pages 72 and 73. remains low when reviewed in the context
directors’ incentive schemes. The inclusion of the wider market. However, the
As is referenced earlier in this Annual
of strategic measures within the Committee is satisfied that this vesting
Report, the business has taken great care
long-term incentive award, allows the is reflective of the challenging business
to support all colleagues during the
Committee to drive the delivery of M&S’s performance Steve Rowe and Archie
Covid-19 pandemic which the Committee
transformation while supporting the Norman have both highlighted earlier
and the Board were supportive of. From a
learnings taken from this global crisis. in this Annual Report.
pay perspective, these include, but are
SINGLE FIGURE REMUNERATION FOR 2019/20
Total
Steve £1,067,583 £143,279 £1,210,862
Rowe
Humphrey
Singer £456,000 £456,000
Fixed pay PSP Total bonus
See Single figure remuneration on p81 See PSP on p84-p85 See Annual Bonus Scheme on p83
Annual Report & Financial Statements 2020 69
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pmREMUNERATION OVERVIEW CONTINUED
PERFORMANCE SHARE PLAN (PSP) VESTING 2019
IMPACT OF SHARE PRICE CHANGE ON
VESTING OUTCOMES PSP VESTING VALUES
Adjusted EPS
Maximum 33.33%
Actual 0%
Average ROCE 50%
share price
Maximum 33.33% Adjusted Relative decline
Actual 12.7% EPS TSR
Relative TSR
Maximum 33.33% Max
Actual 0% Average
Outturn ROCE
Maximum 100%
Actual 11.2%
Max
Outturn
Outturn
Value at Value at
As is shown in the illustration above, a significant proportion of grant share price vesting share price
a director’s reward is linked to the movement in share price, providing (£3.28) (£1.65)
significant investment in the Company and strong long-term
alignment with shareholders See Performance Share Plan on p84-p85
The 2019/20 Annual Bonus Scheme However, in order to ensure continued PAY ARRANGEMENTS FOR 2020/21
was focused on restoring the business to strong governance and transparent
profitable growth. Annual performance reporting to shareholders, and in line When reviewing salary levels, the
for the year was again focused on Group with the normal processes, the Committee Committee considers a number of internal
PBT before adjusting items (PBT) with discussed each director’s achievement and external factors, primarily the salary
individual measures set against the key against the relevant individual review principles applied to the rest of
areas of delivery deemed most critical performance targets. Final achievement the organisation, but also Company
to the transformation journey. As with against these individual objectives is performance during the year and external
previous years, individual performance detailed on page 83 of this report. market data. As a result of performance in
was measured independently of the year and the unprecedented impact of
The Committee is satisfied that incentive the Covid-19 pandemic, it was decided not
PBT performance, but, mirroring
payments made to executive directors to implement any salary increases in the
arrangements elsewhere in the business,
during the year are appropriate in the wider organisation and the Committee
no individual element could be earned
context of business performance for decided that it would be appropriate to
until the threshold needed to secure
2019/20 and payments made elsewhere freeze Steve Rowe’s salary. As detailed
payment under the PBT element was
in the business. The Remuneration Policy within this report, the Committee made
similarly achieved. For the 2019/20
operated as intended so no changes to the recommendation, and Steve agreed,
financial year, the PBT achievement of
outcomes were necessary. that over the next three years the CEO
£403.1m was below the threshold to
trigger a bonus payment and so no pension supplement would be reduced to
bonus was paid under the Annual Bonus zero. While the intended structure of the
Scheme to anyone within the organisation, Annual Bonus Scheme, as detailed on
including the executive directors. page 75 in the Policy table, remains
70 Marks and Spencer Group plc
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pmunchanged from 2019/20, the Committee since awards were made in 2019 and so LOOKING AHEAD
has agreed that for 2020/21 only there will took decisive action to significantly reduce
be no bonus scheme in operation for the the quantum of the 2020 PSP award This was the final year under the current
executive directors. Executive directors from 250% to an intended 175% of salary. remuneration framework, and we hope
will still continue to be measured against a In determining the size of this year’s to have your support at the 2020 AGM to
scorecard of individual objectives aligned PSP awards, the Committee, wished to approve the new Remuneration Policy.
to the strategic priorities set out earlier acknowledge the shareholder experience The new Policy has been designed to
in this report, however no financial of Covid-19 to reduce windfall gains from ensure that executive director pay
payment will be made in respect of their directors’ awards. As such, M&S’s average arrangements support and drive the
achievements. The Committee debated share price since February 2020 until business strategy while remaining
the appropriateness of this decision in a mid-May was used as a reference point in appropriate when considered within the
time when executives are working harder Committee discussions. The Committee overall M&S remuneration framework and
than ever and believes, in the context of will review and reconfirm this decision the external regulatory environment.
wider macroeconomic factors and the immediately prior to grant to ensure this A robust framework is especially crucial
experience of the business with a large remains appropriate. given the challenging environment in
number of colleagues placed on furlough, which we are operating. Having engaged
Targets will be set and disclosed no later with our major shareholders as part of this
this is the right decision for M&S.
than 31 December 2020. The Committee process, to both incorporate their views
The Committee continues to ensure that is committed to shareholder engagement and to maintain open dialogue on director
the total remuneration framework for and will further engage with our major pay arrangements, we hope that all our
executives is aligned to shareholder shareholders in advance of any long-term shareholders will support the Policy at
interests. In light of the decision not to incentive targets being determined. the AGM.
operate a bonus scheme for 2020/21, More details are set out on page 85.
the Committee believes it is critical to As we look to the future, the Committee
The Committee believes that this will also need to take into consideration
ensure that executives remain aligned
approach is appropriate as the business the impact of investment in Ocado,
with shareholders’ long-term interests
reviews its strategy in light of the a partnership we believe will bring
GOVERNANCE
through a PSP award set against not only
Covid-19 crisis and when retention and substantial benefits and has
appropriate measures but also achievable
motivation of the senior leadership transformative potential for our
yet stretching targets. In the current
team remains critical. business. The Committee fully intends
rapidly changing circumstances caused
by Covid-19, and the extreme uncertainty to review the extent to which this
SHAREHOLDER APPROVAL partnership impacts structures, targets
in the retail sector more broadly, the
AT THE AGM and application of M&S’s incentive
Committee debated the operation of the
PSP, the appropriateness of the proposed arrangements in both the short-
In addition to the resolution at this year’s
performance measures and targets as well and long-term.
Annual General Meeting (AGM) to renew
as the timing of a 2020/21 award which is the Remuneration Policy, we are also I would like to thank our shareholders for
typically granted shortly after M&S’s final seeking shareholder approval to make an their continued support during what has
year results. As a result, the Committee amendment to the existing share plan been an unprecedented year. Due to the
has agreed to grant a PSP award to rules. We wish to provide the facility to Covid-19 pandemic the Company’s AGM
executives in July 2020. The performance satisfy awards with new issue shares, on 3 July 2020 will be via a live webcast
targets for this award will be set at a time rather than market purchase shares as is broadcast from Waterside House and I will
when the impact of Covid-19 on the currently the practice. This change will be able to answer any questions in relation
business can be better forecast and the support M&S in securing its cash flow for to this Remuneration Report at this time.
proposed strategic measures reviewed financially efficient business operations.
in light of the business’s strategic Andrew Fisher, Chairman of the
In addition some minor amendments to
response to the post-pandemic trading Remuneration Committee
align with the operation of our existing
environment. However, the Committee Remuneration Policy approved by
recognises the material fall in share price shareholders in 2017 are proposed.
Further details are set out in the Notice
of Meeting on pages 183 to 199.
Annual Report & Financial Statements 2020 71
© 2019 Friend Studio Ltd File name: RemXXXXXChairmansXstatement_v85 Modification Date: 27 May 2020 5:32 pmREMUNERATION
REMUNERATION IN
CONTEXT
COLLEAGUE ENGAGEMENT
–– Share ownership across our contribute on a range of topics colleagues and also gives the
colleagues M&S is a proud advocate and activities. During the year, Committee the opportunity to explain
of employee share ownership, representatives from BIG have been and discuss our pay practices and how
encouraging colleagues to share in engaged on a number of pay-related executive pay aligns with pay across
M&S’s success while aligning interests topics, beyond the executive level, the wider workforce. In addition, the
with our shareholders. Across our including: helping colleagues to Head of Executive Reward & External
UK and Irish colleagues, M&S has a understand the impact of the rights Reporting also provides updates to
significant number of participants issue on their share schemes and the Committee as appropriate on
in all employee share schemes: providing ongoing feedback on pay and people-related issues during
colleagues hold over 53m SAYE colleague questions and concerns the year.
options in our ShareSave scheme and during this period; user acceptance
–– Pay Budgets Under the remit of
over 3,000 colleagues hold shares in testing of our share schemes website;
the Remuneration Committee,
our Share Incentive Plan ShareBuy. and providing feedback and support
total budgeted salary expenditure
on the timing of our annual ShareSave
–– Direct engagement with our across M&S for salary review is
invitation. The collaborative
colleagues Since 2018, the Chair of noted, as are bonus and share scheme
relationship that we have with BIG
the National Business Involvement budgets ensuring principles for reward
strongly reflects our belief in the key
Group (BIG), our colleague allocation are aligned across the full
role that BIG plays in ensuring the
representative body, is invited to workforce, inclusive of senior leaders.
Committee has greater visibility of
attend a Remuneration Committee
the things that really matter to our
meeting each year to engage and
CONSIDERATION OF COLLEAGUE PAY In approving the budget for the annual CONSIDERATION OF
bonus, the Committee reviews all bonus STAKEHOLDER VIEWS
The Committee monitors and reviews the costs for the Company against the
effectiveness of the senior remuneration operating plan. The Committee also The Committee is committed to an
policy and its impact and compatibility reviews and approves any PSP awards open and transparent dialogue with
with remuneration policies in the wider made to executive directors and directors shareholders on the issue of executive
workforce. Throughout the year, the below the Board prior to their grant. remuneration. Where appropriate,
Committee reviews the frameworks and the Committee will actively engage
budgets for key components of colleague The Committee receives updates with shareholders and shareholder
pay arrangements, together with the on a variety of colleague engagement representative bodies, seeking views
broader structure of Group bonus initiatives which form part of our colleague which may be considered when making
provisions which ensures appropriate voice surveys, asking colleagues about any decisions about changes to the
alignment with senior pay arrangements. engagement, empowerment and directors’ Remuneration Policy.
enablement. While colleagues were not
The Committee is provided throughout formally consulted on the development The Committee seeks the views of
the year with information detailing of the Policy, the annual employee voice the largest shareholders individually
pay in the wider workforce, which gives and others through shareholder
survey asks colleagues about the fairness
additional context for the Committee to and reasonableness of colleague representative bodies when considering
make informed decisions. The Head pay and benefits, and they are also making any significant changes to the
of Executive Reward & External encouraged to raise questions at the Remuneration Policy; this may be done
Reporting advises the Committee periodic all-colleague announcements annually or on an ad hoc basis, dependent
of the approach which will be adopted upon the issue. For example, during the
led by the CEO. Any questions raised at
with the forthcoming UK pay review this time are answered, and comments year the Committee proposed changes
and the Committee then considers the made during the year through surveys to the PSP measures and, as a direct
executive directors’ pay in line with or our network of elected colleague response to shareholder feedback TSR
these arrangements. representatives via BIG are considered. remains a key measure. The Committee
annually engages in a process of investor
The Head of Executive Reward & External The Head of Executive Reward & External
Reporting typically provides an annual consultation, which is typically in written
Reporting consults on all executive
update to these colleague representatives format, but may be through face-to-face
director bonus objectives and advises
meetings, if considered useful. The
the Committee on how, and the extent to with an explanation of the executive
Committee Chairman is available to
which, these may be cascaded throughout directors’ pay arrangements during the
year, and they are able to ask questions answer questions at the AGM and the
the Company.
on the arrangements and their fit with the answers to specific questions are posted
on our website.
other reward policies at this time.
72 Marks and Spencer Group plc
© 2019 Friend Studio Ltd File name: RemXXXXXRemXinXcontext_v61 Modification Date: 26 May 2020 7:25 pmGENDER PAY GAP As part of our socially responsible benefits, bonus and long-term
reporting strategy, an annual shareholder incentives for the 12 monthly payrolls
The M&S median gender pay gap meeting is normally held and the within the full financial year. Earnings
for the year to April 2019 is 4.0%, consideration of views on a variety for part-time colleagues are annualised
compared with a national average of topics, including executive pay, on a full-time equivalent basis to allow
of 17.3%. The M&S mean gap for the is taken into account. equal comparisons.
same period is 12.9%. –– Adjusting the value of any bonus so
CHIEF EXECUTIVE’S PAY RATIO
In the last 12 months, we’ve made that it only reflects the amount earned
several steps to further promote In last year’s report, the Committee in respect of the 2019/20 financial year
and enhance diversity and equality chose to early disclose an indicative and does not include the value of any
at M&S. This includes, but is by no CEO pay ratio. During the year, the deferred shares from the 2016 bonus
means limited to, the launch of our Committee considered the appropriate which vested in June 2019.
Breakthrough Leaders programme calculation approaches as set out in the
–– Adding in the employer pension
aimed at developing and accelerating regulations and has chosen Methodology
contribution from the M&S Pension
the progression of diverse talent in A, as we believe it to be the simplest, most
Saving Plan.
the business, our participation in appropriate and robust way to calculate
Retail Week’s Be Inspired accelerator the ratio. Joiners and leavers in the year have been
programme for senior women, excluded from the calculations, the
Option A requires three UK colleagues to
collaboration in the 30% Club’s percentile figures are therefore
be identified as the equivalent of the 25th,
cross-business mentoring representative of the whole colleague
50th and 75th percentile. Having identified
programme and the launch of our population but do not include all
these colleagues based on pay and
own internal mentoring portal for colleagues as at 28 March 2020.
benefits as at 28 March 2020, the total
our colleagues. All of this activity remuneration is calculated on the same The table below shows the ratio of CEO
is supported by our colleague basis as the CEO single total figure of pay in 2019/20, using the single total figure
networks, including the Gender remuneration, the only exception being remuneration as disclosed in Figure 8
GOVERNANCE
Equality Network, which hold events the individual performance element of the (page 81) to the comparable, indicative,
and raise important discussions Annual Bonus Scheme applicable to the full-time equivalent total reward of those
on gender equality via their online relevant colleagues is assumed to be the colleagues whose pay is ranked at the
social communities. respective target value, as the actual value 25th, 50th and 75th percentiles in our
We’re proud that 74% of our Customer is not known at the time of producing the UK workforce. The calculation used to
Assistants are women but we need Annual Report. This requires: determine these figures is reflective
to do more to encourage diversity in of M&S’s pay proposition across the
–– Starting with colleague pay that was
senior roles. Diversity and inclusion workforce as all pay elements have been
calculated based on actual base pay,
remains a key priority for us and we included to ensure equal comparisons.
have developed a bold strategy and 25th percentile 50th percentile 75th percentile
Year Methodology ratio ratio ratio
will not be letting our focus relent
through these challenging times. 2020 Figures (Option A) 64 : 1 59 : 1 51 : 1
4%
Total pay and
Salary benefits
Pay data (£000) (£000)
CEO remuneration 828 1,211
Gender pay gap (median)
UK colleague 25th percentile 18 19
UK colleague 50th percentile 19 21
PAY ARRANGEMENTS FOR UK colleague 75th percentile 22 24
COLLEAGUES DURING COVID-19
PERCENTAGE CHANGE IN CEO’S REMUNERATION
We are proud to be providing support
to our colleagues during Covid-19. The table below sets out the change in the CEO’s remuneration (i.e. salary, taxable
As detailed earlier in this Annual benefits and annual bonus) compared with the change in our UK-based colleagues’ pay.
Report, for those colleagues needing This group has been chosen as the majority of our workforce are based in the UK.
to self-isolate or shield themselves, % change 2018/19 – 2019/20
they have done so on full pay. Our Base salary Benefits Annual bonus
frontline store and e-commerce CEO (Steve Rowe) 3.0% -0.2% –
distribution colleagues continuing
UK employees (average per FTE) 3.7% 0.7% –
to work are being provided with a
short-term 15% additional pay award Salary reviews in 2019/20 awarded across The change in colleague benefits is
and similarly, colleagues working in the wider organisation ranged from 2% to reflective of a shift in workforce structure
support centres will receive a share 4%, the 3% increase awarded to the CEO rather than a change in benefit offering,
award equivalent to 5% of salary for was the first salary increase since his which remains unchanged from 2018/19.
the furlough period. Furloughing appointment to the role in 2016, despite There has been no fundamental change
frontline colleagues continue to his salary being significantly lower than in the CEO benefit offering.
receive full pay with 90% of pay being that of his predecessor. There were no
paid for support centre colleagues No award under the Annual Bonus
annual base pay increases awarded to
placed on furlough. This ensures Scheme was made to either the CEO or
the CEO or to colleagues in respect of
consistent treatment of all anyone else within the wider workforce
the 2020/21 financial year.
colleagues, by maintaining a 15% in either 2018/19 or 2019/20.
differential in pay between those
working and those on furlough.
Annual Report & Financial Statements 2020 73
© 2019 Friend Studio Ltd File name: RemXXXXXRemXinXcontext_v61 Modification Date: 26 May 2020 7:25 pmREMUNERATION
REMUNERATION POLICY
FIGURE 1: EXECUTIVE DIRECTORS’ REMUNERATION POLICY TABLE
Shareholders approved the Base salary Benefits Pension benefits
Remuneration Policy at the
AGM in 2017. As such, the
Company is required to seek
approval for the new Policy PURPOSE AND LINK TO STRATEGY PURPOSE AND LINK TO STRATEGY PURPOSE AND LINK TO STRATEGY
at the AGM to be held on To attract, retain and motivate To provide market-competitive To attract and retain high-calibre
3 July 2020, from which high-calibre executives needed benefits which drive employee executives through a commitment
date the updated Policy to deliver our strategy and drive engagement and commitment to responsible, secure retirement
will apply. The Committee business performance. in our business. funding in line with our
reviewed the senior Company values.
remuneration framework
during the year to ensure
that it remains fit for purpose,
providing an appropriate OPERATION OPERATION OPERATION
framework to fulfil M&S’s
Payable in cash. Directors are eligible to receive Current directors may participate
reward philosophy which benefits in line with our policies in the Your M&S Pension Saving
Reviewed annually by the
is, in turn, designed to Committee considering a which may include: Plan (a defined contribution
support and drive the number of factors, including: –– A car or cash allowance. arrangement) or an alternative
business strategy. –– Salary increases awarded –– A driver. pension saving vehicle that the
to other colleagues in the Company may offer, on the same
The Policy remains largely –– Life assurance.
wider workforce which are terms as all other colleagues or
unchanged from the one Where appropriate, our Global/ receive a cash supplement in lieu
typically reviewed annually Domestic Mobility Policy may
approved by shareholders on a similar basis. of pension contributions into
in 2017; for transparency, apply. This may include, but not this scheme.
–– Comparable salaries in be limited to, travel, relocation
where amendments appropriate comparator groups. and tax equalisation allowances.
have been made these are Salaries reflect the experience, Directors are offered a number of
highlighted. Once approved, responsibility and contribution other benefits in line with all other
this Policy may operate of the individual and role within colleagues, such as colleague
for up to three years. the Group. discount and salary sacrifice
schemes such as Cycle2Work.
The Policy is designed
to attract, retain and Directors may participate in a
Save As You Earn Scheme and a
motivate our leaders
Share Incentive Plan and any
within a framework designed other all-employee share
to promote the long-term schemes on the same terms
success of M&S and as other colleagues.
aligned with our
shareholders’ interests.
MAXIMUM OPPORTUNITY MAXIMUM OPPORTUNITY MAXIMUM OPPORTUNITY
While there is no set maximum, While there is no set maximum, any A maximum employer contribution
any increases are normally in line benefits will be provided at a rate currently of 12% of salary where the
with those in the wider workforce. commensurate with the market. employee contributes 6% of salary.
Individual adjustments in excess of Maximum participation in Prior to 11 July 2017 an alternative
this may be made outside of this all-employee share schemes is cash payment capped at 25%
cycle at the discretion of the in line with local statutory limits. of salary was available for
Committee, where appropriate. executive directors.
Such circumstances can include: PERFORMANCE CONDITIONS Change for 2020
–– Where the role scope has N/A
changed; Removal of pension cash
supplements for any
–– Where comparable salaries
future directors.
in the external market have
changed; or Reduction of the CEO’s cash
–– To apply salary progression pension supplement to zero
for newly appointed directors. over the next three years.
PERFORMANCE CONDITIONS PERFORMANCE CONDITIONS
N/A N/A
74 Marks and Spencer Group plc
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Annual Bonus Scheme including Performance Share Plan (PSP) Shareholding Requirement
Deferred Share Bonus Plan (DSBP)
PURPOSE AND LINK TO STRATEGY PURPOSE AND LINK TO STRATEGY PURPOSE AND LINK TO STRATEGY
To drive annual profitability, strategic change and Measured against the key financial drivers of the To drive long-term, sustainable
individual performance in line with the business plan. business plan to deliver sustainable value creation. decision-making for the benefit of
To recognise and reward individual contributions To encourage long-term shareholding to retain the Company and our shareholders.
to the way we do business. directors, and provide greater alignment with
The deferral into shares provides alignment with shareholders’ interests.
shareholders’ long-term interests following the
successful delivery of short-term targets.
OPERATION OPERATION OPERATION
Directors are eligible to participate in this The Company’s principal long-term incentive Directors are required to hold shares
non-contractual, discretionary scheme. scheme, approved by shareholders in 2015. equivalent in value to a minimum
Payments are made subject to the satisfaction of Directors are eligible to participate in this percentage of their salary within
a five-year period from their
GOVERNANCE
predetermined targets set at the start of the year, non-contractual, discretionary plan.
as approved by the Committee. Directors may receive an annual award which appointment date.
Not less than 50% of any bonus earned is paid in vests after three years subject to predetermined
deferred shares under the DSBP, with the remainder performance conditions.
payable in cash. Clawback and malus rules apply to awards
Deferred shares vest after a period of three years (see explanatory notes).
subject to continued service, but no further Good leaver and change of control provisions
performance conditions. apply (see explanatory notes).
Clawback and malus rules apply to cash and The value of any dividends during the vesting
DSBP awards respectively; see explanatory notes period may be payable (see explanatory notes).
(page 76) for more information. Awards are subject to a further two-year holding
Good leaver and change of control provisions apply period after the vesting date. Directors may
to the deferred shares (see explanatory notes). sell sufficient shares to satisfy the respective tax
The value of any dividends during the deferred liability but must retain the net number of shares
period may be payable (see explanatory notes). until the end of this two-year period.
The Committee retains the right to exercise As with the bonus scheme, the Committee retains
discretion, both upwards and downwards, to ensure the right to exercise discretion in the same manner
that the level of award payable is appropriate to ensure appropriateness of outcomes.
and fair in the context of the director’s individual
performance and the Company’s overall
performance. Where exercised, the rationale for
this discretion will be fully disclosed to shareholders
in the subsequent Annual Report.
MAXIMUM OPPORTUNITY MAXIMUM OPPORTUNITY MAXIMUM OPPORTUNITY
A maximum annual potential of up to 200% of salary. The maximum value of shares (at grant) which can For the CEO, this requirement is
be made under an award to an individual in respect 250% of salary. For all other executive
PERFORMANCE CONDITIONS
of a financial year is 300% of salary. directors the requirement is 200%.
Quantifiable one-year performance measures and Change for 2020
targets are set by the Committee around financial PERFORMANCE CONDITIONS
Directors are required to continue
and individual objectives linked with the sustainable Performance is measured over a three-year
to hold their shareholding
delivery of the business plan. period against a balanced scorecard of appropriate
requirement, or, if their level
Financial performance measures comprise at measures as determined by the Committee each
of shareholding is below the
least 50% of awards and may include, but not be year. This currently includes EPS, ROCE, TSR and
requirement, their actual
limited to Group PBT after adjusting items. from 2020 strategic measure. These are chosen
shareholding for two years after
Typically, no payment for individual objectives as those measures which support and drive
leaving M&S.
can be earned unless a ‘threshold’ level of Group top-line and bottom-line performance in line
PBT after adjusting items has been achieved. with business strategy. The shareholding requirement
This threshold level is set by the Committee taking Financial measures comprise at least 50% of awards. for other executive directors
into account the previous year’s performance and The threshold level of vesting is 20% of increased from 150% to 200%.
the business operating plan for the current year. the maximum.
For achievement of individual objectives no more than For performance between threshold and maximum,
PERFORMANCE CONDITIONS
40% (currently 30%) of the maximum bonus potential awards vest on a straight-line basis.
is paid for threshold performance, and no more than N/A
60% for target performance. However, the Committee
retains the flexibility to amend the pay-out level at
different levels of performance for future bonus
cycles. This is based on its assessment of the level of
stretch inherent in the set targets, and the Committee
will disclose any such determinations appropriately.
Annual Report & Financial Statements 2020 75
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FIGURE 2: POLICY TABLE
Executive directors may be in receipt of awards under share plans outside of the current remuneration framework detailed on pages
74 and 75; these may have been awarded upon recruitment or prior to their appointment as an executive director. While awards under
these plans do not form part of a forward-looking policy, for transparency, details of the plans are set out in the table below.
PURPOSE AND LINK PERFORMANCE
ELEMENT TO STRATEGY OPERATION MAXIMUM OPPORTUNITY CONDITIONS
Restricted To enable the –– Restricted awards may be granted for the recruitment While there is no The Committee
Share Plan recruitment of key of directors. maximum set in the may choose to
(RSP) directors who are rules, the Committee apply no formal
–– Awards vest after a restricted period, which can vary
necessary to considers the scale and performance
by award but is typically between one and three years.
the delivery of structure of awards on conditions save for
business strategy. –– Malus provisions, good leaver and change of control an individual basis. continued service.
provisions apply (see below and page 78).
–– The value of any dividends during the restricted period
may be payable (see explanatory notes below).
Executive Measured against –– Approved by shareholders and HMRC in 2015, Awards are capped at Awards vest
Share Option the key drivers of our the Committee may choose to award share options 250% of salary in respect subject to at
Scheme business plan to to directors if appropriate. of any financial year least three-year
(ESOS) deliver sustainable of the Company predetermined
–– Malus provisions, good leaver and change of control
value creation. but in recruitment performance
provisions apply (see below and page 78).
circumstances awards conditions.
To encourage long-term
–– Options are normally exercised between the third may be granted up
shareholding to retain
and tenth anniversaries of grant, subject to the to a higher limit of
directors, and provide
achievement of any performance conditions set 400% of salary.
greater alignment with
by the Committee.
shareholders’ interests.
EXPLANATORY NOTES Any performance conditions applicable (including the PSP) in 2015 and onwards
to PSP, RSP and ESOS awards may be will similarly be subject to clawback
The Committee reserves the right amended by the Committee if an event provisions. These provisions enable the
to make any remuneration payments occurs which causes it to consider that the Committee, in its absolute discretion, to
notwithstanding that they are not in line performance condition would not achieve reclaim awards paid to individuals for up
with the Policy set out above, where the its original purpose and the amended to three years after the respective vesting
terms of the payment were agreed at a performance condition is, in the opinion of or payment date (or up to two years in the
time when the relevant individual was not the Committee, no less difficult to satisfy case of PSP awards) where specified
a director of the Company, or under a prior but for the event in question. events occur. The specified events that
approved policy and, in the opinion of would trigger clawback include the
the Committee, the payment was not in Our long-term incentive plans provide
discovery of a material misstatement
consideration of the individual becoming the Committee with discretion with
resulting in an adjustment in the audited
a director of the Company. respect of vesting outcomes that affect
consolidated accounts of the Company,
the actual level of reward payable to
For these purposes, payments include the the assessment of any performance
individuals, such discretion would only be
Committee satisfying awards of variable condition, terms or conditions in respect
used in exceptional circumstances and, if
remuneration and, in relation to an award of an award or payment that were based
exercised, the rationale for this discretion
over shares, the terms of the payment are on error, or inaccurate or misleading
will be fully disclosed to shareholders in
agreed at the time the award is granted. information, the discovery that any
the subsequent Annual Report.
information used to determine the
Awards granted under the PSP, DSBP, number of shares subject to an award or
and RSP can be made in the form of CLAWBACK AND MALUS
amount payable was based on an error,
conditional share awards, forfeitable or inaccurate or misleading information,
M&S is committed to ensuring its
shares, options or rights with the same the action or conduct of a participant
remuneration arrangements motivate
economic effect. In addition, awards which, in the reasonable opinion of the
participants to strive for exceptional
may be settled in cash. Awards may Committee, amounts to gross misconduct
performance while also protecting
incorporate the right to receive (in cash or a material breach of the participant’s
shareholder value from the Company
and/or shares) the value of dividends, service contract that falls short of gross
taking unnecessary risks. As such,
including any dividend tax credit where misconduct, and events or behaviour of
clawback and malus provisions apply
applicable, between grant and vesting a participant that have had a significant
to the executive directors’ incentive
on the shares that vest. This amount detrimental impact on the reputation
arrangements. All share awards granted
may be calculated on a cumulative basis, of any member of the Group, provided
from 2013 onwards are subject to malus
assuming the reinvestment of dividends that the Committee is satisfied that the
provisions. These provisions allow the
into shares. relevant participant was responsible for
Committee, in its absolute discretion, to
In the event of a variation of the determine at any time prior to the vesting the reputational damage and that the
Company’s share capital or a demerger, of an award to reduce the number of reputational damage is attributable to the
special dividend or other event which in shares, cancel an award or impose further participant. Clawback may be effected,
the Committee’s opinion may affect the conditions on an award in circumstances among other means, by requiring the
price of shares, the Committee may alter for which the Committee considers transfer of shares, payment of cash or
the terms of awards and the number such action to be appropriate. Such reduction of awards.
of shares subject to them. The terms of circumstances may include, but not be
awards may be amended in accordance limited to, a material misstatement of PERFORMANCE CONDITIONS AND
with the relevant plan rules (which were the Company’s audited results. TARGET SETTING
formally approved by shareholders on
In addition, clawback provisions were The Committee reviews annually the
7 July 2015).
introduced in 2015 and apply to cash measures, weightings and targets for the
payments made under the Annual Bonus incentive arrangements for the executive
Scheme. Awards made under any of the directors. In doing so, the Committee
76 Marks and Spencer Group plc Company’s other executive share plans considers a number of factors which assist
© 2019 Friend Studio Ltd File name: RemXXXXXRemXPolicy_v82 Modification Date: 26 May 2020 7:26 pmin forming a view. These include, but are not Targets are set against the respective executives, part of the bonus is deferred
limited to, the strategic priorities for M&S annual and long-term operating plans into shares for three years.
over the short- to long-term, shareholder taking into account analysts’ forecasts,
Around 170 of M&S’s top senior executives
feedback, the risk profile of the business M&S’s strategic plans, prior year
may be invited to participate in the PSP,
and the macroeconomic climate. performance, estimated vesting levels
measured against the same performance
and the affordability of pay arrangements.
The Annual Bonus Scheme is measured conditions as executive directors. Award
Targets are set to provide a sustainable
against a balance of profitability and levels granted are determined to be
balance of risk and reward to ensure that,
the delivery of key strategic areas of aligned with market practice and reflect
while being motivational for participants,
importance for the business. The an individual’s level of seniority as well
maximum payments are only made for
profitability measure used is Group PBT as their performance and potential within
exceptional performance.
before adjusting items as this is used the business.
internally to report and assess business
REMUNERATION FRAMEWORK FOR
performance by the Board and Operating FIGURE 3: RECRUITMENT POLICY &
THE REST OF THE ORGANISATION
Committee. Refer to the glossary on SERVICE CONTRACTS
pages 176 to 178 for the definition of M&S’s philosophy is to provide a fair
Group PBT before adjusting items, and The table below sets out the Company’s
and consistent approach to pay.
to note 5 of the financial statements policy on the recruitment of new executive
Remuneration is determined by level
for a description of adjusting items. directors. Similar considerations may also
and is broadly aligned with those of the
apply where a director is promoted to
The PSP is assessed against a balance executive directors.
the Board.
of measures identified as those most Base salaries are reviewed annually
relevant to driving both sustainable In addition, the Committee in exceptional
and reflect the local labour market.
top-line and bottom-line business circumstances has discretion to include
performance, as well as providing All UK colleagues are eligible to any other remuneration component or
value for shareholders, and strategic participate in the Your M&S Pension award which it feels is appropriate,
alignment with the business. Saving Plan on the same terms as the considering the specific circumstances
GOVERNANCE
executive directors. In addition, all UK of the individual, subject to the limit on
This is reflected in the EPS and ROCE colleagues are provided with life insurance variable remuneration set out below.
measures which focus on a balance of and colleague discount, and may
profitability, cost control and the The rationale for any such component
choose to participate in the Company’s
efficient use of capital investment. would be appropriately disclosed.
all-employee share schemes and salary
For example, for internal promotional
The value delivered to shareholders is sacrifice arrangements.
appointments to the Board, the
reflected by Relative TSR which is A significant number of colleagues are Committee would honour any pre-existing
measured against a bespoke group of eligible to be considered to participate in contractual remuneration arrangements;
retail companies which are believed to an annual bonus scheme which for the these arrangements may be outside of
provide a balanced portfolio of those majority will be a cash-based payment the Policy detailed on pages 74 to 75.
most likely to be alternative investment partially determined by Group PBT
choices for M&S shareholders. performance. For M&S’s most senior
ELEMENT APPROACH
Service –– All executive directors have rolling contracts for service which may be terminated by M&S giving 12 months’ notice and the
contract individual giving six months’ notice.
–– There are no further obligations which could give rise to a remuneration or loss of office payment other than those set out
in the Remuneration Policy and the Termination Policy.
–– The directors’ service contracts are available for shareholder inspection at the Company’s registered office.
Base –– Salaries are set by the Committee, taking into consideration a number of factors including the current pay for other executive
salary directors, the experience, skill and current pay level of the individual and external market forces.
–– For new appointments to the Board, the Committee may set the rate of pay at the lower end of the rate for other directors
and/or other comparable roles within the market with the intention of applying staged increases.
Benefits –– The Committee will offer a benefits package in line with our benefits policy for executive directors.
Pension –– Maximum contribution in line with our policy for future executive directors (currently up to 12% of salary).
benefits
Annual Bonus –– Eligible to take part in the Annual Bonus Scheme with a maximum bonus of 200% of salary in line with our policy for
Scheme executive directors.
PSP –– A maximum award of up to 300% of salary in line with our policy.
Buy-out –– Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result
awards of their appointment with M&S, the Committee may offer compensatory payments or buy-out awards, dependent on the
individual circumstances of recruitment, determined on a case-by-case basis.
–– The Committee in its judgement normally intends that any such payments are made on a like-for-like basis and considers
issues such as the plan type, time horizons and valuation of the forfeited awards. The Committee’s intention would be to
ensure that the expected value awarded will be no greater than the expected value forfeited by the individual.
–– Where appropriate, the Committee may choose to apply performance conditions to any of these awards.
Annual Report & Financial Statements 2020 77
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