We believe that the interests of Directors should be closely aligned with those of shareholders so we operate a shareholding requirement to achieve this. For executive Directors, a considerable part of this alignment can be achieved through the retention of shares released under the DBP and under long term incentive plans.
In July 2012, the alignment between shareholders and executive Directors was improved as the minimum shareholding requirement was increased from 100% to 200% of base salary. Nigel Stein, Marcus Bryson and Andrew Reynolds Smith, who were all in post at that time, were expected to meet the requirement within five years and did so comfortably (see table below).
Adam Walker, as a newly appointed Director, is expected to acquire shares with a value of 100% of his base salary within five years of appointment and 200% of base salary as soon as possible after that. He is expected to retain all vested long term incentive awards (net of tax) until the requirement is met in full. He has made considerable progress towards meeting the requirement since his appointment to the Board on 1 January 2014.
The shareholding requirement is tested annually on 31 December using the average share price for the final three months of the year based only on shares that are held outright by the Director or their connected persons.
We also apply a similar shareholding requirement for Executive Committee members and the top 100 executives in the Group as we believe that their interests should be closely aligned with shareholders in the same way as those of executive Directors and non-executive Directors (see page 93). Executive Committee members are expected to hold shares with a value of a minimum of 100% of base salary (retaining all vested long term incentives net of tax until the requirement is met in full). The top 100 executives below that level are required to hold a minimum of either 20% or 30% of base salary, depending on their grade, (retaining 50% of vested long term incentives net of tax until the requirement is met in full).
The following table shows the number of shares held by the Directors (and their connected persons) at 31 December 2014. It also shows the interests of executive Directors in share awards at the same date (with further details provided in the subsequent tables).
Shares Interests in shares
Shares held
Shareholding requirement
Without performance
conditions With performance conditions
%
of salary DBP
awards(b) Restricted award(c) LTIP
awards(d) SEP
awards(e) Performance
awards(f) ESOS
options(g)
Required Achieved(a) Unvested Unvested Vested Unvested Unvested Vested
Executive Directors
Nigel Stein 1,370,077 200 564 32,569 – 408,997 1,439,773 – 1,387,902
Marcus Bryson 873,161 200 576 11,675 – 343,558 895,746 – 168,353
Andrew Reynolds Smith 905,455 200 597 25,383 – 343,558 895,746 – 168,353
Adam Walker 77,281 200(h) 50 – 71,423 – 212,982 76,218 –
Former executive Director
William Seeger 612,712(i) – – – – – 644,775(j) – –
(a) Based on average share price of 323.33p per share for the period 1 October 2014 to 31 December 2014 and salary as at 31 December 2014.
(b) DBP awards are in the form of conditional shares which will vest subject to continued employment and malus provisions.
(c) Restricted award is in the form of conditional shares and will vest subject to continued employment. Clawback will apply in the event employment ceases within 12 months of vesting.
(d) LTIP awards are in the form of nil cost options (with the exception of those to William Seeger which are in the form of conditional shares). Vested LTIP awards have a deferral period and are capable of exercise on 1 April 2015 (fourth anniversary of date of grant).
(e) SEP awards are in the form of conditional shares and will vest subject to the achievement of an EPS performance condition (which is the same as that attached to the 2013 SEP Core Award) and continued employment.
(f) Performance award is in the form of conditional shares and will vest subject to the achievement of an EPS performance condition and continued employment.
Clawback will apply in the event employment ceases within 12 months of vesting.
(g) ESOS awards are market value options. Vested ESOS awards are those not exercised at 31 December 2014.
(h) Required to achieve a shareholding requirement of 100% of salary within five years of appointment and 200% of salary as soon as possible after that.
(i) Shares held on retirement from the Board on 25 February 2014.
(j) Awards held on retiring from the Company on 31 August 2014 (see SEP table on page 89 for further details).
Further details on the awards shown in the above table can be found in the share awards tables below and the additional notes.
There were no changes in the interests of Directors in the period 31 December 2014 to 23 February 2015.
Nigel Stein 06.03.14 – 32,569 – 32,569 Unvested 402.16 2016
Marcus Bryson 08.08.12 53,278 – 53,278 – Released 212.18 26.02.14
06.03.14 – 11,675 – 11,675 Unvested 402.16 2016(b)
Andrew Reynolds Smith 06.03.14 – 25,383 – 25,383 Unvested 402.16 2016
(a) Average GKN share price for the five dealing days immediately before the grant dates used to calculate the number of shares under the awards.
(b) Normal release date under DBP rules, however shares will be released following his retirement as a Director and the announcement of the 2014 annual results.
Beneficial interests under the SEP
Grant date
Nigel Stein 06.08.12 622,143 – 622,143 Unvested 208.36 2012 – 2016 24.02.2015 / 2017
04.03.13 482,128 – 482,128 Unvested 268.87 2013 – 2017 2016 / 2018 10.03.14 – 335,502 335,502 Unvested 396.23 2014 – 2018 2017 / 2019
1,439,773
Marcus Bryson 06.08.12 386,647 – 386,647 Unvested 208.36 2012 – 2016 24.02.2015(d)
04.03.13 299,631 – 299,631 Unvested 268.87 2013 – 2017 2016 / 2018(e) 10.03.14 – 209,468 209,468 Unvested 396.23 2014 – 2018 2017 / 2019(e)
895,746
Andrew Reynolds Smith 06.08.12 386,647 – 386,647 Unvested 208.36 2012 – 2016 24.02.2015 / 2017 04.03.13 299,631 – 299,631 Unvested 268.87 2013 – 2017 2016 / 2018 10.03.14 – 209,468 209,468 Unvested 396.23 2014 – 2018 2017 / 2019
895,746
Adam Walker 10.03.14 – 212,982 212,982 Unvested 396.23 2014 – 2018 2017 / 2019
William Seeger 06.08.12 363,265 – 363,265 (f) Unvested 208.36 2012 – 2016 24.02.2015 / 2017 04.03.13 281,510 – 281,510(f) Unvested 268.87 2013 – 2017 2016 / 2018
644,775
(a) Includes shares under both the Core and Sustainability Awards.
(b) Average GKN share price for the three dealing days immediately before the grant dates used to calculate the number of shares under the Core Awards. The number of Sustainability Award shares is based on 20% of the Core Award shares.
(c) 50% of any vested Core Award is released after three years and the remaining 50% (and any vested Sustainability Award) is released after five years, in both cases after announcement of the prior year annual results. For the 2012 SEP Core Award, the performance condition was satisfied at 67.5%.
(d) Shares vested under the 2012 Core Award will be released in full on 24 February 2015 (no shares will be deferred). The Sustainability Award will lapse. See page 91 for further details.
(e) Shares that vest under the 2013 and 2014 Core Awards will be released on the original release dates subject to the performance conditions being satisfied and pro-rated to reflect period of service during the performance periods. The Sustainability Awards will lapse.
(f) Awards held on retiring from the Company on 31 August 2014. Shares that vest will be released on the original release dates subject to the performance conditions being satisfied and pro-rated to reflect period of service during the relevant performance periods. Details of awards released are shown on page 91.
Beneficial interests under the LTIP
Grant date
Nigel Stein 11.08.10 453,720 453,720 – Released 88.16 2010 – 2012 11.08.14
01.04.11 408,997 – 408,997 Vested 146.7 2011 – 2013 01.04.15 – 31.03.21
Marcus Bryson 11.08.10 381,125 381,125 – Released 88.16 2010 – 2012 22.10.14
01.04.11 343,558 – 343,558 Vested 146.7 2011 – 2013 01.04.15(b)
Andrew Reynolds Smith 11.08.10 381,125 381,125 – Released 88.16 2010 – 2012 23.10.14
01.04.11 343,558 – 343,558 Vested 146.7 2011 – 2013 01.04.15 – 31.03.21
William Seeger 11.08.10 372,050 372,050 – Released 88.16 2010 – 2012 11.08.14(c)
01.04.11 335,378 335,378 – Released 146.7 2011 – 2013 25.09.14(d)
(a) Average GKN share price for the prior year used to calculate the number of shares under the awards.
(b) Normal release date under LTIP rules. However, shares are released as soon as practicable following retirement (in this case following the announcement of the 2014 annual results).
(c) Award released before retiring from the Company on 31 August 2014 (see page 91 for further details).
Directors’ remuneration report continued
Beneficial interests under the ESOS
Grant date
Status of award at 31.12.2014
Nigel Stein 12.08.09 752,861 – 752,861 Unexercised 110.08 2009 – 2011 12.08.12 – 11.08.19
07.05.10 434,621 – 434,621 Unexercised 134.60 2010 – 2012 07.05.13 – 06.05.20 01.04.11 200,420 – 200,420 Unexercised 199.58 2011 – 2013 01.04.14 – 31.03.21
1,387,902
Marcus Bryson 01.04.11 168,353 – 168,353 Unexercised 199.58 2011 – 2013 01.04.14 – 31.03.21(b) Andrew Reynolds Smith 01.04.11 168,353 – 168,353 Unexercised 199.58 2011 – 2013 01.04.14 – 31.03.21
William Seeger 01.04.11 164,345 164,345 – Exercised 199.58 2011 – 2013 01.04.14(c)
(a) Average GKN share price for the five dealing days immediately before the grant dates used to calculate the number of shares under the awards.
(b) Normal exercise period under the rules. The award must be exercised within six months following retirement.
(c) Awards exercised before retiring from the Company on 31 August 2014 (see page 91 for further details).
Beneficial interests under the joining awards for Adam Walker
Award type Grant date
Restricted Shares 1 10.03.14 – 12,114 167 12,281 – Released 396.23 29.07.14
Restricted Shares 2 10.03.14 – 71,423 – – 71,423 Unvested 396.23 24.02.15
Performance Shares 10.03.14 – 76,218 – – 76,218 Unvested 396.23 2016
147,641
(a) Average GKN share price for the three dealing days immediately before the grant date used to calculate the number of shares under the awards.
The aggregate gain made by Directors on the release of awards and exercise of options in the year was £4.2 million.
Pension (audited)
The table below sets out details of the pension benefit provisions under the defined benefit and defined contribution sections of the Scheme for executive Directors during the year.
Normal
Andrew Reynolds Smith 12.05.26 46 953 3 66 154 220
Adam Walker – – – – – 123 123
(a) Earliest date that a non-reduced pension is payable to Directors.
(b) Accrued annual pension includes entitlements earned as an employee prior to becoming a Director as well as for qualifying services after becoming a Director.
(c) Transfer value represents the present value of accrued benefits. It does not represent an amount of money which the individual is entitled to receive. The change in transfer value over the year reflects the additional pension earned and the effect of changes in financial market conditions during the year. The method and assumptions used to calculate transfer values from the Scheme were last reviewed in November 2012 and remain applicable.
(d) Notional value of defined benefit included in single total figure table on page 81.
(e) Retired from the Company on 1 January 2015.
He will be employed on a part-time basis until 31 December 2015. No STVRS or SEP awards will be made to him in respect of 2015.