Directors’ Remuneration Report
Dear Shareholder
During 2014 the Committee completed a review of IMI’s
executive remuneration practices, with the simple objective
of ensuring IMI’s remuneration arrangements are aligned with
our new robust strategic growth plan. Following this review
we are proposing a number of changes to the existing executive
remuneration arrangements and we will be seeking your approval
of a new remuneration policy at the upcoming Annual General
Meeting. This review, coupled with Douglas Hurt’s retirement
and Daniel Shook’s appointment, made for a busy year.
What did the Committee focus on during the year?
It was an exciting year in IMI’s history with Mark Selway taking
over from Martin Lamb following his retirement. With this
change came the opportunity to take a fresh perspective
on our strategy, and as discussed by Mark and Roberto,
significant opportunities have been identified to accelerate
growth and build long-term shareholder value. The Committee
considered the remuneration arrangements, not just for the
executive directors but also for the senior leadership group
and broader employee population, all of whom are critical
to the successful delivery of our strategic ambitions.
Clearly, it is important for the Committee to take account of
feedback from our shareholders when considering any change.
Following a formal consultation, which we undertook in autumn
2014, the majority of our shareholders were fully supportive of
the changes put forward.
The primary change we are proposing to make to the
remuneration arrangements is the removal of the Share
Matching Plan (SMP) in favour of a simpler model with a single
performance share plan in response to both shareholder
feedback and market developments. At the same time we
have significantly increased our share ownership guidelines
to reinforce shareholder alignment. The changes have been
calibrated to ensure consistency of new total remuneration
levels against both previous levels and market norms, while
reducing overall leverage in our incentive plans.
During the year, Douglas Hurt decided to retire having played
a key role in IMI’s development over the last eight years.
Douglas will be succeeded by Daniel Shook, who joined IMI in
January as Finance Director Designate. Daniel will take over as
Finance Director on 1 March 2015 and Douglas will step down
from the Board at the AGM.
For Douglas, with respect to compensation, the overriding
principle was that we should treat him fairly and honour any
contractual commitments. I can confirm that we did not use
any discretion to pay him more than he was entitled to under
his service contract or the share plan rules. We determined
that it was critical for Douglas to remain focused on the long-
term success of IMI and in ensuring a smooth handover to
Daniel, so we used our power under the share plan rules
to defer vesting of all share-based awards to the third
anniversary of their grant, rather than the earlier date of
Douglas’ retirement. Awards will be pro-rated to May 2015
and corporate performance will be measured over the full
three-year performance period, thus ensuring that Douglas
is rewarded according to IMI’s performance after he has
passed the baton on to Daniel.
How were pay outcomes linked to performance?
2014 was another year of good progress for IMI. Organic
revenue increased by 2% to £1,686m and adjusted basic EPS
increased by 7%. Shareholders have also benefitted from a 7%
increase in the total dividend for the year and the £620m return
of cash occurring in the first half of 2014 as a result of the sale
of the Retail Dispense divisions.
The 2014 annual bonus will be paid against a pre-set range
of targets for profit before tax, adjusted EPS, organic
revenue growth, cash conversion and health, safety and
environment measures. An overall Group-level bonus score
of 37%
1
was recorded.
The 2012 matching share award and performance award
vested at 70% and 0% respectively. Further details on the
levels of performance are set out on pages 73 to 75.
1
Assumes maximum achievement of the personal objective component
“It has been a busy year for the Remuneration
Committee. In this report we propose changes
to IMI’s executive remuneration arrangements
to align with our new business strategy to drive
growth and build long-term shareholder value.
We will be seeking your approval for these changes
at our upcoming Annual General Meeting.”
Annual Statement from the
Chairman of the Committee
Corporate Governance
57
Strategic Review
Performance Review
rporate Governance
Financial Statements
Introduction
Annual Report and Accounts 2014
