Compliance Statement

This report, prepared by the Committee on behalf of the Board, takes full account of the UK Corporate Governance Code ("the Code") and the latest ABI/PLSA guidelines and has been prepared in accordance with the provisions of the Companies Act 2006 ("the Act"), the Listing Rules of the Financial Conduct Authority and the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The Act requires the Auditor to report to the Company's Shareholders on the audited information within this report and to state whether in their opinion those parts of the report have been prepared in accordance with the Act. The Auditor's opinion is set out in the Independent Auditor's Report and those aspects of the report that have been subject to audit are clearly marked.

It is considered that throughout the year under review the Company has complied with the governance rules and best practice provisions applying to UK-listed companies.

This section of the report sets out the Remuneration Policy for Executive Directors in accordance with Section 439A of the Act. The Remuneration Policy was approved by Shareholders at the AGM on 16 May 2014, and took effect from that date. The report that follows is as disclosed in the 2013 Directors' Remuneration Report save a number of non-significant changes (as permitted by the terms of the Remuneration Policy approved by Shareholders) as follows:

  • References to financial years have been updated where appropriate;
  • Pay-for-performance scenario charts have been updated to reflect 2016 salaries;
  • Current Non-Executive Director appointment expiry dates have been updated; and
  • Malus provisions have been clarified with respect to incentives awarded in respect of 2015 and previous years, and clawback has been introduced, and was applied from 1 January 2016 in respect of the annual bonus and DSBP, and from September 2015 awards in respect of the LTIP.

considerations of conditions elsewhere in the group

The Committee considers the pay and employment conditions elsewhere in the Group when determining remuneration for Executive Directors, and the Company seeks to promote good relationships with employee representative bodies as part of its employee engagement strategy. However, the Committee does not currently consult specifically with employees on the Executive Remuneration Policy.


When determining remuneration, the Committee takes into account the guidelines of investor bodies and Shareholder views. The Committee is always open to feedback from Shareholders on the Remuneration Policy and arrangements, and commits to undertaking Shareholder consultation in advance of any significant changes to the Remuneration Policy. Further detail on the votes received on the 2014 Directors' Remuneration Report and the Committee's response are provided in the Annual Report on Remuneration.

Remuneration Policy

The Company's policy is to provide remuneration packages that fairly reward the Executive Directors for the contribution they make to the business and that are appropriately competitive to attract, retain and motivate Executive Directors and Senior Managers of the right calibre. The policy is designed to align the Executive Directors' interests with those of Shareholders, and to incentivise the Executive Directors to meet the Company's financial and strategic objectives such that a significant proportion of remuneration is performance-related. The Group's financial and strategic objectives are set out in the Strategic Report in Our Strategic Pillars, Our Strategic Priorities and Our KPIs. The Remuneration Policy for Executive Directors is summarised in the table below:

Fixed remuneration
ElementPurpose and link to strategyOperation and processOpportunityPerformance metrics
Base salaryTo attract and retain talent in the labour market in which the Executive Director is employed.Reviewed on an annual basis (with effect from January) or following a significant change in responsibilities, taking into account the individual's performance and experience, with reference to published remuneration information from similar sized companies (excluding financial services) and companies operating in a similar sector. The Committee also takes account of the annual salary review for the rest of the Group.Base salary increases will be applied in line with the outcome of the review.
In respect of existing Executive Directors, it is anticipated that salary increases will be within the range of increases for the general employee population over the term of this policy.

In exceptional circumstances (including, but not limited to, a significant increase in role size or complexity) the Committee has discretion to make appropriate adjustments to salary levels to ensure they remain market competitive.
Not applicable.
BenefitsTo provide benefits that are appropriately competitive within the relevant labour market.Benefits include (but are not necessarily limited to) a company car, medical and permanent health insurance. Benefits are reviewed annually and their value is not pensionable.Benefits may vary by role.
It is not anticipated that the cost of benefits will exceed £35,000 per annum per Executive Director over the term of this policy.

The Committee retains the discretion to approve a higher cost in exceptional circumstances (e.g. relocation) or in circumstances driven by factors outside the Company's control (e.g. material increases in insurance premiums).
Not applicable.
PensionTo provide retirement benefits that are appropriately competitive within the relevant labour market.New joiners will participate in the Company's defined contribution pension scheme (open to all UK-based employees of the Group) or receive a cash equivalent.
The two current Executive Directors participate in the defined contribution pension scheme.
Defined contribution: SIG contributes 15% of base salary.Not applicable.
Share Incentive Plan ("SIP")To encourage share ownership across all UK-based employees using HMRC tax-advantaged schemes.The SIP is an HMRC tax-advantaged arrangement which entitles all UK-based employees to purchase shares and receive matching shares in a potentially tax-advantageous manner. The Company gives one matching share for each share purchased by the employee up to a maximum of £20 each month.Maximum opportunity is in line with HMRC limits.The SIP is an all-employee scheme and Executive Directors participate on the same terms as other employees. The acquisition of shares is therefore not subject to the satisfaction of a performance target.
Variable remuneration
ElementPurpose and link to strategyOperation and processOpportunityPerformance metrics
Annual performance bonus ("annual bonus")To provide an incentive to achieve annual performance targets, which are set at the beginning of the financial year in line with the Group's strategy.The annual bonus is reviewed annually prior to the start of each financial year to ensure bonus opportunity, performance measures, targets and weightings are appropriate and continue to support the strategy. Executive Directors are required to defer one-third of their bonus into an award over SIG shares for a period of three years under the DSBP.

Effective from the 2015 performance year (i.e. payments from 1 January 2016), the bonus is subject to malus and clawback, i.e. forfeiture or reduction of the deferred portion or recovery of paid amounts, in exceptional circumstances. Such circumstances may include (but are not limited to) material misstatement of the Group's financial results or gross misconduct. In respect of bonuses up to the 2014 performance year, only malus provisions apply.

Dividend equivalents are payable over the vesting period in respect of the awards which vest.
Maximum annual opportunity of up to 100% of salary.
For entry level and target performance, the bonus earned is up to 30% and up to 65% of maximum respectively.
Performance is determined by the Committee on an annual basis by reference to Group financial measures, as well as the achievement of personal and/or strategic objectives.

The personal/strategic element will not be weighted more than 30% of the total in any year.

When assessing financial performance, the Committee typically considers underlying PBT and Group working capital, as well as other indicators of performance defined at the start of the year. Performance targets are generally calibrated with reference to the Group's budget for the year.

Details of the measures and weightings applicable for the financial year under review are provided in the Annual Report on Remuneration.
Long-Term Incentive Plan ("LTIP")To reward and retain Executive Directors to deliver the Group's long-term strategy whilst providing strong alignment with Shareholders.Executive Directors are
granted annual awards of nil-cost options or contingent rights to acquire shares for no cost as determined by the Committee, which vest based on performance over three years.

To encourage long-term decision making and further improve Shareholder alignment, the Committee introduced a two year holding period on vested LTIP awards for awards made in 2014 and subsequent years. Performance will continue to be measured over three years.

From 2015, awards are subject to malus and clawback, i.e. forfeiture or reduction of unvested awards or recovery of vested awards, in exceptional circumstances (e.g. material misstatement or gross misconduct).

Dividend equivalents are payable over the five year vesting and holding period in respect of the awards which vest.
Maximum annual award of up to 150% of salary.

In exceptional
circumstances, such as to facilitate the recruitment of an external hire, the Committee may, in its absolute discretion, exceed this maximum annual opportunity, up to 200% of salary.

Threshold performance will result in no more than 25% vesting.
Vesting of LTIP awards is subject to the Group's performance over a three year performance period. If no entitlement is earned at the end of the performance period, awards will lapse.

The performance measures and respective weightings may vary year-on-year to reflect strategic priorities, subject to retaining an element on underlying EPS growth and ROCE.

Details of the measures, weightings and performance targets used for specific LTIP grants are included in the Annual Report on Remuneration.

The Committee is satisfied that the Remuneration Policy is in the best interests of Shareholders and does not promote excessive risk-taking. The Committee will consider the Company's performance on environmental, social and governance issues when determining the overall reward for the Executive Directors, and has discretion to make adjustments as appropriate. The Committee also retains discretion to make non-significant changes to the policy without reverting to Shareholders.

Notes to the Remuneration Policy Table

Payments from existing awards

Executive Directors are eligible to receive payment under any award made prior to the approval and implementation of the Remuneration Policy including under the existing LTIP.

LTIP awards

Awards under the new LTIP may be structured in a manner which delivers tax advantages to the Executive Directors but the value delivered will be no greater than as set out in the Variable remuneration table.

Selection of performance measures

The performance measures used under the annual performance bonus are selected annually to reflect the Group's main strategic objectives for the year and reflect both financial and non-financial priorities.

The Committee continues to believe that ROCE reinforces the focus on capital efficiency and delivery of strong returns for our Shareholders, thereby further strengthening the alignment of management's incentives with SIG's strategy. The Committee also continues to believe that underlying EPS is a key driver of long-term Shareholder value for SIG.

Performance targets are set to be stretching and achievable, taking into account the Group's strategic priorities and the economic environment in which the Company operates. Targets are set taking into account a range of reference points including the Group's strategic plan and broker forecasts for both SIG and its peers. The Committee believes that the performance targets set are very challenging and that the maximum outcomes are only available for truly outstanding performance.

Remuneration Policy for Other Employees

Our approach to salary reviews is consistent across the Group, with consideration given to the level of responsibility, experience, individual performance, salary levels in comparable companies and the Company's ability to pay. Remuneration surveys are referenced, where appropriate, to establish market rates.

Senior Managers participate in an annual bonus plan which has similar performance targets to those of the Executive Directors. A limited number of Senior Managers also receive LTIP awards. Performance conditions are consistent for all participants, while award sizes vary by organisational level. All UK employees are eligible to participate in the SIP on the same terms.

Pension and benefits arrangements are tailored to local market conditions, and so various arrangements are in place for different populations within SIG. Executive Directors participate in the same pension scheme as other senior managers.

Approach to Recruitment Remuneration

The Committee's policy is to set pay for new Executive Directors within the existing Remuneration Policy in order to provide internal consistency. The Committee aims to ensure that the Company pays no more than is necessary to appoint individuals of an appropriate calibre.

Share Ownership Guidelines

To ensure alignment between Executive Director interests and those of Shareholders, the Company has established the principle of requiring Executive Directors to build up and maintain a beneficial holding of shares in the Company equivalent to a minimum of 200% of base salary. Under normal circumstances it is expected that this should be achieved within five years of appointment. It is anticipated that the satisfaction of this target will be mainly achieved by the vesting of shares through the Company's share plans.

External appointments

In the case of appointing a new Executive Director, the Committee may make use of any of the existing components of remuneration, as follows:

ComponentApproachMaximum annual grant value
Base salaryThe base salary will be determined by reference to the scope and responsibility of the position as well as internal relativities and their current remuneration. Where a new appointee has an initial base salary set below market, any shortfall may be managed with phased increases over a period of years, subject to the Executive Director's development in the role, which may result in above-average salary increases during this period.n/a
BenefitsNew appointees will be eligible to receive benefits which may include (but are not limited to) a company car, medical and permanent health insurance.n/a
PensionNew appointees will be eligible to participate in the Company's defined contribution pension scheme or receive a cash equivalent payment.n/a
SIPNew appointees will be eligible to participate in the SIP.n/a
Annual bonusThe plan as described in the policy table will apply to new appointees with the relevant maximum being pro-rated to reflect the proportion of the year employed. Targets for the personal element will be tailored to the role of the appointee.100% of salary
LTIPNew appointees will be granted awards under the LTIP on the same terms as other Executives, as described in the policy table.200% of salary

The Committee may also make an award in respect of a new appointment to "buy out" incentive arrangements forfeited on leaving a previous employer and may exercise the discretion available under the relevant Listing Rule to facilitate this, i.e. in the event that a different structure would be required. In doing so, the Committee will ensure that "buyout awards" would have a fair value no higher than that of the awards forfeited and would consider relevant factors including any performance conditions attached to these awards, the likelihood of those conditions being met, and the remaining vesting period of these awards. Where, in the Committee's opinion, awards forfeited are still subject (at date of appointment) to substantive performance conditions, any awards made in compensation will have SIG-specific performance conditions attached.

Internal appointments

Remuneration for new Executive Directors appointed by way of internal promotion will similarly be determined in line with the policy for external appointees, as detailed above. Where an individual has contractual commitments made prior to their promotion to the Board, the Company will continue to honour these arrangements. Incentive opportunities for below Board employees are typically no higher than for Executive Directors, but incentive measures may vary to provide better line of sight.

Executive Director Service Contracts and Leaver/Change of Control Provisions and Policy for Loss of Office

The Committee sets notice periods for the Executive Directors (including future Executive Directors) at twelve months.

Subject to the considerations set out overleaf, the Company's policy is to limit termination payments to pre-established contractual arrangements. In the event that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between the Company and the employee, as well as the rules of any incentive plans.

If employment is terminated by the Company, the departing Executive Director may have a legal entitlement (under statute or otherwise) to additional amounts, which would need to be met. In addition, the Committee retains discretion to settle any claims by or on behalf of the Executive Director in return for making an appropriate payment and contributing to the legal fees incurred by the Executive Director in connection with the termination of employment, where the Company wishes to enter into a settlement agreement (as provided for overleaf) and the individual must seek independent legal advice.

There is no provision in the Executive Directors' contracts for compensation to be payable on termination of their contract over and above sums due in respect of notice and accrued but untaken holiday, and as outlined overleaf regarding bonus and LTIP. Executive Director service contracts are available to view at the Company's registered office.

In certain circumstances, the Committee may approve new contractual arrangements with departing Executive Directors including (but not limited to) settlement, confidentiality, outplacement services, restrictive covenants and/or consultancy arrangements. These will be used sparingly and only entered into where the Committee believes that it is in the best interests of the Company and its Shareholders to do so.

The table below provides details of the main terms of Executive Director service contracts and termination payments not otherwise set out in this report.

DurationContinuous term subject to notice or reaching retirement age.
Holiday30 working days' holiday plus public holidays per holiday year.
Notice periodTwelve months' notice period in writing by either party, save in circumstances justifying summary termination.
Exit paymentsThe Executive Directors will be paid a sum equal to base salary and the value of contractual benefits (or receive the benefits themselves) which will not include a bonus. The Company may pay as a lump sum or in instalments and may require the Executive Director to mitigate his loss by seeking alternative employment. Where phasing payments, any income received from a third party shall be deducted from sums due to the Company.

The Company will take account of all the circumstances on a case-by-case basis when determining whether to exercise its discretion, including the need for an orderly handover and the contribution of the Executive Director to the success of the Company during his or her tenure.
Restrictive covenantsApply during the contract and for up to a period of twelve months after leaving, subject to any period served by way of gardening leave.
Executive DirectorDate of service contract
S. R. Mitchell10 December 2012
D. G. Robertson10 October 2011

When considering termination payments under incentive plans, the Committee reviews all potential incentive outcomes to ensure they are fair to both Shareholders and participants. The table below summarises how the awards under the annual bonus, the DSBP, the 2004 LTIP and the 2014 LTIP are typically treated in specific circumstances, with the final treatment remaining subject to the Committee's discretion.

PlanScenarioTiming of vestingCalculation of vesting/payment
Annual bonusDeath, injury, ill-health or disability, retirement, or any other reason the Committee may determine.Normal payment date, although the Committee has discretion to accelerate.The Committee will determine the bonus outcome based on circumstances and the date of leaving. Performance against targets is typically assessed at the end of the year in the normal way and any resulting bonus will be pro-rated for time served during the year.
Change of control.Immediately.Performance against targets will be assessed at the point of change of control, and any resulting bonus will be pro-rated for time served up to the point of change of control.
All other reasons.No bonus is paid.n/a
Deferred Share
Bonus Plan
Death, injury, ill-health or disability, retirement, or any other reason the Committee may determine.Normal vesting date, although the Committee has discretion to accelerate.n/a
Change of control.Immediately.n/a
All other reasons.Awards lapse.n/a
2004 LTIPInjury, ill-health or disability, redundancy, retirement, the sale of the employing company or business out of the Group or any other reason as the Committee may determine.Normal vesting date, although the Committee has discretion to accelerate.Any outstanding awards will normally be pro-rated for time and performance conditions will be measured.
Change of control.Immediately.Any outstanding awards will normally be pro-rated for time and performance conditions will be measured up to the point of the change of control.
All other reasons.Awards lapse.n/a
2014 LTIPDeath, injury or disability, redundancy, the sale of the employing company or business out of the Group or any other reason as the Committee may determine.Normal vesting date, although the Committee has discretion to accelerate.Any outstanding awards will normally be pro-rated for time and performance conditions will be measured. The Committee retains discretion to dis-apply performance conditions in exceptional circumstances.
Change of control.Immediately.Any outstanding awards will be pro-rated for time and performance up to the point of the change of control. The Committee retains discretion to dis-apply performance conditions in exceptional circumstances.
All other reasons.Awards lapse.n/a

Pay-for-Performance: Scenario Analysis

The following charts provide an estimate of the potential future reward opportunities for the Executive Directors, and the potential split between the different elements of pay under three different performance scenarios: "Minimum", "On-target" and "Maximum". Potential reward opportunities are based on SIG's current Remuneration Policy (unchanged), applied to salaries as at 1 January 2016. Note that the projected values exclude the impact of any share price movements.

Chief Executive

Chief Executive

Finance Director

Finance Director

Salary, pension and benefits Annual bonus Long-term incentives

The "Minimum" scenario shows base salary, pension and benefits only. These are the only elements of the Executive Directors' remuneration packages which are not at risk. The "On-target" scenario shows fixed remuneration above, plus a target payout of 50% of the annual bonus and threshold performance vesting for long-term incentives. The "Maximum" scenario reflects fixed remuneration, plus full payout of all incentives.

Non-Executive Directors

The Non-Executive Directors ("NEDs"), including the Chairman, do not have service contracts. The Company's policy is that NEDs are appointed for specific terms of three years unless otherwise terminated earlier in accordance with the Articles of Association or by, and at the discretion of, either party upon three months' written notice. NED appointments are reviewed at the end of each three year term. NEDs will normally be expected to serve two three year terms, although the Board may invite them to serve for an additional period.

Summary details of terms and notice periods for NEDs are included below:

NEDDate of current letter of appointmentEffective date of appointmentExpiry of current term
Mr L. Van de Walle16 September 20131 October 201012 May 2016
Ms A. Abt5 March 201512 March 201510 May 2018
Ms J. E. Ashdown16 May 201411 July 201111 May 2017
Mr M. Ewell16 May 20141 August 201111 May 2017
Mr C. V. Geoghegan6 May 20151 July 200912 May 2016
Mr J. C. Nicholls6 May 20156 November 200912 May 2016

NEDs do not receive benefits from the Company and they are not eligible to join the Company's pension scheme or participate in any bonus or share incentive plan. Any reasonable expenses that they incur in the furtherance of their duties are reimbursed by the Company.

Details of the policy on NED fees are set out in the table below:

Purpose and link to strategyOperation and processOpportunity
To attract and retain NEDs of the highest calibre with experience relevant to the Company.Fees are reviewed annually in May with any increase effective from 1 June.
The fee paid to the Chairman is determined by the Committee, and fees to NEDs are determined by the Board. The fees are calculated by reference to current market levels and take account of the time commitment and the responsibilities of the NEDs.
Additional fees are payable for acting as Senior Independent Director or as Chairman of a Board Committee as appropriate.
Any fee increases are applied in line with the outcome of the review.
It is anticipated that increases to Chairman and NED fee levels will typically be in line with market levels of fee inflation. In exceptional circumstances (including, but not limited to, material misalignment with the market or a change in the complexity, responsibility or time commitment required to fulfil an NED role) the Board has discretion to make appropriate adjustments to fee levels to ensure they remain market competitive and fair to the Director.
The maximum aggregate fees, per annum, for all NEDs allowed by the Company's Articles of Association is £500,000.

NED Recruitment

In recruiting a new Chairman or NED, the Committee will use the policy as set out in the table above. A base fee would be payable for Board membership, with additional fees payable for acting as Senior Independent Director or as Chairman of a Board Committee as appropriate.

External Directorships

The Committee acknowledges that Executive Directors may be invited to become independent Non-Executive Directors of other quoted companies which have no business relationship with the Company and that these duties can broaden their experience and knowledge to the benefit of the Company.

Executive Directors are permitted to accept such appointments with the prior approval of the Chairman. Approval will only be given where the appointment does not present a conflict of interest with the Group's activities and the wider exposure gained will be beneficial to the development of the individual. Where fees are payable in respect of such appointments, these would be retained by the Executive Director.