The Board has established a committee to be known as the Remuneration Committee to assist it in fulfilling its oversight and governance responsibilities in connection with remuneration activity undertaken by the Society. The Remuneration Committee has the delegated authority of the Board in respect of the functions and powers set out in these terms of reference and is authorised by the Board to obtain, at the Society’s expense, outside legal or other professional advice on any matters within its terms of reference.
The role of the Remuneration Committee is to assist the Board to fulfil its responsibility to the Society’s members to ensure that remuneration policy and practices of the Society reward fairly and appropriately, with a clear link to corporate and individual performance, having regard to statutory and regulatory requirements.
In particular, the Committee shall consider:
a. Remuneration policies, including base pay, long and short term incentives (including variable pay) for Society employees;
b. The importance of achieving consistency in remuneration practice and its cost across the Society;
c. Recruitment, service contracts and severance policies for Executives and Executive Directors;
d. Pension and superannuation arrangements and other benefits; and
e The engagement and independence of external remuneration advisers.
No person shall participate in decision making by the Committee (or during a relevant part) at which any part of their remuneration is being directly discussed or participate in any recommendation or decision specifically concerning their remuneration.
3. Meetings and membership
The Committee will be chaired by a Non-Executive Director (other than the Chair of the Board) as appointed from time to time by the Board with a minimum of one year’s prior service on a remuneration committee.
The Committee will comprise at least three Non-Executive Directors. The Committee may operate with a vacancy. The Chair of the Board may serve on the Committee if considered independent on appointment as Chair of the Board but will not be present at any discussion by the Committee relating to the Chair of the Board’s fees. Members of the Committee shall be appointed by the Board, on the recommendation of the Nominations & Governance Committee.
Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chief Executive, the Human Resources Director and external advisers may be invited to attend meetings when appropriate and necessary and with the agreement of the Committee chair.
The Committee will meet four times annually as a minimum and otherwise as required. The Chair of the Committee may convene meetings of the Committee at any time to consider any matters falling within these terms of reference.
Meetings of the Committee will be quorate if there are present at least three members. If the Chair of the Committee is absent, the remaining members shall elect one of their number, other than the Chair of the Board to chair the meeting. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.
The General Counsel & Secretary or their nominee shall be Secretary of the Committee.
The Secretary shall draft the agenda for each meeting and provide this to the Chair of the Committee for approval in advance of the meeting. The Secretary shall collate and circulate the papers to members and attendees at least six calendar days prior to the meeting.
Formal minutes of the meetings of the Committee will be taken and circulated to members and other regular attendees for the relevant meeting. A summary of each meeting will be made available to the Board of Directors in the month following the meeting. The Committee Chair will be available at the Society’s AGM to answer questions from members falling within the Committee’s remit.
The Committee shall have the following responsibilities:
4.1. Setting the Society's Remuneration Policy
4.1.1. To review and recommend to the Board for approval the Society’s Remuneration Policy, taking into account the link between business strategy, culture and the long-term sustainable success of the Society, as well as the need to promote effective risk management, comply with applicable regulation including the provisions of the UK Corporate Governance Code and relevant external trends.
4.1.2. In discharging this responsibility the Committee shall:
(i) exercise discretion and judgement in the application of remuneration policies to promote the long term success of the Society for the benefit of members;
(ii) include measures in the remuneration approach to avoid potential conflicts of interest in the design of incentive arrangements to ensure the interests of employees and members are appropriately taken into account;
(iii) obtain the advice of the Board Risk Committee that performance objectives do not drive excessive risk taking and that reward takes sufficient account of risk management performance;
(iv) receive from the Chief Risk Officer on the management of risk relating to remuneration including whether the Remuneration Policy is compliant with the PRA’s Remuneration Code.
(v) ensure the reward, incentives and conditions available to the Society’s workforce are taken into account when deciding the pay of Executive Directors and executives.
4.2. Authorising Specific Remuneration Arrangements for Executives
4.2.1. Within the terms of the agreed Remuneration Policy, to determine the remuneration of Executive Directors and Executives including (to the extent applicable):
184.108.40.206. base salary;
220.127.116.11. participation in and awards arising from variable pay plans;
18.104.22.168. pension arrangements, including the level of contributions by the Society; and
22.214.171.124. other benefits in cash or in kind.
4.2.2. To ensure, where relevant, that any payments made in respect of any remuneration package are permitted under the latest member approved Remuneration Policy.
4.2.3. Within the terms of the agreed Remuneration Policy, to decide on any ex-gratia payments to be made or benefits granted to Executives.
4.2.4. Exercise any discretion or judgement on remuneration issues in accordance with the Remuneration Policy including clawback, deferral and malus assessments.
4.2.5. Agree the Expenses Policy for Executive Directors.
4.2.6. Approve or decline the retention by Executives of any financial rewards from external directorships or similar appointments.
4.2.7. Consider and approve the buyouts of forfeited rights for any new appointments.
4.3. Oversee Variable Pay Plans for Executives
4.3.1. In respect of any variable pay plans for Executives:
126.96.36.199. approve the introduction of new variable pay plans or significant changes to such plans;
188.8.131.52. determine targets for variable pay plans operated by the Society ensuring such arrangements are compliant with the requirements of applicable law and regulation;
184.108.40.206. exercise its judgement and discretion to determine each year whether awards will be made, and if so, the overall amount of such awards and the individual awards to be made to participants under any such plan ensuring such arrangements are compliant with applicable law and regulation and consistent with the Society’s mission of “Putting Members First”.
4.4. Authorise the Remuneration of the Chair of the Board
4.4.1. To review the Chair of the Board’s fees at least annually and make recommendations to and seek approval from the Board for any changes to such fees.
4.5. Oversee Employee Remuneration Arrangements
4.5.1. To oversee the overall reward approach for the Society’s employees as a whole including base pay, benefits, and incentives.
4.5.2. To set the Success Share annually payable to all Society employees.
4.5.3. To oversee major changes in employee benefits structures impacting the Society’s employees as a whole or a significant proportion of the Society’s employees.
4.6. Regulatory Obligations
4.6.1. To ensure that the disclosure of remuneration, both internally, and externally within the Society’s Pillar 3 Disclosures follows the Prudential Regulation Authority’s rules regarding remuneration disclosure including the guidelines on remuneration rules for high earners.
4.6.2. To review and approve the PRA Remuneration Policy Statement and list of Material Risk Takers.
4.6.3. Receive updates from the HR Director on the remuneration of Material Risk Takers who are not Executive Directors or Executives including any decisions on clawback, deferral and malus assessments required under the Remuneration Code for such employees.
4.6.4. Oversee remuneration arrangements required by the PRA Remuneration Code, including remuneration for employees in control functions such as Internal Audit, Risk, Compliance, HR and Legal, even if they are covered by the ‘de minimis’ exemption.
4.6.5. To adhere to the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 and publish and report specific data about the Society’s gender pay gap on an annual basis, in accordance with regulatory guidance.
4.7. Reporting and Disclosures
4.7.1. The Committee shall compile a report detailing how it discharged its responsibilities for inclusion in the Society’s Annual Report & Accounts, including a description of the significant issues dealt with by the Committee and other matters required to be disclosed under the Corporate Code.
4.8. Reviewing Committee Performance
4.8.1. To arrange annual assessments of Committee effectiveness and report the output of this activity to the Board.
4.8.2. To review periodically these Terms of Reference and recommend any changes to the Board for approval.
4.9. External Advice
4.9.1. To appoint remuneration consultants and to commission, obtain or purchase any professional advice, which it reasonably deems necessary to discharge its responsibilities. The Committee shall exercise independent judgement when evaluating advice received from such consultants.
These terms of reference were approved by the Committee at its meeting on 12 December 2018 and by the Board at its meeting on 23 January 2019.