Executive directors' remuneration for the year ended 31 March 2019

Single total figure of remuneration for executive directors (audited information)

Year ended 31 MarchFixed payVariable pay
Base salary
£'000
Pension
£'000
Benefits
£'000
Annual bonus
£'000
Long-term
incentives
£'000
Total
£'000
201920182019201820192018201920182019(1)2018(2)20192018
Steve Mogford75473716616228297747185475212,2692,167
Russ Houlden47646610510225254864503453291,4371,372
Steve Fraser(3)44027897612115452277(4)1291021,139733
  1. The long-term incentive amount is in respect of the Long Term Plan award which was granted in June 2016 and which will vest based on performance over the three-year period from 1 April 2016 to 31 March 2019. The Long Term Plan amount is estimated as the vesting percentage for the one-third relating to customer service excellence will not be known until later in 2019, and the award for Steve Mogford and Russ Houlden will not vest until the end of an additional two-year holding period. Steve Fraser's award was granted prior to his appointment to the board and so no holding period applies. There is no share price appreciation attributable to these awards. See the Annual report on remuneration for further details.
  2. The long-term incentive amount for the year ended 31 March 2018 is in respect of the Long Term Plan award which was granted in June 2015 and whose performance period ended on 31 March 2018. The figures for Steve Mogford and Russ Houlden have been restated to reflect the additional dividend equivalents accrued to 31 March 2019. Their awards are not due to vest until April 2020 following an additional two-year holding period and for the purposes of this table have been valued on the basis of the average share price over the three-month period from 1 January 2019 to 31 March 2019 of 824.5 pence per share.
  3. Salary, benefits, pension and annual bonus figures for Steve Fraser in 2018 reflect part-year earnings and are for the period from 1 August 2017, when he was first appointed to the board.
  4. A bonus of around £74,000 was earned by Steve Fraser in respect of the period from 1 April 2017 to 31 July 2017 prior to him joining the board. This is not included in the table.

Base salary

Executive directorBase salary
£'000
Current
salary
1 September 2017
Steve Mogford760.0745.0
Russ Houlden480.0470.5
Steve Fraser443.7405.0

Executive director salaries were increased by 2.0 per cent with effect from 1 September 2018. This is lower than the 3.0 per cent increase applying to the general workforce in 2018. The committee judged that the increase was supported by very good individual and business performance.

On his appointment as COO on 1 August 2017, Steve Fraser's salary was set at £405,000 in consideration of the organisational structure and the level of responsibilities he assumed at that time, and also took account of internal and external market benchmarks. As stated in last year's report, on 1 January 2018 there was a material change in the size and scope of the COO role as a result of a reorganisation, and his salary was increased to £435,000 from the same date in recognition of this. His current salary reflects the 2.0 per cent increase applied to the executive directors on 1 September 2018.

Pensions

The executive directors receive a cash allowance of 22 per cent of base salary in lieu of pension. No changes are expected to the pensions cash allowance percentage for the current executive directors during the year commencing 1 April 2019.

Benefits

For executive directors, benefits include: a car allowance of £14,000; health, life cover and income protection insurance; travel costs; and communication costs.

No material changes are expected to benefits during the year commencing 1 April 2019.

External appointments

Steve Mogford is the senior independent director of G4S PLC for which he received and retained an annual fee of £78,500. Russ Houlden is an independent member of the supervisory board, and audit committee chairman, of Orange Polska SA for which he receives and retains annual fees of around £80,000.

Annual bonus

Annual bonus in respect of financial year ended 31 March 2019 (audited information)

The performance measures, targets and outcomes in respect of the executive directors' annual bonus for the year ended 31 March 2019 are set out below. The table in the At a glance summary: executive directors' remuneration summarises how these performance measures are linked to our business strategy.

MeasureThreshold (25%
vesting)
TargetStretch
(100% vesting)
Vesting
as a
% of maximum
Steve Mogford
weighting
(% of award)
Outcome
Russ Houlden weighting (% of award)
Outcome
Steve Fraser weighting (% of award)
Outcome
Underlying operating profit(1)
£806.4m£831.4m£856.4m65%30.0%30.0%30.0%
Actual: £838.9m
19.5%19.5%19.5%
Customer service in year
Service incentive
mechanism – qualitative
5th position v other WASCs4th position v other WASCs3rd position v other WASCs50%12.0%12.0%12.0%
Actual 4th position
v other WASCs
6.0%6.0%6.0%
Service incentive
mechanism – quantitative
73.573.072.5100%4.0%4.0%4.0%
Actual: 69.8
4.0%4.0%4.0%
Maintaining and enhancing services for customers
Wholesale outcome delivery incentive (ODI) composite(£25.1m)(£4.7m)£17.8m100%24.0%24.0%24.0%
Actual: £19.2m
24.0%24.0%24.0%
Time, cost and quality of capital programme (TCQi)(2)85.0%91.5%98.0%80%20.0%20.0%20.0%
Actual: 95.4%
16.0%16.0%16.0%
Personal objectives (see the Annual report on remuneration for further detail)
Steve Mogford95%10.0%
Actual: 95%
9.5%
Russ Houlden90%10.0%
Actual: 90%
9.0%
Steve Fraser95%10.0%
Actual: 95%
9.5%
Total:
Actual award (% of maximum)79.0%78.5%79.0%
Maximum award (% of salary)130%130%130%
Actual award (% of salary)(3)102.7%102.1%102.7%
Actual award (£'000 – shown in single figure table)(3)774486452
  1. The underlying operating profit figure for bonus purposes is based on the underlying operating profit in the Our performance in 2018/19 section and excludes infrastructure renewals expenditure and property trading. The vesting percentage shown in the table above is the figure after this adjustment.
  2. TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required quality standard. It is expressed as a percentage, with a higher percentage representing better performance.
  3. Under the Deferred Bonus Plan, 50 per cent of the annual bonus will be deferred in shares for three years.

Further detail of achievement against personal objectives

Personal objectives represent 10 per cent of the total bonus opportunity. Assessment of outcomes against personal objectives is summarised in the table below:

Steve Mogford
Personal objectives related to:Performance summary
  • Preparations for the new regulatory period (2020–2025);
  • Operational performance for the benefit of customers;
  • Analyst and investor engagement; and
  • Organisation culture.
The committee assessed that Steve Mogford's performance warranted an outcome of 95 per cent in respect of the personal objective element of his bonus, including:
  • Led the formulation of the company's PR19 business plan for the period 2020–25, rewarded by the award of fast-track status to the plan by Ofwat, yielding a significant reward in AMP7.
  • Drove a further step-change in company performance with significant financial rewards related to ODI and SIM performance. 
  • Provided strong leadership of the company's response to the exceptional weather conditions during the summer of 2018.
  • Engaged actively with investors and analysts in the communication of our strategy, performance and plan.
  • Continued to develop a strong and cohesive executive team and organisation culture.
Russ Houlden
Personal objectives related to:Performance summary
  • Financial preparations for the new regulatory period 2020–25;
  • Financing activities; and
  • Cyber security.
The committee assessed that Russ Houlden's performance warranted an outcome of 90 per cent in respect of the personal objective element of his bonus, including:
  • Strong contribution to the formulation of the company's PR19 business plan for the period 2020–25.
  • Led the enhancement of our financing competitive advantage, with low cost financing raised within the context of a low risk hedging strategy delivering significant value to customers and shareholders, benefitting service resilience and the environment.
  • Strengthened our cyber security strategy to defend against increasing cyber threats, covering information technology and operational technology.
Steve Fraser
Personal objectives related to:Performance summary
  • Operational preparations for the new regulatory period 2020–25; and
  • Operational performance for the benefit of customers.
The committee assessed that Steve Fraser's performance warranted an outcome of 95 per cent in respect of the personal objective element of his bonus, including:
  • Strong contribution to the formulation of the company's PR19 business plan for the period 2020–25.
  • Achievement of our best ever annual ODI result.
  • Established a new network maintenance function and implemented a revised contracting framework, delivering a marked improvement in network performance and best ever customer satisfaction scores.
  • Strong leadership of the company's operational teams in addressing the impact of the exceptional weather conditions.

Deferred Bonus Plan awards made in the year ended 31 March 2019 (audited information)

Bonuses are earned by reference to performance in the financial year and paid in June following the end of the financial year. Fifty per cent of any bonus is deferred into shares under the Deferred Bonus Plan. These awards vest after three years and are subject to withholding provisions. There are no service or additional performance conditions attached.

The table below provides details of share awards made on 18 June 2018 in respect of bonus payments made to executive directors in 2018/19.

Executive DirectorType of
award
Basis of
award
Number of
shares
Face value of award(1)
(£'000)
End of
deferral period
Steve MogfordConditional shares50% of bonus47,057£35918.06.2021
Russ HouldenConditional shares50% of bonus29,517£22518.06.2021
Steve FraserConditional shares50% of bonus(2)22,043£16818.06.2021
  1. The face value has been calculated using the closing share price on 15 June 2018 (the dealing day prior to the date of grant), which was 762.8 pence per share.
  2. As stated in last year's report, a bonus of around £277,000 was earned by Steve Fraser in respect of the period 1 August 2017 to 31 March 2018 (following his appointment to the board), along with a bonus of around £74,000 in respect of the period 1 April 2017 to 31 July 2017 (prior to his appointment to the board). He received one overall Deferred Bonus Plan award in respect of both bonus payments, where the overall award value was based on 50 per cent of the bonus earned since his appointment to the board plus 40 per cent of the bonus earned prior to his appointment.

Annual bonus in respect of the financial year commencing 1 April 2019

The maximum bonus opportunity for the year commencing 1 April 2019 will remain unchanged at 130 per cent of base salary.

The annual bonus will operate in a similar way as that for the year 2018/19, except in relation to the 'Customer service in year' measures. As Ofwat transitions from using the service incentive mechanism (SIM) to C-MeX as its primary assessment of customer service, the two SIM measures will be replaced by measures based on performance related to the new C-MeX approach.

The table below summarises the measures, weighting and targets for the 2019/20 bonus. Targets that are considered commercially sensitive will be disclosed in the 2019/20 annual report on remuneration.

MeasureTargets
Threshold
(25% vesting)
Target
(50% vesting)
Stretch
(100% vesting)
Weighting
% of award)
Underlying operating profit(1)Commercially sensitive30.0%
Customer service in year
C-MeX – customer service survey (out of 10 WASCs)6th4th3rd12.0%
C-MeX – quantitative16.6216.0615.504.0%
Maintaining and enhancing services for customers
Wholesale outcome delivery incentive (ODI) compositeCommercially sensitive24.0%
Time, cost and quality of capital programme (TCQi)(2)85%91.5%98%20.0%
Personal objectivesCommercially sensitive10.0%
Total100%
  1. Underlying operating profit for bonus purposes excludes infrastructure renewals expenditure and property trading.
  2. TCQi is an internal measure which measures the extent to which we deliver our capital projects on time, to budget and to the required quality standard. It is expressed as a percentage, with a higher percentage representing better performance.

Long-term incentives

Performance for Long Term Plan awards

2016 Long Term Plan (LTP) awards with a performance period ended 31 March 2019 (audited information)

The 2016 LTP awards were granted in June 2016 and performance was measured over the three-year period from 1 April 2016 to 31 March 2019. Executive directors' awards will normally vest in April 2021, following an additional two-year holding period. The unvested shares will remain subject to withholding provisions over this two-year holding period.

Note that the final outcome for the customer service excellence measure (which forms one-third of the award) will not be known until Ofwat publishes the combined service incentive mechanism scores for the company and its comparator water companies (expected to be published in late summer 2019). The values of the 2016 LTP awards in the single total figure of remuneration table are therefore estimated and will be restated in next year's report once the final outcome is known.

The table below shows how the long-term incentive amount in respect of the 2016 LTP was calculated:

MeasureThreshold (25%
vesting)
IntermediateStretch (100% vesting)Vesting as a % of maximumSteve Mogford weighting
(% of award)
Outcome
Russ
Houlden weighting
(% of award)
Outcome
Steve
Fraser weighting
(% of award)
Outcome
Relative total shareholder return (TSR)
TSR versus median TSR of FTSE 100 companies (excluding financial services, oil and gas, and mining companies)(1)Median
TSR
Straight-line between threshold and stretchMedian
TSR x 1.15
0%33.3%33.3%33.3%
Actual: Less than median TSR
0%0%0%
Company TSR of 2.7% was below threshold TSR of 17.9%
Sustainable dividends(50% vesting)
Average underlying dividend cover over the three-year performance period1.051.131.15100%33.3%33.3%33.3%
Actual: 1.22
33.3%33.3%33.3%
Underpin: Dividend growth of at least RPI in each of the years 2016/17, 2017/18 and 2018/19(2) Met
Customer service excellence(80% vesting)
Ranking for the year ended 31 March 2019 versus 17 other water companies using Ofwat's service incentive mechanism (SIM) combined score(3)Median
rank
Upper
quartile rank
Upper
decile rank
80.0%33.3%33.3%33.3%
Estimate: 5th out of 18
26.7%26.7%26.7%
Overall underpin
Overall vesting is subject to the committee being satisfied that the company's performance on these measures is consistent with underlying business performance Assumed met.
The committee will make a final assessment of the company's performance once the combined SIM score is known.
Estimated vesting (% of award)60.0%60.0%60.0%
Number of shares granted98,76362,33323,397
Number of dividend equivalent shares11,7337,4042,778
Number of shares before performance conditions applied110,49669,73726,175
Estimated number of shares after performance conditions applied66,29741,84215,705
Three-month average share price at end of performance period (pence)(4)824.5824.5824.5
Estimated value at end of performance period (£'000 – shown in single figure table)547345129
  1. For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is independently calculated by New Bridge Street.
  2. Subject to approval of the final dividend by shareholders at the 2019 AGM.
  3. This is an estimate as the final outcome will not be known until the combined scores are published later in 2019.
  4. Average share price over the three-month period from 1 January 2019 to 31 March 2019.

Long Term Plan awards granted in the year

2018 LTP awards with a performance period ending 31 March 2021 (audited information)

The table below provides details of share awards made to executive directors on 25 June 2018 in respect of the 2018 LTP:

Executive DirectorType of awardBasis of awardFace value
of award
(£'000)(1)
Number of shares under award% vesting at thresholdEnd of
performance
period(2)
Steve MogfordConditional shares130% of salary£968129,03025%31.03.2021
Russ HouldenConditional shares130% of salary£61281,48825%31.03.2021
Steve FraserConditional shares130% of salary£56575,33925%31.03.2021
  1. The face value has been calculated using the closing share price on 22 June 2018 (the dealing day prior to the date of grant) which was 750.6 pence per share.
  2. An additional two-year holding period applies after the end of the three-year performance period.

Details about the 2018 LTP performance measures and targets are shown in the following table. Performance is measured over the three-year period 1 April 2018 to 31 March 2021. The table in the At a glance summary: executive directors' remuneration summarises how these performance measures are linked to our business strategy.

MeasureTargetsWeighting
Threshold
(25% vesting)
Stretch
(100% vesting)
Relative total shareholder return (TSR)
TSR versus median TSR of FTSE 100 companies (excluding financial services, oil and gas, and mining companies) (1) measured over the three-year performance periodMedian TSR

Median TSR

x 1.15

33.3%
Sustainable dividends
Average underlying dividend cover over the part of the performance period up to the end of the regulatory period
(31 March 2020)
The targets are considered commercially sensitive and so are not disclosed in this report. However, actual targets, performance achieved and awards made will be published retrospectively so that shareholders can fully understand the basis for any vesting33.3%
Underpin:Dividend growth of at least RPI in each of the years 2018/19 and 2019/20
Customer service excellence (2)
Ranking for the year ending 31 March 2021 versus ten other water and wastewater companies using Ofwat's service incentive mechanism (SIM) combined scoreMedian rank
(5th out of 10)
Upper
quartile rank
(3rd out of 10)
33.3%
Overall underpin
Overall vesting is subject to the committee being satisfied that the company's performance on these measures is consistent with underlying business performance
  1. For the purposes of calculating TSR, the TSR index is averaged over the three months prior to the start and end of the performance period. TSR is independently calculated by New Bridge Street.
  2. The committee retains the discretion to adjust the customer service measure and targets once Ofwat's approach to assessing customer service for the regulatory period 2020–25 is agreed.

Straight-line vesting applies between the threshold and stretch targets, with nil vesting below threshold performance. The committee will have the flexibility to make appropriate adjustments to the performance targets in exceptional circumstances, to ensure that the award achieves its original purpose.

Performance targets for future Long Term Plan awards

2019 LTP awards with a performance period ending 31 March 2022

Awards are expected to be made in late June 2019 and the award level for executive directors will remain unchanged at 130 per cent of base salary. Setting appropriate targets against the current performance measures is challenging given that two of the three years of the performance period will be in the new regulatory period. The committee is considering whether it might begin to reflect the performance measures included in the proposed directors' remuneration policy in the construct of the 2019 LTP awards, and major shareholders will be consulted on the proposed approach before the awards are made.

Executive directors' interests in shares

Executive directors' shareholding (audited information)

Executive directors are expected to reach a shareholding guideline of 200 per cent of salary, normally within five years of appointment. There is no additional requirement in the current guidelines for post-employment shareholding requirements as outlined in the Review of the directors' remuneration policy.

Details of beneficial interests in the company's ordinary shares as at 31 March 2019 held by each of the executive directors and their connected persons are set out in the charts below along with progress against the target shareholding guideline level. Steve Mogford and Russ Houlden have both exceeded the target shareholding guideline level of 200 per cent of salary. Steve Fraser is expected to reach his shareholding guideline of 200 per cent of salary within five years of his appointment to the board.

Unvested shares not subject to performance conditions after tax and national insurance

Shares owned outright

Number of shares required to achieve shareholding guideline at 31 March 2019

Further details of the executive directors' shareholdings and their share plan interests are given in the table below and in Appendix 1.

DirectorShare-
holding guideline
(% of
salary)
Number
of shares
required
to meet
shareholding
guideline(1)
Number of shares owned outright (including
connected persons)
Unvested
shares
not subject
to performance
conditions(2)
Total shares
counting
towards
shareholding
guidelines(3)
Share-
holding
as % of
base
salary at
31 March
2019(1)
Share-
holding guideline met at
31 March
2019
Unvested
shares subject
to performance
conditions(4)
2019201820192018201920182019201920192018
Steve Mogford(5) (6)200%184,354158,299110,119255,366225,615293,665229,713319%Yes352,738318,589
Russ Houlden(5) (6)200%116,43455,04069,435160,669142,088140,217144,760241%Yes222,701201,117
Steve Fraser(5) 200%107,62960,60846,90543,06929,02783,45762,310155%No129,08175,479
  1. Share price used is the average share price over the three months from 1 January 2019 to 31 March 2019 (824.5 pence per share).
  2. Unvested shares subject to no further performance conditions such as matching shares under the ShareBuy scheme. Includes shares subject only to withholding provisions such as Deferred Bonus Plan shares in the three-year deferral period and Long Term Plan shares in the two-year holding period.
  3. Includes unvested shares not subject to performance conditions (on a net of tax and national insurance basis), plus the number of shares owned outright.
  4. Includes unvested shares under the Long Term Plan.
  5. In the period 1 April 2019 to 21 May 2019, additional shares were acquired by Steve Mogford (37 ordinary shares), Russ Houlden (37 ordinary shares) and Steve Fraser (38 ordinary shares) in respect of their regular monthly contributions to the all-employee ShareBuy scheme. These will be matched by the company on a one-for-five basis. Under the scheme, matching shares vest one year after grant provided the employee remains employed by the company.
  6. On 1 April 2019, shares granted on 30 June 2014 under the Long Term Plan vested for Steve Mogford and Russ Houlden following their additional two-year holding period. Steve Mogford had 66,415 shares vesting, of which 31,294 shares were sold to cover tax and national insurance. Steve retained the remaining balance of 35,121 shares. Russ Houlden had 41,920 shares vesting, of which 19,752 shares were sold to cover tax and national insurance. Russ retained the remaining balance of 22,168 shares.

Dilution limits

Awards granted under the company's share plans are satisfied by market purchased shares bought on behalf of the company by United Utilities Employee Share Trust immediately prior to the vesting of a share plan. The company does not make regular purchases of shares into the Trust nor employs a share purchase hedging strategy and shares are bought to satisfy the vesting of share plans. The rules of the Deferred Bonus Plan do not permit awards to be satisfied by newly issued shares and must be satisfied by market purchased shares. The rules of the Long Term Plan permit the awards to be satisfied by newly issued shares but the company has decided to satisfy awards by market purchased shares.

Should the company's method of satisfying share plan vestings change (i.e. issuing new shares) then the company would monitor the number of shares issued and their impact on dilution limits set by The Investment Association in respect of all share plans (10 per cent in any rolling 10-year period) and executive share plans (five per cent in any rolling 10-year period).

No treasury shares were held or utilised in the year ended 31 March 2019.

Other information

Performance and CEO remuneration comparison

This graph illustrates the company's performance against the FTSE 100 over the past ten years. The FTSE 100 has been chosen as the appropriate comparator as the company is a member of the FTSE 100 and it is considered to be the most widely published benchmark for this purpose. The table below the TSR chart shows the remuneration data for the CEO over the same ten-year period as the TSR chart.

United Utilities Group PLCFTSE 100 Index

Year ended 31 March2010201120122013201420152016201720182019
CEO single figure of remuneration (£000)Steve Mogfordn/a3771,4211,5492,3782,8842,760(1)2,233(2)2,167(3)2,269
Philip Green1,9923,073n/an/an/an/an/an/an/an/a
Annual bonus payment (% of maximum)Steve Mogfordn/a90.672.084.478.277.454.583.774.979.0
Philip Green89.290.8n/an/an/an/an/an/an/an/a
LTP vesting (% of maximum)(4)Steve Mogfordn/an/a(5)n/a(5)n/a(5)93.597.533.654.555.460.0(7)
100(6)
Philip Green0(8)28.1(10)n/an/an/an/an/an/an/an/a
12.5(9)100(11)
  1. This includes the pay-out from the 2013 Long Term Plan (LTP) as well as £1.028 million in respect of Steve Mogford's one-off Matched Share Investment Scheme which ended on 5 January 2016.
  2. The pay-out from the 2014 LTP, which vested on 1 April 2019 after the end of a two-year holding period, has been updated to reflect the additional dividends accruing on this award and the closing share price on the date of vesting of 813 pence per share.
  3. The pay-out from the 2015 LTP has been restated to reflect the additional dividend equivalents accruing on these awards, final vesting outcome and updated share price. See the Annual report on remuneration for further details.
  4. For performance periods ended on 31 March, unless otherwise stated.
  5. Steve Mogford was not a participant in any long-term incentive plans that had performance periods ending during 2011 to 2013. For those who did participate in those plans, the vesting as a percentage of maximum was 37.5 per cent for those vesting in 2012 and 35.3 per cent for those vesting in 2013.
  6. The retention period applicable to Steve Mogford's Matched Share Investment Scheme ended on 5 January 2016.
  7. The 2016 Long Term Plan amount vesting percentage is estimated. See the Annual report on remuneration for further details.
  8. 2007 Performance Share Plan (PSP).
  9. 2007 Matching Share Award Plan (MSAP).
  10. 2008 PSP and MSAP.
  11. The retention period applicable to Philip Green's Matched Share Investment Scheme ended on 12 February 2011.

Date of service contracts

Executive directorsDate of service contract
Steve Mogford5.1.11
Russ Houlden1.10.10
Steve Fraser(1)1.8.17
  1. Steve Fraser joined the company on 23 May 2005.

Relative importance of spend on pay

The table below shows the relative importance of spend on pay compared to distributions to shareholder.

2018/19

2017/18

  1. Employee costs includes wages and salaries, social security costs, and post-employment benefits.

Alignment of wider workforce pay

Percentage change in CEO's remuneration versus the wider workforce

The figures below show how the percentage change in the CEO's salary, benefits and bonus earned in 2017/18 and 2018/19 compares with the percentage change in the average of each of those components for a group of employees.

Change in CEO remuneration

Base salary(1)

+2.0%

Bonus(2)

+7.8%

Benefits(2)

-3.6%

Change in employee remuneration(3)

Base salary(4)

+4.3%

Bonus

+11.3%

Benefits(5)

+16.9%

  1. On 1 September 2018, Steve Mogford received a base salary increase of 2.0 per cent.
  2. See the Annual report on remuneration for further details.
  3. To aid comparison, the group of employees selected by the committee are all those members of the workforce who were employed over the complete two-year period.
  4. Includes promotional increases. The headline salary increase for employees was 3.0 per cent.
  5. The increase in benefits for employees mainly relates to the alignment of life assurance benefits with effect from 1 April 2018, which improved the value of the benefit package for a large number of employees. Additionally, a large number of employees became eligible for group income protection benefits with effect from 1 April 2018.

Cascade of remuneration through the organisation

Executive directorsExecutive committeeSenior leadersManagementWider workforceGraduatesApprentices
Base salary
Annual bonus – cash
Annual bonus – deferred shares
Long Term Plan(1)
Pension
Life cover and ill health benefits
Company-funded healthcare
ShareBuy
Other benefits
  1. Long Term Plan grants for senior leaders are made annually on a selective basis.

Non-executive directors

Single total figure of remuneration for non-executive directors (audited information)

Year ended 31 MarchSalary/fees
£'000
Taxable benefits £'000Total £'000
201920182019201820192018
Dr John McAdam30730012308302
Stephen Carter7876007876
Mark Clare8078028080
Alison Goligher6665006665
Brian May8281028283
Paulette Rowe(1)6649006649
Sara Weller8078008078
  1. Paulette Rowe joined the board on 1 July 2017.

Fees

Non-executive director annual fee rates were reviewed and increased with effect from 1 September 2018 as shown below. Base fees were increased by 2.0 per cent which is lower than the 3.0 per cent increase applying to the general workforce in 2018. Additional fees for the senior independent non-executive director and the chairs of committees were not increased.

RoleFees
£'000
1 Sept 20181 Sept 2017
Base fee: Chairman(1)309.0303.0
Base fee: other non-executive directors(2)66.965.6
Senior independent non-executive director(2)13.513.5
Chair of audit and treasury committees(2)16.016.0
Chair of remuneration committee(2)13.513.5
Chair of corporate responsibility committee(2)12.012.0
  1. Approved by the remuneration committee.
  2. Approved by a separate committee of the board.

Non-executive directors' shareholding (audited information)

Details of beneficial interests in the company's ordinary shares as at 31 March 2019 held by each of the non-executive directors and their connected persons are set out in the table below.

Non-executive directorsDate first appointed
to the board
Number of shares
owned outright
(including connected
persons) at 31 March
2019(1)
Dr John McAdam4.2.081,837
Stephen Carter1.9.143,075
Mark Clare1.11.137,628
Alison Goligher1.8.163,000
Brian May1.9.123,000
Paulette Rowe1.7.173,000
Sara Weller1.3.1211,000
  1. From 1 April 2019 to 21 May 2019 there have been no movements in the shareholdings of the non-executive directors.

The remuneration committee

Summary terms of reference

The committee's terms of reference were last reviewed in November 2018 and are available on our website: corporate.unitedutilities.com/corporate-governance

The committee's main responsibilities include:

  • determining and recommending to the board the policy for executive director remuneration, having reviewed and taken into account workforce remuneration and related policies and the alignment of incentives and reward with culture;
  • setting the individual employment and remuneration terms for executive directors and other senior executives, including: recruitment and severance terms, bonus plans and targets, and the achievement of performance against targets;
  • approving the general employment and remuneration terms for selected senior employees;
  • setting the remuneration of the Chairman;
  • proposing all new long-term incentive schemes for approval of the board, and for recommendation by the board to shareholders; and
  • assisting the board in reporting to shareholders and undertaking appropriate discussions as necessary with institutional shareholders on aspects of executive remuneration.

Composition of the remuneration committee

MemberMember sinceMember to
Sara Weller (chair since 27.7.12)1.3.12To date
Mark Clare1.9.14To date
Alison Goligher1.8.16To date
Brian May16.5.17To date

The committee's members have no personal financial interest in the company other than as shareholders and the fees paid to them as non-executive directors.

Support to the remuneration committee

By invitation of the committee, meetings are also attended by the Chairman of the company, the CEO, the company secretary (who acts as secretary to the committee), the customer services and people director and the head of reward and pensions, who are consulted on matters discussed by the committee, unless those matters relate to their own remuneration. Advice or information is also sought directly from other employees where the committee feels that such additional contributions will assist the decision-making process.

The committee is authorised to take such internal and external advice as it considers appropriate in connection with carrying out its duties, including the appointment of its own external remuneration advisers.

During the year, the committee was assisted in its work by the following external adviser:

AdviserAppointed byHow appointedServices provided to the committee in year ended 31 March 2019Fees paid by company for these services in respect of year and basis of charge
New Bridge StreetCommitteeReappointed following committee review in 2013General advice on remuneration matters and support for the directors' remuneration policy review£205,000 on a time/cost basis
Other services provided to the company:
Benchmarking of roles not under the committee's remit, provision of market information relevant to the price review submission and advice on non-executive director remuneration

The independent consultants New Bridge Street (a trading name of Aon Hewitt Limited, an Aon PLC company) are members of the Remuneration Consultants Group and, as such, voluntarily operate under the Code of Conduct in relation to executive remuneration consulting in the UK. The committee is satisfied that the advice they received from external advisers is objective and independent.

In addition, during the year the law firm Eversheds Sutherland provided advice on the company's share schemes to the company.

Key activities of the remuneration committee over the past year

The committee met seven times in the year ended 31 March 2019.

Regular activities

  • Approved the 2017/18 directors' remuneration report;
  • Reviewed the pay comparator group;
  • Reviewed the base salaries of executive directors and other members of the executive team;
  • Reviewed the base fee for the Chairman;
  • Assessed the achievement of targets for the 2017/18 annual bonus scheme, reviewed progress against the targets for the 2018/19 annual bonus scheme, and set the targets for the 2019/20 annual bonus scheme;
  • Assessed the achievement of targets for the Long Term Plan (LTP) awards made in 2015 and set the targets for LTP awards made in 2018;
  • Reviewed and approved awards made under the annual bonus scheme, Deferred Bonus Plan (DBP) and LTP;
  • Monitored progress against shareholding guidelines for executive directors and other members of the executive team;
  • Reviewed the committee's performance during the period;
  • Amended the committee's terms of reference, taking account of best practice and changes introduced by the 2018 UK Corporate Governance Code, including the committee assuming responsibility for the setting of remuneration for all members of the executive team;
  • Considered governance developments and market trends in executive remuneration, including in the wider utilities sector; and
  • Noted progress on the company's gender pay gap reporting.

Other activities

  • Reviewed the executive pay arrangements and consulted with shareholders on the proposed remuneration policy;
  • Reviewed the shareholding guidelines; and
  • Agreed to align pension arrangements for future executive directors with those of the wider workforce.

2018 AGM: Statement of voting

At the last Annual General Meeting on 27 July 2018, votes on the 2017/18 directors' remuneration report (other than the part containing the directors' remuneration policy) were cast as follows:

Votes    438,000,676

(98.64% of votes cast)

Votes against    6,060,476

(1.36% of votes cast)

444,061,152

Total votes cast

779,222

Votes withheld (abstenons)

The directors' remuneration report was approved by the board of directors on 21 May 2019 and signed on its behalf by:

Sara Weller

Chair of the remuneration committee