Directors' Report: Corporate governance

Introduction

This Directors' remuneration report has been prepared in accordance with the requirements of the Companies Act 2006 and Schedule 8 of the Large and Medium Sized Companies and Groups (Accounts & Reports Regulations) 2008 which set out requirements for the disclosure of Directors' remuneration, and also in accordance with the requirements of the Listing Rules of the Financial Services Authority.

The relevant legislation requires the auditors to report to the Company's members on the ‘auditable part' of the Directors' remuneration report and to state whether, in their opinion, the part of the report that has been subject to audit has been properly prepared in accordance with the relevant legislation. This report is therefore divided into separate sections to disclose the audited and unaudited information.

Unaudited information

Remuneration Committee

Clare Spottiswoode (Chairman)

David Bamford

Ann Grant

Steven McTiernan

Pat Plunkett

David Williams
 

Main responsibilities

  • Determining and agreeing with the Board the remuneration policy for the Chief Executive Officer, Chairman, Executive Directors and senior executives;
  • Approving the design of, and determining targets for, an annual performance-related pay scheme for the Executive Directors and senior executives;
  • Reviewing the design of share incentive plans for approval by the Board and shareholders and determining the annual award policy to Executive Directors and senior executives under existing plans;
  • Within the terms of the agreed policy, determining the remainder of the remuneration packages (principally comprising salary and pension) for each Executive Director and senior executive; and
  • Reviewing and noting the remuneration trends across the Group.

The Committee met four times during the year. The full terms of reference for the Committee are available on the Group's website.

Committee's advisers

The Committee invites individuals to attend meetings to provide advice so as to ensure that the Committee's decisions are informed and take account of pay and conditions in the Group as a whole. These individuals include Gordon Headley, Chief HR Officer. No Director takes part in any decision directly affecting his own remuneration. The Company Chairman, Pat Plunkett, also absents himself during discussion relating to his own fees. The Committee has appointed Hewitt New Bridge Street (HNBS) as its independent remuneration advisers. They also provide technical advice to the Group in connection with the operation of its share incentive arrangements. A statement outlining the business relationship with HNBS can be viewed on the Investor Relations section of the Group's website. The Committee also consults with the Company's major investors and investor representative groups as appropriate.

Remuneration policy

The Group's policy is to maintain levels of remuneration so as to attract, motivate and retain Executive Directors and senior executives of the highest calibre who can contribute their experience to the Group's operations. The elements of the remuneration package for Executive Directors and senior management are base salary, annual bonus, taxable benefits, pension payments and participation in the Group's share incentive arrangements. A significant element of the potential remuneration package is, therefore, performance-linked.

When determining the total remuneration of the Executive Directors and senior management, the Committee predominately takes into account the remuneration practices adopted by UK listed companies of a similar market capitalisation and overseas complexity to Tullow. Practice within other relevant Oil & Gas companies is also considered.

The key elements of the remuneration package for the Executive Directors are set out in the Executive Directors' remuneration section.