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This report covers the remuneration of Executive and non-executive Directors. The report has been split into three sections: a summary of the remuneration policy operated during 2012, the proposed remuneration policy which will be operated for 2013 onwards and an Implementation Report which, consistent with the draft proposals on Directors' pay published by BIS, discloses how the current remuneration policy has been implemented in the year ended 31 December 2012.
In addition to adopting a number of the proposals from BIS on disclosure, this 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) 2008 Regulations, which set out the current requirements for the disclosure of Directors' remuneration, and also in accordance with the requirements of the Listing Rules of the Financial Services Authority. The current legislation requires the auditors to report to the Company's members on the 'auditable parts' of the Directors' remuneration report and to state whether, in their opinion, the parts of the report that have been subject to audit have been properly prepared in accordance with the relevant legislation and have been highlighted
On behalf of the Board, I am pleased to present the Directors' report on remuneration for 2012, for which we will be seeking approval from shareholders at our forthcoming AGM.
The report has been split into three sections:
We will be seeking your support for each part of the report by way of a single advisory vote at the AGM on 8 May 2013.
The Remuneration Committee (Committee) considers that the remuneration paid to the Executive Directors fairly reflects their strong performance during the year, but also recognises the challenges that Tullow has faced. Base salaries were increased by 5% from 1 January 2012 (being in line with general increases awarded across the Group). The annual bonus paid out was at 70% of the maximum (equivalent to a bonus of 140% for Executive Directors) and the 2012 Performance Share Plan (PSP) awards, which had a three-year performance period ending 31 December 2012, vested at 23.2% of the maximum.
In view of the first award of the Tullow Incentive Plan (TIP) being in 2014, based on performance for 2013, a final PSP award will be made in the first quarter of 2013.
During the year Anne Drinkwater and Steve Lucas joined the Committee and David Williams and Steven McTiernan ceased to be members of the Committee on retiring from the Board in May and December 2012, respectively. I would like to thank Steven and David for their valuable contribution during their time on the Committee and I would like to welcome Anne and Steve and look forward to working with them. In addition, New Bridge Street was appointed as independent remuneration advisers to the Committee in 2012, replacing Kepler Associates.
In light of widespread public concern about senior executive pay, and after consulting with major shareholders and shareholder representative bodies, the Committee proposes a radical overhaul of pay for our Executive Directors and senior managers for 2013 onwards with two primary objectives:
The proposed policy will consist of just two main elements – fixed pay (base salary, benefits and pension provision) and the TIP. In summary:
On behalf of the Board, I would like to thank shareholders for their continued support. Should any shareholder wish to contact me in connection with the Group's senior executive remuneration policy, please email me at: email@example.com.
Chairman of the Remuneration Committee
12 February 2013