newbridgestreetLeaders in Executive Remuneration

leaders | from experience

40highly experiencedconsultants

25+years’ experience

An expert field where specialist advice is required

Executive remuneration has many objectives – including retention, reward and incentivisation. In a world of regulation, scrutiny and complexity, it has become more and more evident that this is an expert field, where specialist advice is required.

Remuneration Committees now face an increasing number of issues, including:

■ Ensuring that the pay policy fits with the corporate strategy.

■ Paying for performance and avoiding rewarding failure.

■ Benchmarking pay against the right companies.

■ Accessing independent and accurate pay data.

■ Responding constructively to shareholder opinion.

■ Complying with an increased legislative and regulatory burden.

New Bridge Street is the UK’s leading executive remuneration consultancy and is part of Aon Hewitt's global executive remuneration offering. We work alongside over a third of FTSE 350 companies, many of whom are truly international organisations. We also act for a significant proportion of FTSE Small Cap and AIM companies, as well as private and mutual organisations. We often advise at times of corporate change, including company divestments, refinancings and IPOs.

judgement | from experience 3

An expert field where specialist advice is required

we provide simple, innovative and tailored solutionsto complex problems

4 focus | from experience

over athirdof the FTSE350choose us to advise them

Tax

IFRS

ABI

Risk Metrics

Shareholders

Media

Companies Act

Securities Laws

Widerworkforce

Appropriatecomparators

Accuratedata analysis

Business environment

Shareholderexpectations

RegulatoryEnvironment

ExecutivePay Policy

CorporateStrategy

Market

CorporateGovernance

clarity | from experience 5

ExperienceWe have been advising on executive pay for over 25 years and have the largest market share in the FTSE 350 and FTSE Small Cap.

Partner level consultants lead our client assignments. There are often no clear ‘right or wrong’ answers when it comes to executive pay and our clients have immediate and regular access to experienced advisers to help them make appropriate decisions in the context of their business strategy.

Strength in depthWe have around 40 executive pay consultants in the UK and form an integral part of Aon Hewitt’s global executive remuneration practice (with our US colleagues advising a substantial number of Fortune 500 companies). This allows us to field very strong international client teams to ensure the highest level of service on a global basis.

Multi-disciplinary approachOur experienced staff includes accountants, lawyers, reward experts, investor relations specialists and actuaries. We can also call upon the varied skills of other elements of the Aon Hewitt Human Resources consulting service offering (e.g. employee reward, talent management, organisational effectiveness, employee engagement) and retirement benefits practice. Therefore, our teams can support our clients on all aspects of executive pay, from design through to technical implementation.

Tailored adviceWe firmly believe that a remuneration structure should be fully aligned to business strategy and company needs. We do not believe in off-the-shelf solutions.

Quality of deliveryWe pride ourselves on the quality and punctuality of our delivery. While our advice is of the highest quality and deals with some complex issues, our reports are clear and avoid unnecessary jargon.

Investor insightAs the leading adviser to many of the UK’s largest companies, our experience of helping companies to deal with UK shareholders is unrivalled. We are able to identify potential shareholder concerns early on to ensure that there are no surprises and can help clients react accordingly.

Access to Aon Hewitt’s wider HR consulting expertiseOur ability to access the expertise of Aon Hewitt’s HR consulting team allows us to leverage off the knowledge and experience of our colleagues around the world on a wide range of employee reward, benefit and communication issues.

Why New Bridge Street?

6 understanding | from experience

Our ServicesExecutive pay benchmarkingWe have access to some of the most comprehensive UK and international executive pay databases:

■ Our database of listed company pay information includes data on directors' pay (both executive and non-executive) in every FTSE All-Share, Fledgling and AIM 100 company. We also hold data on companies in the Eurotop 100.

■ Our Executive Total Reward Survey holds total remuneration data for the five most senior job levels and over 50 distinct roles, as well as data on middle management positions, for more than 300 UK and international companies.

■ We also operate sector-specific pay surveys e.g. in the Biotech, Insurance and Retail sectors and can draw upon Aon Hewitt’s Total Compensation Measurement™ databases around the globe.

We present our data clearly and transparently. We explain it simply. Where possible, we allow you to get behind the numbers. This allows all interested parties to take comfort that a robust approach is being adopted.

Annual bonus designAnnual bonuses play an increasingly important role in executive remuneration packages.

We help companies to design and implement their short-term executive incentives so that they clearly and simply support the delivery of the company's corporate strategy. We also help companies understand the disclosure requirements and investor expectations around annual bonus plan design and target disclosure. In addition, we advise on Deferred Bonus Plans (where a portion of the bonus is deferred beyond the end of the financial year, typically in shares) and "clawback" provisions (where a past bonus can be reclaimed, if paid on the back of misstated results).

leaders | from experience 7

we have oneof the largest technicalimplementation teamsin the UK

8 leaders | from experience

we use ourexperience and judgementto offer business-drivensolutions

focus | from experience 9

Long-term incentive designShare-based long-term incentives are another key feature of the executive pay landscape and one that attracts considerable debate. Long-term incentives should not be designed in a vacuum but, instead, must take full account of a company’s particular circumstances and be structured to support the delivery of long-term strategic goals.

We advise on the design and implementation of all types of long-term incentives. This can take the form of traditional share options, conditional allocations of ‘free’ shares which vest depending on company performance under a ‘Performance Share Plan’, a ‘Share Matching Plan’ (where executives invest a bonus in shares and receive extra shares from the company, usually based on performance) or ‘Value Creation Plans’, where the returns in excess of a hurdle are shared between management and shareholders.

ImplementationNew Bridge Street has one of the largest technical implementation teams in the UK, rivalling any ‘magic circle’ law firm or ‘Big 4’ accounting firm. Many of our consultants are qualified lawyers who have implemented many share plans for our clients – both in the UK and internationally.

We provide all necessary documentation (such as plan rules, award certificates and shareholder circulars). Tax planning, securities law, exchange control and regulatory issues are all covered, both in the UK and internationally.

In cases where we both design and implement plans, overlapping adviser fees are avoided and nothing gets lost in translation.

Shareholder liaisonLiaising with shareholders is an increasingly critical aspect of executive remuneration design.

Most shareholders now have their own ‘best practice’ guidelines which they regularly update and which can vary between investors.

We play an integral role in presenting a client’s remuneration policy to its investors in the best possible light, showing how it is directly linked to the achievement of the client's key strategic objectives. We help draft consultation letters, prepare investor presentations and accompany our clients to face-to-face meetings with their shareholders.

Forewarned is forearmed. We know which investor guidelines are key and which are more aspirational. As a result, you will know the issues before they are raised by shareholders. There should be no surprises.

10 knowledge | from experience

Financial modellingThe cost of a remuneration policy (particularly the accounting cost of share plans) is another key issue. A number of our consultants are qualified accountants who can construct financial models to show the cost impact of a pay policy and provide IFRS 2 share-based payment valuations.

Almost all long-term incentive plans for executives incorporate performance conditions, often based on a company’s total shareholder return (share price growth and dividends) relative to a peer group or financial performance (e.g. earnings per share growth).

In order to ensure that these plans are relevant and valued by executives, companies need to provide regular and clear communication of on-going performance against their performance conditions. Remuneration Committees also generally require independent verification of performance and the extent to which awards can vest.

We currently provide a performance monitoring service for total shareholder return / share price performance conditions for around 100 companies.

All-employee share plan designWe are very experienced in designing share plans for the whole workforce (both in the UK and internationally) and structuring these efficiently in terms of tax (including HMRC-approved Sharesave plans and Share Incentive Plans), accounting cost and share usage while always reflecting and reinforcing the company’s culture and objectives.

In addition, through Aon Hewitt’s HR consultants our clients also have access to expert local and global advice on workforce-related topics such as total reward optimisation, performance management, pay and grading, flexible benefits, talent management, engagement, leadership and communication.

CommunicationHowever well designed, a pay policy will not work if it is not understood. Effective communication is key. We help our clients explain their remuneration strategy to their executives. This can be done through a client's intranet, simple guidance booklets, information distributed or made available in digital forms, one-on-one presentations to executives or at management conferences.

Regular communication is also vital. How will a plan incentivise if participants do not know how they are performing against the targets? We provide our clients with clear and simple performance updates which they can use and reinforce key messages.

leaders | from experience 11

our experienceof helping companiesto deal with shareholdersis unrivaled

In summary we can help you with the following:

■ Benchmarking pay levels (Board, non-executive and the wider executive population).

■ Designing both short- and long-term incentives for executives and all employees.

■ Updating the Remuneration Committee on pay trends and other developments.

■ Shareholder liaison.

■ Drafting LTIP and option plan documentation, AGM and Board resolutions.

■ Selecting and calibrating annual bonus plan and long-term incentive performance measures.

■ TSR performance monitoring/updates.

■ Advising on senior executive recruitments/terminations and other ad hoc sensitive issues.

■ Acting as ‘wise counsel’ on all reward issues of interest to the Board.

■ Calculating the accounting charge and dilution for long-term incentive awards.

■ Producing Total Reward Statements.

■ Drafting Directors’ Remuneration Reports for inclusion in Report and Accounts.

New Bridge Street is the UK's leading executive remuneration consultancy. We have a single focus – to assist companies design and implement executive remuneration policies that will help them meet their business objectives.

We are a multi-disciplinary team, combining the professional skills of accountants, lawyers, reward experts, investor relations specialists and actuaries. We are named advisers in the Directors' Remuneration Report of more UK listed companies than any other consultancy.

We are part of the HR Consulting business of Aon Hewitt, which has over 29,000 associates in over 90 countries providing advice to our clients on a range of reward, executive remuneration, HR, pension and outsourcing issues.

If you wish to find out how we can help you, please contact New Bridge Street:

by telephone on: 02070868000; or email to: newbridgestreet@aonhewitt.com; or visit our website at: www.newbridgestreet.com

New Bridge Street10 Devonshire Square, London, EC2M 4YP

This publication is designed to provide a summary of the main aspects of the subject matter covered.

It does not purport to be comprehensive or to render advice. No responsibility can be accepted for loss

occasioned to any person acting or refraining from acting as a result of any statement in this publication.

© Aon Hewitt Limited 2012. Aon Hewitt Limited is authorised and regulated by the Financial Services Authority.

Registered in England and Wales. Registered No: 4396810. Registered Office: 8 Devonshire Square, London EC2M 4PL.

SB2985

the leading advisers

www.newbridgestreet.com