AstraZeneca's overall remuneration policy and purpose
The Board is committed to maintaining a dynamic performance culture, in which the Group can compete strongly by employing and developing the best talent and where every employee is clear about the Company’s objectives, how their work will impact on those objectives and how they will benefit from achieving high levels of performance.
To underpin these objectives, in addition to fixed remuneration (basic pay, pension and certain other benefits) benchmarked against appropriate external comparators, the majority of employees are eligible to receive an annual cash incentive, with a component based on corporate financial performance in the form of earnings per share (EPS) and/or individual performance. Whilst details of bonus plans differ from country to country, the EPS component ensures that all eligible employees receive an element of reward based on the Company’s overall financial performance. In addition, long-term incentive awards are provided to selected employees in order to align their interests closely with those of the shareholders.
These pay-for-performance principles apply throughout the Group, and provide a consistent framework within which executive remuneration decisions are made. The Remuneration Committee seeks to ensure that the overall proportion of variable pay (bonuses and share-based awards) to which Directors and members of the Senior Executive Team (SET) may become entitled makes up a significant proportion of their overall remuneration package. The Remuneration Committee’s objective is to ensure that such variable pay is linked to a range of measures designed to promote both individual and team behaviour and performance that genuinely contributes to the success of AstraZeneca and which ultimately creates value for shareholders. Such measures are designed to be stretching and challenging.
Consistent with its approach during the year, the Board has confirmed that the Company’s overall remuneration policy and purpose going forward will continue to be to:
- Attract and retain people of the quality necessary to sustain the Company as one of the best pharmaceutical companies in the world.
- Motivate these people in order to achieve the level of performance necessary to create sustained growth in shareholder value.
In order to achieve this, the remuneration policy and practice are designed to:
- Closely align individual and team reward with business performance at each level.
- Encourage employees to perform to their fullest capacity.
- Encourage employees to align their interests with those of shareholders.
- Support managers’ responsibility to achieve improvements in business performance through people and to recognise superior performance, in the short and longer term.
- Be internally consistent, as far as practicable and beneficial, but taking due account of local market needs and permitting flexibility where this is beneficial.
- Be competitive and cost-effective in each of the relevant employment markets.
The cost and value of the components of the remuneration package are considered as a whole and are designed to:
- Ensure a proper balance of fixed pay and variable performance-related pay (linked to short- and long-term objectives).
- Reflect market competitiveness.
During 2008, the Remuneration Committee intends to review the current remuneration policy for members of the SET with a view to benchmarking reward against the companies and markets with which AstraZeneca should appropriately reference competitive levels of reward. This is partly the consequence of the changing composition of the senior leadership group, which has become increasingly international and partly because we have added significant capability in our pursuit of growth (the best example being the biologics businesses which we have acquired over the last two years). In seeking to attract, develop and retain the best human capital in the industry, we must remain very attentive to the wider industry practice and the impact of the international pay environment.
We expect to report to our shareholders the key findings, and any changes to the remuneration policy as a consequence of this review, in next year’s Annual Report and Form 20-F Information.
