Components of remuneration
During 2008, the components of employee remuneration (including that of the Executive Directors and SET members) comprised fixed and variable (ie performance-related) elements, as set out below:
- Annual salary – based on conditions in the relevant geographic market and the value of an individual’s sustained personal performance to the business, resulting from their ability and experience.
- Pension arrangements – appropriate to the relevant national market.
- Benefits (such as healthcare) – cost‑effective and compatible with relevant welfare arrangements.
- Short-term bonus – a lump sum payment related to the targeted achievement of corporate, functional and individual goals, measured over a year and contained within a specific plan. The corporate goals are derived from the annual financial targets set by the Board and take into account external expectations of performance. The functional goals are agreed by the Remuneration Committee at the start of the year. These functional goals are derived from the Business Scorecard, the key elements of which are set out in the strategy, goals and performance measurement table, and are monitored thereafter as part of a Quarterly Business Review. Individual goals are based on annual objectives, which are linked to functional goals.
- LTI arrangements – for selected groups, targeted at the achievement of strategic objectives closely aligned with the interests of shareholders, namely the AstraZeneca Performance Share Plan (PSP), and the AstraZeneca Share Option Plan, and in line with market practice. Some individuals (primarily those based in the US, but excluding Executive Directors) participate in the Restricted Stock Unit Award Plan.
- Share participation – various plans provide the opportunity for employees to take a personal stake in the Company’s wealth creation as shareholders. These plans are described in Note 24 to the Financial Statements.
The way in which these elements of remuneration were combined and applied varied according to a range of factors including specific business needs and practices in different geographic markets, although, in general, the more senior the role within the business, the greater the proportion of total remuneration was made up from variable pay.
Components of remuneration are taken into account both separately and in their totality in judging the value of a package. For 2009, the Company will continue to benchmark against appropriate comparator companies and will assess whether or not and to what extent the overall opportunities for remuneration offered by the current structure of remuneration remain appropriate in the context of changes within the business and the external environment in which it operates.
Recognising that shareholder approval to operate the AstraZeneca Share Option Plan will expire at the end of its 10-year life during 2010, and that it will be necessary to seek further shareholder approval in order to continue operating the plan beyond this date, the Remuneration Committee intends to consider whether or not the Company’s established remuneration policy and the operation of the existing incentive plans continue to meet the needs of the business in securing key senior executive talent to grow shareholder value. This will build on a review of remuneration policy started during 2008. To the extent that any material changes are to be proposed as a consequence of this review, the Remuneration Committee will consult with shareholders in advance of next year’s AGM.
