The European Capital Requirements Directive (CRD) requires certain disclosures to be made which enable market participants to assess information on a firm’s risks, capital and risk management procedures. One subset of these disclosures relate to remuneration practices.
The CRD is implemented in the UK by the Financial Services Authority (FSA). The following information is provided in accordance with FSA rules regarding the disclosure of remuneration practices. It relates to Skandia MultiFUNDS Limited
Certain FSA rules apply to staff that have a material influence on the risk profile of Skandia MultiFUNDS Limited. These are called “Remuneration Code staff”. Remuneration Code staff comprise categories of staff including senior management, risk takers, staff engaged in control functions and any employee receiving total remuneration that takes them into the same remuneration bracket as senior management, whose professional activities have a material impact on the firm’s risk profile. The aggregate information about remuneration shown below relates to our Remuneration Code staff only.
This information relates to the year ending 31 December 2012.
Our remuneration policy
Our governance framework includes a remuneration policy for determining risk tolerances that do not encourage risk taking outside the Old Mutual Group’s risk appetite. The remuneration policy has been designed to eliminate conflicts of interest and support business strategy, objectives, values, and the long-term interests of the Group.
The policy is overseen by a Remuneration Committee the Old Mutual plc Remuneration Committee (RemCom), RemCom is appointed by the Board and consists of five non-executive directors of the Old Mutual Group, which enable it to exercise independent competent judgement on compensation policies and the incentives for managing risk, value and capital in line with stakeholders’ expectations. Policy is implemented and applied within Old Mutual Wealth by the Old Mutual Wealth RemCom. OMWML is a holding company and Skandia MultiFUNDS Limited sits within the OMWML management structure.
The long-term nature of the businesses in which we operate is reflected in our remuneration structures both to protect customers and support the creation and preservation of enduring value in the Group for the benefit of all relevant stakeholders.
In order to be aligned with shareholder value creation remuneration is structured to incentivise out-performance. We use Economic Profit as one of the primary measures for driving pool formulas as well as other factors appropriately aligned to performance or strategy. In this way incentives are linked to a risk-adjusted profit measure and encourage value creation over time.
Incentive awards for Remuneration Code staff include an element of deferral in Old Mutual plc shares. The deferred proportion relates to the uncertainty of sustainable outcome and be subject to clawback provisions. The vesting period is at least 3 years.
Determining bonus pools for variable pay awards
Short term incentives are structured to deliver market median reward when business plan targets (which relate to market median or average business performance) are achieved. Business plans will be challenged to ensure that they are robust and realistic and will be assessed against expected competitor deliveries.
A bonus pool approach is used to align aggregate short-term incentives to specific, measurable and relevant business results in a transparent manner.
Pool structures are intended to share a portion of value created with the employees responsible for that business. The allocation of the pool is apportioned firstly based on the relative performance of business units included in the pool and then by the relative contribution of individuals.
Pool formulas are based on agreed business plans and economic and market assumptions set at the start of each year to ensure that:
- remuneration is influenced more by the long-term progress of the company than by the short-term volatility
- the size of the bonus pool will have a direct comparison to the overall performance of the business and so awards will diminish or disappear in the event of poor performance.
Economic Profit is used as a primary measure, in determining the size of the pool however other factors aligned to the business strategy are used as appropriate.
While formulas are used to calculate the bonus pool size, the WM RemCom may exercise its judgement and discretion to adjust pool calculations at the end of the year in order to ensure that actual remuneration reflects all performance-related and risk-adjusted factors. Factors that they may take into account include, but are not limited to:
- quality of earnings/results
- risks incurred
- economic and market factors not anticipated at the start of the year
- performance relative to competitors
- competitive market remuneration.
Share related awards and link to performance
Any share awards made in Old Mutual plc equity must be approved by RemCom. Non-standard share awards, including any one-off awards such as buy-outs of deferrals on joining or retention awards, must be approved in accordance with our Remuneration Governance requirements.
Share awards are subject to clawback, which will be applied subject to RemCom discretion, under the following circumstances:
- If the results or accounts or consolidated accounts of any company, business or undertaking in which the participant worked or works or for which he was or is directly or indirectly responsible are found to have been materially incorrect or misleading;
- If the company, business or undertaking in which the participant worked or works or for which he was or is directly or indirectly responsible subsequently makes a loss out of business written due to poor risk management; and
- If the performance of the company, business or undertaking in which the participant worked or works or for which he was or is directly or indirectly responsible and upon which the plc RemCom relied in making its determination to grant an award to the participant and/or the size of such award is found by the RemCom to have been based upon any material misrepresentation.
Share Plan rules ensure that awards may not be hedged in any manner (such as by the participant ceding or assigning rights to a third party).
The exit conditions to be applied to share awards will be determined by the share award scheme rules. Any request for non-standard treatment must be escalated for approval to the Good Leaver Committee via the Group HR Director.