Remuneration Report
Share Incentive Schemes
The Company operates five share incentive schemes, namely the Unapproved Share Option Scheme (the ‘Unapproved Scheme’), the Sportingbet Plc Company Share Option Plan (the ‘IR Approved Scheme’), the Sportingbet Plc Executive Share Option Scheme (the ‘Executive Scheme’), the Long Term Retention Plan 2005 (the ‘2005 Share Plan’) and the 2006 Restricted Share Plan (the ‘2006 Share Plan’). Prior to the Company’s admission to AIM on 30 January 2001, share options were granted under the Unapproved Scheme only. Share options are now only granted under the HMRC Approved Scheme and the Executive Scheme, unless they exceed the HMRC limits. The 2005 Share Plan was introduced on 2 August 2005 and the 2006 Share Plan was introduced on 3 November 2006. The Company’s policy to grant share options under the Executive Scheme and awards under the 2006 Share Plan is at the Remuneration Committee’s discretion as and when considered appropriate.
Entitlements under the 2005 Share Plan entail a loyalty element and a performance element. The loyalty element represents 35% of the Executive Directors’ total potential awards pursuant to the 2005 Share Plan. Participants who remain employed by the Company until 31 July 2007 may exercise loyalty awards which have vested up to that date. Participants who remain employed by the Company until 31 July 2007 may exercise performance awards which may have vested, subject to the satisfaction of certain performance conditions, up to that date. Only Executive Directors are entitled to participate under the 2005 Share Plan, and all are subject to the same performance conditions. Details of the awards released to the Executive Directors under the 2005 Share Plan are set out in the table on page 25.
The 2006 Share Plan entails a performance based award, calculated as a multiple of salary using the three day average of the Company’s closing share price prior to the award being made. The award vests after the relevant periods as contained within each participant’s award, broadly following the end of the following financial year. As with the 2005 Plan, the shares may only vest and be released subject to the satisfaction of certain performance conditions. Only Executive Directors are entitled to participate under the 2006 Share Plan, and all are subject to the same performance conditions.
As an additional incentive, on 9 May 2006 the Remuneration Committee granted Andrew McIver, Dave Hobday and Nigel Payne the right to earn additional shares in the Company. These shares would vest in three equal amounts after the three financial periods ending 2007, 2008 and 2009, subject to the Company meeting the same performance conditions as the 2005 and 2006 Share Plans.
For both the 2005 and 2006 Share Plans, performance conditions are based on the extent to which growth in the Company’s adjusted continuing earnings per share (‘EPS Growth’) exceeds growth in the retail prices index (‘RPI Growth’) over a financial year of the Company.
For the performance award to be exercisable in full, EPS Growth must exceed RPI Growth by 5% per financial year compound. The proportion of the performance award exercisable increases on a straight line sliding scale between 0 and 100% if EPS Growth exceeds RPI Growth by any margin up to 5% over a financial year. The Remuneration Committee continues to believe that, in relation to the 2005 and 2006 Share Plans, EPS Growth in excess of RPI Growth is the most appropriate measure for determining the increase in value delivered to shareholders by the Company’s Executive Directors and other senior executives. The Remuneration Committee reviews the appropriateness of the performance measure and the specific target set when considering each new grant of performance awards.