Remuneration Report

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Introduction

The Remuneration Committee (sometimes referred to in this Report as the ‘Committee’) has adopted the principles of good governance relating to Directors’ remuneration as set out in the 2006 Combined Code on Corporate Governance (the ‘Combined Code’). This Report has been prepared in accordance with the Companies Act 1985 (the ‘Act’) and meets the requirements of the Directors’ Remuneration Report Regulations 2002 and the Listing Rules of the Financial Services Authority.

It is a requirement that the Company’s auditors report to shareholders on certain parts of this Report and state whether in their opinion those parts of it have been properly prepared in accordance with the above regulations. Accordingly, the Report has been divided into separate sections consisting of unaudited and audited information.

As required by the Act, a resolution to approve this Report will be proposed at the Annual General Meeting of the Company on 17 April 2008.

This Report has been prepared by the Remuneration Committee on behalf of the Board.

Part 1: Unaudited Information:
Remuneration Committee

The Remuneration Committee has clearly defined terms of reference which are reviewed annually by the Board and are available on the Company’s website at www.taylorwimpey.com. The key remit of the Committee is to recommend to the Board the remuneration strategy and framework for Executive Directors and senior management. Within this framework the Committee’s main role and responsibilities are to:

  • determine the remuneration, including pension arrangements of the Executive Directors and the Group Company Secretary and General Counsel;
  • monitor and make recommendations in respect of remuneration for the tier of senior management one level below that of the Board;
  • approve annual and long term incentive arrangements together with their targets and levels of awards;
  • determine the level of fees for the Company Chairman.

The Committee comprises five independent Non Executive Directors. On 3 July 2007, following completion of the merger between Taylor Woodrow plc and George Wimpey plc (the ‘Merger’), Anthony Reading was appointed as Committee Chairman. The other members of the Committee are Katherine Innes Ker (Committee Chairman until the Merger), Mike Davies, as well as Brenda Dean and David Williams who were appointed on completion of the Merger. Vernon Sankey was a member of the Committee until completion of the Merger. Details of attendance at Remuneration Committee meetings held during 2007, are set out in the Corporate Governance Report

No Director is involved in any decisions about his/her own remuneration.

Advice to the Company

The Committee keeps itself fully informed on developments and best practice in the field of remuneration and it seeks advice from external advisers when appropriate. During the year, the Committee received material advice from New Bridge Street Consultants LLP and KPMG LLP. It also received legal advice from Slaughter and May. Around the time of the Merger, the Committee undertook a detailed review of its remuneration related advisers following which it appointed Mercer. As a result the Committee has received material advice from Mercer on establishing a new Remuneration Policy and Philosophy (as set out below) and in relation to Executive Directors’ remuneration and share schemes. Separately, Mercer also provides actuarial advice to the trustees of the George Wimpey Pension Scheme.

Proportion of fixed to performance based remuneration (%)

Chart: Five-year income growth £mn

In addition, the Company Chairman, Group Chief Executive, Group Company Secretary and General Counsel and Group Human Resources Director provided input to the Committee on remuneration matters except in relation to their own individual remuneration.

Policy and philosophy

Following the Merger, the Committee in conjunction with Mercer, undertook a comprehensive review of the existing remuneration and reward structures in place within both Taylor Woodrow plc and George Wimpey Plc. The prime objective of the review was to ensure that executive compensation practices actively support the attainment of the Company’s strategic objectives. The review addressed a number of key areas including:

  • the development of a new remuneration philosophy;
  • an evaluation of Executive Directors’ base salaries in order to ensure competitive positioning;
  • the alignment of short term incentives with market practice; and
  • the development of long term incentive plan arrangements designed to support strategic goals, motivate and incentivise key executives and align their interests with those of shareholders;

Following the review the Committee adopted the following remuneration philosophy;

  • remuneration arrangements must help attract, motivate and retain the management talent required to meet the Company’s strategic objectives;
  • Taylor Wimpey will be committed to fostering a performance culture that effectively aligns individuals’ reward with increased corporate performance and shareholder value creation;
  • a significant proportion of each executive’s total compensation should be delivered through performance related pay;
  • incentive arrangements should be capable of providing upper quartile total payment if outstanding performance is achieved.

Going forward, within the principles of good governance, the Committee will regularly review its remuneration strategy. The prime objective will be to ensure that the Company is in the best possible position to attract and retain highly skilled and motivated people who will be key to ensuring the long term success of Taylor Wimpey.

Details of the changes to the remuneration framework following the review are set out in this Report. Following consultation with our major shareholders and with shareholder bodies it is proposed to introduce two new long term incentive plans namely, the Taylor Wimpey Performance Share Plan and the Taylor Wimpey Share Option Plan. These proposed plans will be subject to shareholder approval and will be considered at the 2008 Annual General Meeting. Further details are set out in Remuneration Report and also in the Notice of Meeting section and in Appendices 1 and 2 thereto. If approved, these will replace the long term incentive plans currently in place.

As previously announced in connection with the Merger, the Company is committed in its focus on driving out costs from the business by delivering on its efficiency targets, rationalising corporate costs and improving the collective procurement process which is expected to lead to pre-tax synergies significantly in excess of £70 million by the end of 2008 on an annual exit rate basis. As part of the consultation process referred to above, major shareholders were also advised that following the remuneration review the Committee had concluded that a temporary increase in the short term incentive plan to reward the achievement of synergies arising out of the Merger should be introduced for 2008 and 2009. Achieving the synergies is of critical importance in both the short term and for providing a basis for future value creation for the Company. Accordingly, in order to ensure that the Executive Directors and other senior executives including the UK and North American leadership teams are appropriately incentivised to achieve the targeted synergies, a bonus arrangement has been introduced in Remuneration Report Prior to the Merger, George Wimpey Plc had announced a target of £25 million of build cost savings to be achieved in 2007 in the UK and $20 million in the US. These savings have been achieved and are not part of this bonus arrangement.

Remuneration Report