Report on Directors' remuneration
This report sets out BBC Worldwide's remuneration policy and
details the remuneration receivable by the members of the current
Board of Directors in respect of 2010/11. BBC Worldwide has no
statutory requirement to prepare a Directors' Remuneration Report.
Nevertheless, the requirements of the UK Companies Act 2006 and
Schedule 8 of the Large- and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 have been followed, where
relevant, in preparing this report. The BBC Worldwide Remuneration
Committee ("the committee") also used as a benchmark the
requirements of the Listing Rules.
BBC Worldwide Ltd is a commercial organisation, owned by a
public service broadcaster, the BBC. Its remit is to exploit BBC
intellectual property and other high-quality content around the
world, in order to deliver strong returns to its shareholder which
supplement the licence fee.
The committee believes that a remuneration framework that is
effective in rewarding the architects of BBC Worldwide's success
has a part to play in securing strong future financial performance,
and is in the best interests of both BBC Worldwide and its
shareholder. This is achieved by providing an overall package that
is market competitive, supports the retention of its key staff and
incentivises the achievement of stretching growth targets.
The principal tenets of BBC Worldwide's remuneration strategy
- Adopt a commercial approach to pay, with emphasis on
performance-related pay, without leading the market.
- Ensure that overall remuneration is affordable and
appropriately linked to absolute profit growth.
- Balance the public purposes of the BBC with the need to attract
and retain key staff in an industry where competition for talent is
During the year the committee made a number of changes to the
company's incentive arrangements to create better alignment between
management and shareholder interests and to drive growth in line
with the company's five-year strategic plan.
Full details of the new schemes are provided in the main body of
the report and the key changes are summarised as follows:
- To incentivise continuing strong performance, we placed an
increased emphasis on variable pay, which now accounts for up to
67% of an executive's compensation package (excluding
- In order to retain staff, we introduced a new long-term
performance plan, which provides value to participants if the
sustained profit and growth targets of the five-year plan are
- To focus on delivering absolute growth in profitability year on
year, rather than exceeding a target based on the current year
budget, we revised BBC Worldwide's Annual Bonus targets.
- To reward the management team for delivery of financial results
over and above the annual bonus targets, we extended the Annual
The committee is confident that these changes will support superior
performance and are well aligned with BBC Worldwide's strategic
objectives and growth in value for our shareholder, the BBC.
During the year the BBC Worldwide Remuneration Committee
comprised Robert Webb (Chairman) and Zarin Patel, both of whom are
Non-executive Directors. On 1 April 2011 Charlotte Hogg was
appointed to the committee as a Non-executive Director.
Summary terms of reference can be found in the Corporate
The committee obtains advice from various sources in order to
ensure it makes informed decisions. The committee's main advisors
are set out below:
||Area of advice
||During the year Deloitte was retained on a consultancy basis to
advise on changes to both the annual and long-term incentive
|Provided comparative benchmark data on executive
At the invitation of the committee, the Chief Executive, the Chief
Financial Officer, the Human Resources Director, the Company
Secretary and both the BBC's Director of People and Head of Reward
provided assistance to the committee during the financial year.
No individual is responsible for setting his/her own
The committee's activities included:
- Determining individual award levels for the BBC Worldwide
Executive Committee based on benchmarking of roles and the
- Setting Annual Bonus targets for 2010/11.
- Approving performance against targets for the 2010/11 Annual
Bonus and long-term incentive schemes, and the resulting payments
- Approving the design and implementation of a new long-term
Profit Sharing Plan to replace the existing Long-term Incentive
- Oversight of the implications for BBC Worldwide staff of
changes to the BBC Pension Plan.
Click here for full details of the composition of the BBC
Worldwide Executive Committee. This report summarises the
remuneration of the relevant BBC Worldwide Board members.
Changes to the BBC Worldwide Board, Executive members
On 17 June 2010, Neil Chugani tendered his resignation following
his decision to join Shine Group. It was agreed that it was no
longer appropriate that Mr Chugani should continue to fulfil his
operational responsibilities and he was placed on a period of
garden leave until 31 August 2010.
Philip Vincent was appointed acting CFO on 17 June 2010 and was
formally appointed to the Board as CFO on 1 December 2010.
Full details of both individuals' remuneration during the year
are disclosed opposite.
There were no other changes to the Executive Directors of the
BBC Worldwide Board.
Our rewards strategy
Our reward strategy has been formulated in the context of the
- BBC Worldwide's status as a commercial entity with no access to
public or guaranteed funding of any description.
- The need to balance the public purposes of the BBC with
high-performance culture, by
incentivising individuals to optimise performance and achieve
growth in line with the priorities.
- The requirement for BBC Worldwide to deliver absolute growth
and substantial cash returns to its shareholder, the BBC.
- That being a global business we therefore compete globally for
the best talent; other competitiors are often able to offer
incentives not available to BBC Worldwide such as equity-based
Components of reward
The following table summarises the key fixed and variable
components of reward:
||Maintain a competitive package at the median of the market for
all levels recognising individual contribution and the scope of the
||Reviewed annually taking into account
the industry in which BBC Worldwide operates, performance of the
executive, individual responsibilities and affordability.
||Reward achievement of short-term strategic goals and profit
||Subject to achievement of challenging
profit1 and individual performance targets.
|Bonus Matching Scheme
||Align interest of management with the performance of the
company over the longer term.
||Participants are invited to defer up
to 50% of their annual bonus for three years with a potential
matching award of up to 25% of the deferred amount subject to the
achievement of a Return on Capital Employed threshold.
||Drive profit performance and returns to BBC Worldwide's
shareholder over the long term, whilst promoting the retention of
||Provides participants with a share in
profit2 above a set of absolute profit hurdles linked to
the five-year strategic plan. Annual payments commence after three
years of participation in the plan, with balancing payments made at
the end of the five-year period.
1. Based on operating profit before specific items
2. Based on Profit after Interest and Tax
The diagram below illustrates the balance between fixed and
variable remuneration (excluding pension) for the Executive
Directors of the BBC Worldwide Board for the current financial
In determining base pay the committee takes into account the
base pay of the other organisations with which BBC Worldwide
competes for talent, the affordability of executive rewards,
individual responsibilities and the performance of the
The committee reviews salaries annually. Any change in base
salary is usually effective from 1 July.
Annual incentives are provided through the BBC Worldwide Annual
Bonus Scheme in which all staff participate*. The Chief Executive
is eligible to receive a core bonus of up to 55% of base pay and
the CFO is eligible for a core bonus of up to 40% of base pay. The
performance conditions are weighted 25% against individual
objectives with 75% determined by the performance of BBC Worldwide
against stretching profit targets.
*Other than those on sales schemes.
Following a review of the company's incentive schemes, the
following changes have been made to BBC Worldwide's Annual Bonus
- Revision of the methodology for setting Annual Bonus targets.
The scheme now seeks to reward for delivering absolute growth in
profitability year on year, rather than exceeding a target based on
the current year budget.
- Modification of the performance conditions so that, for senior
employees, 75% of the bonus opportunity is conditional upon the
delivery of profit performance of BBC Worldwide and the balance is
dependent upon individual performance against pre-determined
- A new element has been added to the scheme to reward senior
managers for delivering financial performance beyond the already
stretching targets set out in the Annual Bonus Scheme. This is self
funding and achieved by creating a pool, calculated as a percentage
of profits achieved above the annual bonus target: 80% of this pool
is shared across participating members. All senior managers (above
a defined grade) are eligible to participate in this element of the
scheme. The remaining 20% is awarded on a discretionary basis for
outstanding performance. Both John Smith and Philip Vincent are
eligible to participate in this.
- Total individual reward under the Annual Bonus Scheme is capped
at 100% of salary.
The company element of the annual bonus awards to be paid in
respect of 2010/11 performance reflects the strong performance of
BBC Worldwide during the year, including headline profit growth of
Bonus Matching Scheme
In previous years up to 2009/10, Executive Directors could
voluntarily invest up to 75% of their annual bonus into the now
closed Long-term Incentive Plan (LTIP) which would be eligible for
a matching award based on the subsequent performance of the
company. Two awards remain outstanding under this plan: the
conditional award relating to the period 2007/08 to 2010/11 which
will be paid out in June 2011 and the final award, made in 2008/09
which will vest in 2011/12.
Although the LTIP has now been replaced, performance of the
outstanding deferred bonus awards continues to be determined in
accordance with the original LTIP criteria. Two measures: Profit
Growth (75% weighting) and Return on Sales Growth (25% weighting)
over a three-year period will be used to rank BBC Worldwide
performance relative to a comparator group of at least 15 other
international media companies.
The comparator group was selected for its mix of business,
industry, size and geographical representation. In the current year
the composition of the Group was updated to ensure it continues to
reflect as closely as possible BBC Worldwide's business.
- British Sky Broadcasting Group plc
- Cablevision Systems Corporation
- Comcast Corporation
- CKx Inc
- Entertainment One Ltd
- Fuji Television Network Inc
- Grupo Televisa
- ITV plc
- Mediaset SpA
- M6-Metropole Television SA
- News Corporation
- Pearson plc
- ProSiebenSat.1.Media AG
- Reliance MediaWorks
- RTL Group
- Singapore Press Holdings
- Special Broadcasting Service Corporation
- The Walt Disney Corporation
- UBM plc
- Village Roadshow Ltd
- Vivendi Group
Matching will be determined on a straight line basis with the
top ranking delivering a 100% match and the bottom ranking
resulting in the forfeit of 50% of the total amount deferred.
From 2009/10 a new scheme has been introduced, under which
Directors can defer up to 50% of their annual bonus for three
years. The deferred amount is then eligible for a 25% matching
award at the end of three years, subject to a cumulative Return on
Capital Employed (ROCE) threshold of 40% over the period having
During the year the company's Long-term Incentive Plan (LTIP)
was replaced with a new Profit Sharing Plan (PSP).
The new plan was introduced to better align reward to BBC
Worldwide's long-term strategy, drive profit performance and
deliver strong returns to the BBC. Participants receive an award of
units which entitles them to a share of a profit pool each year
over the life of the plan. The profit pool is calculated as a
percentage of profits achieved above a set of absolute profit
hurdles, derived from the company's strategic five-year plan.
Annual payments commence after three years of participation and
equate to 50% of the accumulated pool. A balancing payment is then
due at the end of the five-year period.
Profit after Interest and Tax is used as the profit basis for
the plan as it aligns management's interests with a key measure for
the shareholder. To enable the scheme to be introduced with
immediate effect and to replace the pre-existing LTIP scheme, the
new scheme has been backdated to 2008/09 with its first performance
payout due in June 2011 for the three-year performance period
2008/09 to 2010/11. Balancing payments are due to be made at the
end of the plan. Both current Executive Directors waived their
outstanding awards from the pre-existing Long-term Incentive Plan
to participate in this new scheme.
The annual cash PSP payout is capped at 100% of base pay for
Executive members of the Board are eligible to participate in
the BBC Pension Scheme, which provides for pension benefits on a
defined benefit basis.
For an employee joining the Pension Scheme before 1 November
2006, the accrual rate is 1/60th of the final pensionable salary
for each year of service with pensionable salary being base pay,
adjusted in line with inflation up to retirement. However, with
effect from 1 April 2011, all future increases in pensionable
salary will be limited to a maximum of 1% per annum, reflecting the
recent changes to the BBC Pension Scheme. For employees in this
group the normal pensionable age is 60. Pension contribution rates
for these employees were increased from 1 April 2010 to 7.5% (6.75%
at 1 April 2009) with a corresponding reduction in employer
contributions. For an employee who joined on or after 1 November
2006 the accrual rate is 1.67% of their pensionable pay for each
year of service, adjusted in line with inflation up to retirement.
As before, with effect from 1 April 2011 all future increases in
pensionable salary will be capped at 1%. Participating employees
contribute 4% of their pensionable salary to the Pension Scheme.
For employees in this group the normal pensionable age is 65.
Members of existing BBC pension schemes have been given the
opportunity to transfer to a new Career Average Benefits Scheme
(CAB2011) for future pension build up and have their pension built
up to date deferred in the scheme. This deferred pension would
build up broadly in line with inflation. Under CAB2011 there is no
cap on increases in pensionable salary and employee contributions
to the scheme are 6%. Transfers must be made in the period between
1 April to 31 December 2011.
John Smith and Philip Vincent both have a normal pensionable age
of 60 but may continue in employment to age 65. Philip Vincent's
pensionable earnings are subject to a maximum cap of £123,600. No
maximum annual cap is applied to John Smith who joined the BBC
before 31 May 1989. The Pension Scheme provides for early
retirement on medical grounds and life assurance of four times
pensionable pay up to a prescribed limit.
Any participating employee who reaches or exceeds the statutory
Lifetime Allowance of £1.80m (£1.75m 2009/10) may opt out of the
Pension Scheme and instead receive a cash supplement.
In addition to pension, the other main contractual benefits are
a car allowance and private health insurance.
The notice period of Board Directors serving during the year is
detailed in the table above. These are subject to earlier
termination for cause. No payments are made to Directors on
termination other than as contractually required. If termination
arises through redundancy, Board Directors are entitled to one
month's pay for each year of continuing service, subject to a
||Date of appointment
BBC Worldwide Board
||18 March 2005
||1 December 2010
||3 December 2007
1 Neil Chugani resigned from BBC
Worldwide on 17 June 2010
Where there is no potential for conflict of interest, and with
the prior agreement of the Chairman, Executive members of the Board
may hold one paid external directorship. Remuneration which arises
from directorships may be retained by the Executive. This policy is
to encourage the take-up of external Non-executive appointments as
part of the Board Directors' development as well as bringing
broader business skills to BBC Worldwide.
During the year, John Smith served as a Non-executive Director
of Burberry plc. Fees paid for this directorship are shown in the
table below. It is recognised that BBC Worldwide's own
Non-executive Directors are likely to have other directorships and
the restriction regarding paid external directorships applying to
Executive Directors does not apply to them.
The BBC Non-executive Directors, Nicholas Eldred, Zarin Patel
and Sharon Baylay (who ceased to be a Director in November
2010) do not receive remuneration from BBC Worldwide for the
services provided to BBC Worldwide. The other Non-executive
Directors receive a fee, determined by the BBC Trust, reflecting
the complexity of the role and the time required to execute the
role effectively. The fee levels are set with reference to rates
paid by other UK corporations, but at a level such that the
Non-executive Directors would not be financially dependent on BBC
Worldwide. Details are provided below. The fee levels are reviewed
annually on 1 September, the next review being effective from 1
Robert Webb receives a fee of £76,500 for his role as Chairman
of the Board of BBC Worldwide. This is in addition to fees received
from the BBC and from BBC Commercial Holdings in respect of his
Non-executive positions on their respective boards. Further details
are available in the BBC Annual Report and Accounts 2010/11.
Tim Weller and Charlotte Hogg, who were appointed as
Non-executive Directors on 26 April 2010 and 24 September 2010
respectively, each holds a two-year fixed-term contract. Simon
Clift, Sharon Baylay and Thomas Geitner ceased to be Directors on
31 October 2010, 26 November 2010 and 31 December 2010
Non-executive Directors must maintain a register of all external
interests that might be seen to affect their ability to perform
their independent duties. This register includes declarations of
all positions of employment, directorships and voluntary positions
as well as interests of close family members if relevant and is
approved by the BBC Worldwide Board at least annually.
scheme for bonuses deferred from prior years2
|John Smith 1, 2, 6
|Philip Vincent 5, 6
|Neil Chugani 3, 4, 6
|Total Executive Directors
|Sharon Baylay 7, 8
|Simon Clift 9
|Nicholas Eldred 7
|Thomas Geitner 10
|Charlotte Hogg 11
|Zarin Patel 7
|Tim Weller 12
|Total Non-executive Directors
|Total Executive Board
1. In addition to his annual bonus, the Chief Executive
committed £138,000 or 50% of his annual bonus into the new Deferred
Bonus Plan which will vest in March 2014 (subject to performance).
Annual bonus is stated net of any deferral into the matching
2. The Matching payment shown relates to £88,000 of annual
bonus which was invested into the plan in March 2008 and was
matched at 52% in view of the company's performance over the
3. Neil Chugani resigned as a Director on 17 June 2010
following his decision to join Shine Group. It was agreed with
immediate effect that it was no longer appropriate Mr Chugani
should continue to fulfil his operational responsibilities and he
was placed on a period of garden leave until 31 August 2010. The
disclosure reflects his remuneration up to the 31 August
4. In the context of Pension contributions Neil Chugani's
earnings are subject to a maximum annual limit of £123,600 per
annum (£123,600 for 2009/10) and in accordance with his contractual
terms he was entitled to a cash supplement of 20% of base pay above
the annual limit.
5. Philip Vincent was appointed acting CFO on 17 June 2010
and was formally appointed to the Board as CFO on 1 December 2010.
His remuneration detailed in the table above reflects his
remuneration for the period since his appointment to the Board on a
6. The BBC introduced a salary sacrifice arrangement on 1
June 2008 for Old and New Benefits members who joined the Pension
Scheme before 1 November 2006. This arrangement is also applicable
to all Career Average Benefit members. Those Directors indicated in
the table above participated in the arrangement. From that date,
the terms and conditions of employment were changed for those
employees opting for the salary sacrifice arrangement and as a
result employee pension contributions made via the salary sacrifice
have been treated as employer contributions, with a corresponding
reduction in salary. Base salaries for Executive Directors have not
been adjusted to reflect the impact of the salary sacrifice. The
total salary sacrifice by Executive Directors was £38,150 (£33,000
7. The BBC Non-executive Directors, Nicholas Eldred, Zarin
Patel and Sharon Baylay, do not receive remuneration from BBC
Worldwide for the services provided to BBC Worldwide.
8. Ceased to be a Director on 26 November 2010.
9. Ceased to be a Director on 31 October 2010.
10. Ceased to be a Director on 31 December 2010.
11. Appointed on 24 September 2010.
12. Appointed on 26 April 2010.
The movement in joint ventures and associates is as follows:
||Age as at 31 March 2011
||Total accrued pension at 31 March 2011
accrued pension over year
||Transfer value of accrued pension at 31 March
||Transfer value of accrued pension at 31 March
||Increase in transfer
value less Directors' contributions
1. The transfer value of accrued pension benefits
represents the estimated cost to the Pension Scheme of providing
the pension benefits accrued to date. The value is affected by many
factors including age, pensionable salary, pensionable service and
investment market conditions at the date of calculation (in
accordance with regulations 7 to 7E of the Occupational Pension
Schemes Transfer Values Regulations 1996). It is not a sum paid or
due to the individual and therefore cannot be meaningfully added to
remuneration. The effect of the investment market conditions on the
transfer value varies according to the member's age - for older
members the calculation reflects the yields on index-linked gilts,
whilst for younger members the dividend yield on the FTSE All-Share
Index is the more significant determinant.
2. Neil Chugani resigned as a Director on 17 June 2010 and
left the scheme on 31 August 2010. The figures have been calculated
at 31 March 2011 and include scheme service up to the leaving date
of 31 August 2010. The normal retirement age for Neil Chugani is 65
as he joined the Pension Scheme after 1 November 2006.
3. Philip Vincent was appointed as a Director on 1 December
2010, although he joined the Scheme on 14 December 1998. The
figures shown include the period before he was appointed as a
This report was approved by the
Board of Directors on 10 June 2011
and signed on its behalf by:
Robert Webb QC