Remuneration report

REPORT ON DIRECTORS' REMUNERATION

YEAR ENDED 31 MARCH 2015

BBC Worldwide is not funded by the licence fee, but we are keenly aware that, as part of a publicly-funded organisation, it is not appropriate or desirable to lead the market on pay, and that our remuneration policy must be both moderate and justifiable.

Over the last three years, we have been progressively simplifying our Reward offering. 2014/15 saw the final payments under the Profit Share Plan and no matching payment was due under the Deferred Bonus Plan. Both plans are now closed and will not be replaced. Directors, senior managers and all other employees now have very simply structured pay packages, with a basic salary and a performance-related bonus that is at risk if the required results are not achieved.

Wherever possible, we use salary survey data to identify the pay range in the market for a particular role in a particular location. We continue to pay at or below the market median in the UK and no more than 10% above the local market median elsewhere.

As part of the focus on identifying career paths across the whole BBC, we are working to design a job grading structure that will help us ensure that pay is correctly positioned at all levels in BBC Worldwide. This work, along with greater alignment between the BBC's commercial operations and public service broadcasting, forms a key part of our vision to create 'one BBC'.

The Sales Compensation Framework, developed with the aim of consistently focusing our sales teams on delivering the best possible return to the BBC, was implemented in 2014/15, paying a bonus to sales staff in proportion to targets achieved. We will continue to monitor the scheme, refining it as necessary, to ensure that it is delivering maximum value for the BBC.

Governance

There were no significant changes to remuneration governance arrangements in 2014/15, with decisions affecting members of the WEx team and company-wide reward being taken by the BBC Executive Remuneration Committee. Salary decisions affecting other staff earning more than £125,000 (or local equivalent) per year, and severance payments in excess of £75,000, continue to require approval by the BBC Senior Management Remuneration Committee. The BBC Worldwide Pay Forum, comprising the Chief Executive, Chief Financial Officer and People Director, continues to review other significant pay decisions.

No individual is responsible for setting his or her own remuneration.

Full details of all the above governance matters can be found in the BBC Annual Report and Accounts.

Executive Directors

This report summarises the remuneration of the CEO and CFO of BBC Worldwide, who are the sole Executive Directors of BBC Worldwide.

Tim Davie was CEO for the full year. Andrew Bott was Interim CFO and Executive Director of BBC Worldwide from the start of the year. He was appointed to the role permanently on 4 June 2014, moving from the USA to the UK on 1 September 2014.

Base salary

Tim Davie's annual base salary remained unchanged throughout 2014/15. Andrew Bott's salary also remained unchanged during the year, though it was paid in sterling rather than US dollars (converted at GBP1 = US$ 1.50) after his transfer to the UK on 1 September.

Annual incentives

Annual incentives are provided through the BBC Worldwide Annual Bonus Plan, in which all staff participate (other than those on sales schemes).

The Plan is a relatively simple design, with a 'Minimum Growth Hurdle' (a threshold level of performance), a Target Performance level (set to be stretching but, with substantial effort, achievable), at which Target Bonus is payable, and a Maximum Bonus Performance level (above which no further bonus is payable), set significantly above Target.

Target Bonus for the CEO and the CFO is 50% of base pay earnings. Bonus for both Executive Directors is wholly dependent on the performance of BBC Worldwide as this is deemed to be the most appropriate indicator of their performance.

Components of reward

The following table summarises the current key fixed and variable components of reward (excluding sales incentives) for Executives and employees:

Element
Purpose & link to strategy
Performance period
Operation

Base Salary

Maintain a competitive package, at the agreed position for the relevant local market, recognising individual contribution and the scope of the role.

Not applicable

Reviewed annually, taking into account the industry in which BBC Worldwide operates, location, individual performance and responsibilities, and affordability.

Reward from current incentive plans

Annual Incentives

Reward achievement of short-term strategic goals and profit growth.

1 year

Bonus, calculated as a percentage of base pay earnings, is payable for achievement of profit targets1 and, other than for members of the BBC Worldwide Executive, an agreed level of personal performance. The percentage varies by grade (and, at lower levels, by country, in some cases). A reduced bonus is payable for achievement below Target, subject to reaching a threshold level of performance below which no bonus is payable, with additional bonus available for achievement above Target. For members of the Executive, bonus is between 20% and 70% of base pay earnings, with the top of that range payable at a level of profit considered to be achievable only in exceptional circumstances. The levels of profit performance attracting threshold, target and maximum bonus are set by the BBC Executive Remuneration Committee.

Reward from discontinued incentive plans

Profit Share Plan

Drive profit performance and returns to BBC Worldwide's shareholder over the long term while promoting the retention of key management.

5 years

The scheme is now closed. Balancing payments (earned during 2008-2013, but deferred for two years) will be made in July 2015, after which no further payments will be made. The Plan will not be replaced by any other Long Term Incentive Plan.

Benefits2

Pensions

Pensions are offered in line with normal market practice.

Ongoing

Pensions are offered in accordance with the all employee pension arrangements.

Life assurance

Life assurance is offered in line with normal market practice.

Ongoing

4x salary for those who join the pension plan; 2x salary for those who don't.

Private healthcare

Private healthcare is offered in line with normal market practice at middle management level and above.

Ongoing

Family cover for senior executives; single cover for other eligible employees.

Car allowance

With effect from 1 April 2014, BBC Worldwide removed the car allowance benefit for all new Executive Directors and senior managers, to align with arrangements for all BBC employees.

-

Those who were already in receipt of a car allowance have retained it. Neither of the Executive Directors receives the allowance.

1 Based on headline profit.

2 Andrew Bott was employed on a US contract during the period 1 April to 31 August 2014, during which time he received standard US benefits - medical, dental, life, accidental death and dismemberment, dependent life and short-term disability insurances.

Long-term incentives

Profit Share Plan

The company's Profit Share Plan (PSP), which covered the five-year period beginning in 2008/09, provided participants with a share in profits above a set of absolute profit (PAIT, profit after interest and tax) hurdles linked to the five-year strategic plan. Annual payments commenced after three years of participation in the plan, with balancing (i.e. deferred) payments made after the end of the five-year period. For eligible participants, the payments shown on page 36 will be made after year end in July 2015. These are the second and final of two balancing payments due under the PSP. Balancing payments are equal to 50% of the final, full-year payments.

The annual cash PSP pay-out was capped at 100% of base pay for each participant.

The PSP will not be replaced by any other Long Term Incentive Plan.

Pension

Executive Directors who joined the BBC before 1 December 2010 are eligible to participate in the BBC Pension Scheme (the Scheme), which provides for pension benefits on a defined benefit basis. Executive Directors who joined the BBC on or after 1 December 2010 are eligible to join LifePlan which is the BBC's defined contribution arrangement. The BBC pays matching contributions to LifePlan for employee contributions between 4% and 5%. Employee contributions between 6% and 7% are matched plus an additional 1%. Employee contributions of 8% or more receive the maximum employer contribution of 10%. There is no maximum pensionable salary for contributions to LifePlan.

Executive Directors who decide not to join LifePlan or are not already an existing member of the Scheme are, subject to meeting the relevant criteria, automatically enrolled into the National Employment Savings Trust (NEST). The BBC and employees currently pay 1% of qualifying earnings to NEST. Individuals can choose to opt out of this.

Executive Directors' pension arrangements may be reviewed and amended in response to changes in legislation or similar developments.

Features of the BBC's pension arrangements, including normal pension age, are provided in the table below.

Details of the BBC Pension Scheme are available at www.bbc.co.uk/mypension and details of LifePlan can be found at www.friendslife.co.uk/microsite/bbc

Tim Davie became an active member of the CAB 2011 section as at 1 January 2012, and retains a deferred pension in the New Benefits section for service up to that date. The information in the table below reflects his CAB 2011 benefits but includes the period before he was appointed as a director.

Until 31 August 2014, Andrew Bott was employed on a US contract and participated in the BBC Worldwide Americas 401(k) Retirement Plan, under the terms of which employees may, immediately on joining the organisation, contribute up to 70% of pay, to a maximum of US$17,500 per annum. BBC Worldwide Americas provides matching contributions equal to 100% of the first 5% of employee contributions. Employee contributions are always 100% vested. 20% of matching contributions vest each year, becoming fully vested after five years. Andrew joined LifePlan on his return to the UK on 1 September 2014 and retains a deferred pension in the New Benefits section for service before his transfer to the USA in 2006.

Changes to Remuneration graph

Scheme
'Old' Benefits Defined Benefit
'New' Benefits Defined Benefit
CAB 2006 Defined Benefit
CAB 2011 Defined Benefit
LifePlan
National Employment Savings Trust (Auto Enrolment Arrangement) Defined Contribution

Date Closed

30 September 1996

31 October 2006

30 November 2010

1 January 2012

Open to all eligible employees

Open to all eligible employees

Accrual

60ths accrual

60ths accrual

1.67% accrual

Adjusted in line with inflation

1.67% accrual

Adjusted in line with CPI

BBC will contribute a maximum of 10% of salary if employee contributes 8% with lower sliding scale

BBC will contribute 1% of qualifying earnings

Salary

Final pensionable

Final pensionable

Career average revalued earnings

Career average revalued earnings

Normal Pensionable Age

60

60

65

65

N/A

N/A

Earnings Cap

Date of joining before 1 June 1989 uncapped, capped otherwise

Capped at £145,800

Capped at £145,800

Capped at £142,200

Uncapped

Minimum Earnings £5,668 p.a.

Maximum Earnings £41,450 p.a.

Pensionable salary growth before the Earnings cap is applied

Limited at 1% p.a.

Limited at 1% p.a.

Limited at 1% p.a.

No restriction

N/A

N/A

Employee contribution (% of pensionable salary)

7.5%

7.5%

4%

6%

Minimum employee contribution is 4%

1% of qualifying earnings

 

Employment contracts

Employment contracts of Executive Directors recently employed by BBC Worldwide in the UK have a maximum notice period of six months. Contracts are subject to earlier termination for cause. In the UK, if termination arises through redundancy, Executive Directors are entitled to one month's pay for each year of continuing service, up to a maximum of 24 months' base pay (or 12 months' base pay for Executive Directors employed on or after 1 January 2013). This is now subject to a cap of £150,000 in total.

Outside interests

Where there is no potential for conflict of interest, and with the prior agreement of the Chair of BBC Worldwide, Executive Directors 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 Executive Directors' development as well as bringing broader business skills to BBC Worldwide.

During the year, no Executive Directors held paid external directorships.

Non-executive Directors

The Non-executive Directors of BBC Worldwide during the year were Tony Hall, Anne Bulford, Dharmash Mistry (from 16 February 2015) and Sir Howard Stringer (from the same date), none of whom received any remuneration in respect of their duties in this capacity from BBC Worldwide.

Remuneration earned in the year ended 31 March 2015

£'000

Fee/base pay

Annual bonus

PSP

Taxable benefits

Pension-Related Single Figure

Total
2014-15

Total
2013-14
(including
Pension-
Related
Single
Figure)

Total
2013-14
(excluding
Pension-
Related
Single
Figure)

Executive Directors

Tim Davie1

400

201

-

2

37

640

670

633

Andrew Bott2

288

145

29

4

23

489

124

121

 

688

346

29

6

60

1,129

794

754

Non-Executive Directors

-

-

-

-

-

-

-

-

Former Executive Directors

-

-

-

-

-

-

252

224

Total

688

346

29

6

60

1,129

1,046

978

1 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 and for all Career Average Benefit members. From that date, 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. Tim Davie's base salary has not been adjusted to reflect the impact of the salary sacrifice. His total salary sacrifice was £8,532 (2013/14: £8,280).

2 Andrew Bott was an Executive Director of BBC Worldwide throughout the year but was employed on a US contract until 31 August 2014. The figures in the table above include his remuneration up to and including that date, converted from US dollars at the rate prevailing at the time of payment, together with his remuneration from 1 September 2014 onwards, in sterling.

Pension entitlements


£'000

Age as at
31 March
2015

Section

Accrued
pension
31 March
2015

Accrued
pension
1 April
2014

Defined
benefit
contributions
(via salary
sacrifice)

Pension
related
single
figure

Tim Davie

47

CAB 2011

8

5

9

37

 

Tim Davie became an active member of the CAB 2011 section as at 1 January 2012 and retains a deferred pension in the new benefits section for service up to that date. The pensions shown relate to CAB 2011 only but include the period before he was a director.

Until 31 August 2014, Andrew Bott participated in the BBC Worldwide Americas 401(k) Retirement Plan. He joined LifePlan on his return to the UK on 1 September. The employer contributions to these two schemes were £6k and £17k respectively. He retains a deferred pension in the New Benefits section for service before his transfer to the USA in 2006.