The following sets out our Directors' Remuneration Policy (the "Policy"). This Policy will be subject to a binding vote at the 2018 AGM. If approved by shareholders, this Policy will come into effect following the AGM.

Changes implemented since the previous policy

The previous Remuneration Policy was adopted at the AGM in 2015, and received strong support from our shareholders. The Remuneration Committee have concluded that the overall structure of the previous policy continues to successfully support the business and aligns with mainstream FTSE practices. Therefore, while the Remuneration Policy is being renewed under the normal three-year renewal cycle, the general structure of remuneration will remain unchanged under the new Policy.

As part of our review, minor amendments have been made to the detail of the Policy to reflect evolving market and best practice. Most notably, the structure of the annual bonus has been simplified (but with no changes to the maximum annual bonus opportunity nor the mix of cash and deferred shares) and a holding period will apply to any future LTIP awards.

Consort Medical plc's executive remuneration principles

Our key priorities are to provide remuneration packages for executive directors which:

  • are sufficiently attractive to enable the Company to recruit and retain talented individuals with the necessary skills and expertise to support the development of Consort Medical and grow long-term value for our shareholders;
  • contain levels of performance-related variable pay such that they are aligned with the long-term interests of our shareholders; and
  • provide appropriate motivation for executives to execute the strategy agreed by the Board and to develop and grow the Company and shareholder value, while taking account of internal and external risks.

The following outlines the Company's Remuneration Policy, which the Committee believes achieves this objective.

The key features are:

  • providing a remuneration opportunity that is market competitive compared to relevant peers reflecting individuals' experience, performance and responsibilities;
  • operating an annual bonus, with a long-term deferred share element to align interests with shareholders over the longer term, where annual performance targets are aligned with business strategy and financial performance;
  • offering participation in a long-term incentive plan which rewards executives for delivering shareholder value creation and achievement of long-term objectives; and
  • expecting executive directors to build up and maintain a holding of Company shares, thus promoting alignment of directors' interests with those of shareholders.
PURPOSE AND LINK TO ST RATEGYOPERATIONMAXIMUM OPPORTUNITYPERFORMANCE MEASURES
Base salary

The core element of a competitive remuneration package

The Committee sets base salary taking into account:

  • the individual's experience, responsibility and performance;
  • salary levels at relevant comparators and at companies of a similar size and complexity; and
  • remuneration of different groups of employees within the Company.

Base salary is normally reviewed annually with changes effective from 1 August, although salaries may be reviewed more frequently or at different times of the year if the Committee determines that this is appropriate (e.g. role change).

Where appropriate, it is the policy of the Committee to pay upper quartile base salaries where the incumbent is of a proven calibre, along with demonstrable and sustained success in the role.

In determining salary increases the Committee considers the factors outlined in the "operation" section. While there is no maximum salary level, salary increases will normally be in line with the typical level of increase awarded to other employees in the Group.

However, the Committee retains the discretion to make increases above this level in certain circumstances, for example, but not limited to: an increase in the individual's scope of responsibilities; in the case of new executive directors who are positioned on a lower initial salary while they gain experience in the role; where the Company has significantly increased in size or complexity; or where the Committee considers that the current salary does not reflect the Company's policy of upper quartile salary positioning for experienced executives.

Salaries with effect from 1 August 2018 are:

CEO (Jonathan Glenn) – £508,760

CFO (Paul Hayes) – £328,000

None

Annual bonus

To motivate and reward superior performance measured against annual financial, strategic and operational goals of the Company which reflect critical success factors.

A portion of the annual bonus is deferred into shares, which ensures that part of the value of payments earned remains tied to the Company's share price, thus embedding long-term alignment with the interests of our shareholders within the annual bonus plan.

The Committee determines the maximum incentive opportunity taking into account the responsibilities of the role and market practice at comparable companies.

Performance is assessed over a financial year.

The Committee determines the level of annual bonus paid at its discretion taking into account performance against targets, the underlying performance of the business and executive directors' management of, and performance in, all of the business issues that arose during the year.

The annual bonus incorporates malus and clawback provisions. Further details are set out below.

Normally one-third of any annual bonus will be deferred into shares, for three years from the date of award. The Committee may vary the deferral terms in appropriate circumstances.

The vesting of the shares will normally be subject to continued employment.

Dividend equivalents may be awarded in respect of any vested shares. Dividend equivalents may be determined by the Committee on a cumulative basis and may assume reinvestment of dividends in the Company's shares.

CEO – Maximum opportunity of up to 150% of base salary

CFO – Maximum opportunity of up to 110% of base salary

Up to 25% of maximum may be payable for achievement of entry levels of performance, with the full incentive being paid for delivering maximum levels of performance.

Annual bonuses may be based on a combination of financial, operational, strategic and individual goals. The Committee will determine the detail of metrics, weightings, and targets based on the Group's strategic priorities. The Committee sets targets each year to ensure that they are appropriately stretching in the context of the business plan.

In any year, financial performance metrics will always account for at least 50% of the maximum bonus.

The strategic measures are assessed each year and represent areas that are important for the long-term success of the Company, including but not limited to matters such as growth, new value creation, broadening the depth and range of products portfolios, innovation and diversification into adjacent markets while keeping a tight control on costs.

For FY2019, the annual bonus will be based on profit (60%) and strategic and individual (40%) measures.

Performance Share Plan (PSP)

To reinforce the alignment of the interests of executive directors and shareholders.

To motivate long-term business performance and shareholder value creation.

To help retain our critical executive talent.

Award of shares which normally vest based on performance over a period of three years or such other period as the Committee may determine.

Under the PSP rules, awards may be granted in the form of a nil-cost option (or economic equivalent) subject to performance conditions as determined by the Committee.

The Committee may grant awards as "Approved PSP" awards (granting a PSP award in conjunction with a tax advantaged Company Share Option Plan award) to enable the director and the Company to benefit from HMRC-approved tax treatment on part of their award without increasing the pre-tax value delivered to participants. When a director has been granted an option under the Company Share Option Plan 2010, a director may at the same time receive an award of a set value of shares to fund the exercise price for that option or the value of an award on vesting may be reduced if the HMRC tax advantaged option is exercised.

The Committee shall determine the extent to which the performance measures have been met, which may include making adjustments to the metrics used to assess the performance conditions to reflect any relevant factors.

Dividend equivalents may be awarded. Dividend equivalents may be determined by the Committee on a cumulative basis and may assume reinvestment of dividends in the Company's shares.

The PSP incorporates malus and clawback provisions. Further details are set out below.

As set out in the recruitment policy below, the 2015 PSP may be used to grant buyout awards.

Awards granted to Executive Directors in 2018 and future years will normally be subject to a two-year holding period following the end of the performance period.

Under the plan rules, approved by shareholders in 2015, awards can be made up to 150% of salary.

For FY2019, awards for the CEO and CFO will continue to be up to 100% of salary.

In future years, where the Committee determines there are circumstances which merit varying current award levels, the Committee would appropriately consult with shareholders.

Any shares subject to an HMRC-approved option do not count towards these limits.

Awards currently vest based on relative total shareholder return and earnings performance measures. These measures will normally be equally weighted but the Committee may determine that an alternative weighting is appropriate. It is currently envisaged that each measure will have no less than a 25% weighting.

For threshold levels of performance, up to 25% of the award vests, increasing to 100% of the award for maximum performance. There is straight-line vesting of awards between these points.

The Committee determines performance criteria each year to ensure that targets are stretching and contribute towards value creation for shareholders while remaining motivational for management. Where appropriate, alternative metrics may be used for future awards to ensure they remain aligned with the corporate strategy.

If events happen which cause the Committee to consider that a performance condition has become unfair or impractical, it may amend that performance condition provided that the amended performance condition is not materially less difficult to satisfy.

Pension

Part of a competitive package by providing a retirement benefit.

The Company may provide executive directors with a pension benefit through participation in the Group Personal Pension Plan and/or a taxable cash payment.

The Committee may determine that alternative pension provisions will operate for new appointments to the Board. When determining pension arrangements for new appointments, the Board will give regard to the cost of the arrangements, market practice and the pension arrangements received elsewhere in the Group.

The Company's maximum contribution/cash supplement for the executive directors is as follows:

CEO – 20% of base salary

CFO – 17.5% of base salary

None

Benefits

Part of a competitive package.

Benefit policy is to provide an appropriate level of benefit, taking into account market practice at similar sized companies and the level of benefits provided for other employees in the Group.

Core benefits – Currently include car allowance, fuel card, life assurance, private medical insurance (for the executive and his family) and personal permanent health insurance.

All-employee share plans – Executives are eligible to participate in the Company's all-employee share schemes on the same terms as UK colleagues up to HMRC-approved limits. The Company currently operates the Savings Related Share Option Plan and Share Incentive Plan.

Relocation policy – In the event that an executive were required to relocate from their home location to undertake their role, the Committee may provide an additional reasonable level of benefits to reflect the relevant circumstances (on a one-off or ongoing basis).

Benefits are reviewed by the Committee in the context of market practice and practice throughout the Company from time to time and the Committee may introduce or remove particular benefits if it is considered appropriate to do so.

The cost of benefit provision will depend on the cost to the Company of providing individual items and the individual's circumstances and therefore there is no maximum value.

None

Share ownership guidelines

To increase alignment between executives and shareholders.

Executive directors are expected to build and maintain a holding of shares in the Company. The guideline is normally expected to be built up over the course of their tenure.

The minimum share ownership guideline is equivalent to two times base salary for the CEO and one times base salary for the CFO.

Further detail

The Committee may make minor amendments to the Policy set out above (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval for that amendment. Awards granted under the Company's share plans will be operated in accordance with the relevant plan rules. The Committee may adjust awards only in accordance with the provisions of the relevant plan rules. This includes making adjustments to awards to reflect one-off corporate events, such as a change in the Group's capital structure. Where possible under the plan rules, awards may be settled in cash rather than shares, where the Committee considers this appropriate.

The Remuneration Committee reserves the right to make any remuneration payments and payments for loss of office (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed: (i) before 4 September 2014 (the date the Company's first directors' remuneration policy approved by shareholders came into effect); (ii) before the policy set out above came into effect, provided that the terms of the payment were consistent with the directors' remuneration policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a director of the Company and, in the opinion of the Remuneration Committee, the payment was not in consideration for the individual becoming a director of the Company. For these purposes, "payments" includes the Remuneration Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are "agreed" at the time the award is granted.

In respect of variable pay arrangements, the Committee may exercise independent judgement to adjust or vary any performance condition, target, or outcome (upwards or downwards) in certain circumstances, to ensure the incentive arrangements achieve their intended aims. Any such adjustments would be fully explained to shareholders with appropriate disclosure in subsequent Directors' Remuneration Reports.

Malus and clawback

The annual bonus and Performance Share Plan incorporate malus and clawback provisions.

For annual bonuses granted in respect of FY2016 and subsequent years, in the event of (i) a material misstatement in Consort Medical's financial results; or (ii) serious reputational damage to the Company, the Committee may:

  • apply malus to reduce an award before the award is paid to the participant; or
  • clawback payments for up to two years following the end of the relevant performance period.

For long-term incentive awards granted from FY2016 onwards, in the event of (i) a material misstatement in Consort Medical's financial results; or (ii) serious reputational damage to the Company, the Committee may:

  • apply malus to an unvested award; or
  • clawback a vested or exercised award or equivalent value at any time prior to the fifth anniversary grant.

Selection of performance measures

Annual bonuses may be based on a combination of financial, operational, strategic and individual goals. The Committee will determine the detail of metrics, weightings, and targets based on the Group's strategic priorities. The Committee sets targets each year to ensure that they are appropriately stretching in the context of the business plan.

For FY2019, the annual bonus will be based on profit (60%) and strategic and individual (40%) measures.

The strategic measures are assessed each year and represent areas that are important for the long-term success of the Company, including but not limited to matters such as growth, new value creation, broadening the depth and range of products portfolios, innovation and diversification into adjacent markets while keeping a tight control on costs.

Since 2013, the long-term share awards have been based on total shareholder return and earnings performance. Total shareholder return measures share price improvement and dividend returns and therefore is a direct measure of the value we have generated for shareholders compared to the wider market. The earnings measures incentivise management to grow earnings for shareholders over the long-term.

Remuneration arrangements throughout the Group

The Committee generally considers pay and employment conditions elsewhere in the Group when considering pay for executive directors and senior management. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to other employees in the Group.

When assessing remuneration, the Committee takes care to ensure that individuals are not overpaid in relation to their roles and responsibilities, and that packages for senior individuals are appropriate in comparison to the remuneration of other employees within the Company. Remuneration policy throughout the organisation is based on the same principles – that reward should be sufficient to retain and motivate individuals of a sufficient calibre without paying more than is necessary and should encourage individuals to deliver their own objectives and ultimately create value for shareholders. At Consort Medical, our employees have a variety of different roles and responsibilities and therefore the reward opportunity and structure of rewards is necessarily different to reflect this.

Managers across the Group participate in the annual bonus plan with the most senior and key employees participating in the same PSP as the executive directors. Senior executives who are members of the Group Executive Committee participate in the same reward structure as the executive directors. The majority of employees are eligible to earn an annual bonus each year based on their site-specific performance. We also offer employees the opportunity to save and buy shares through the Sharesave Plan, thus giving them the opportunity to be shareholders.

Considering employee views

The Committee generally considers pay and employment conditions elsewhere in the Group when considering pay for executive directors and senior management. When considering base salary increases, the Committee reviews overall levels of base pay increases offered to other employees in the Group.

The Committee does not consult directly with employees regarding executive directors' remuneration. However, the Company regularly conducts surveys of the views of employees in respect of their experience of working at Consort Medical, including their own rewards. The Committee will remain mindful of changes to the UK Corporate Governance Code when reviewing how employees' views are taken into account in future years.

Remuneration policy for non-executive directors

The Board is responsible for determining the policy on remuneration of non-executive directors. Non-executive directors do not vote on their own remuneration. The Company aims to attract non-executive directors who, through their experience, can further the interests of the Company and make an effective contribution to its strategic development.

APPROACH TO SETTING FEESBASIS OF FEESOTHER ITEMS

The fees of the non-executive directors are agreed by the Board.

The fee for the Chairman is agreed by the Committee.

Total fees are subject to the limits as set out in the Articles of Association.

Fees are normally reviewed every two years but may be reviewed more or less frequently if it is considered appropriate.

Fees are set taking into account the level of responsibility, relevant experience and specialist knowledge of each non-executive director and fees at other companies of a similar size and complexity.

Non-executive directors are paid a basic fee for membership of the Board with additional fees being paid for being the Senior Independent Director or Chairman of a Board committee to take into account the additional responsibilities and workload. Additional fees may also be paid for other Board responsibilities or roles if this is considered appropriate.

The non-executive Chairman receives an all-inclusive fee for the role.

Fees are normally paid in cash.

Annual bonuses or share-based incentives are not awarded to non-executive directors, but they are encouraged to hold shares in the Company.

Non-executive directors do not currently receive any benefits. However, benefits may be provided where appropriate.

Travel and other reasonable expenses (including fees incurred in obtaining professional advice in the furtherance of their duties and any associated taxes) incurred in the course of performing their duties are reimbursed to non-executive directors.

Non-executive directors are included on the directors' and officers' indemnity insurance.

The non-executive directors have appointment letters, the terms of which recognise that their appointments are subject to the Company's Articles of Association and their services are at the direction of the shareholders.

Currently, all non-executive directors submit themselves for election at the AGM following their appointment and at subsequent intervals of no more than three years. This approach will be kept under review in light of any changes to the UK Corporate Governance Code which are announced in due course.

Non-executive directors are not entitled to any payment in lieu of notice. The letters of appointment are available for shareholders to view from the Company Secretary upon request.

Remuneration policy for new hires

When determining the remuneration package for a newly appointed executive director, the Committee would seek to apply the following principles:

  • The package should be market competitive to facilitate the recruitment of individuals of sufficient calibre to lead the business. At the same time, the Committee would intend to pay no more than it believes is necessary to secure the required talent
  • The structure of the ongoing remuneration package would normally include the components set out in the policy table for executive directors
  • The Committee has discretion to include any other remuneration component or award which it feels is appropriate, taking into account the specific commercial circumstances, and subject to the limit on variable remuneration set out below. The key terms and rationale for any such component would be appropriately disclosed
  • Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result of appointment, the Committee may offer compensatory payments or awards, in such form as the Committee considers appropriate, taking into account all relevant factors including the form of awards, expected value and vesting time frame of forfeited opportunities. When determining such "buy-out" the guiding principle would be that awards would generally be on a "like-for-like" basis, where appropriate
  • Consistent with the policy table, the maximum level of variable remuneration which may be awarded (excluding any compensatory payments or awards referred to above) is 300% of salary (this reflects the current maximum bonus opportunity for the CEO and a maximum PSP award)
  • Where an executive director is required to relocate from their home location to take up their role, the Committee may provide reasonable assistance with relocation (either via one-off or ongoing payments or benefits)
  • In the event that an internal candidate is promoted to the Board, legacy terms and conditions would normally be honoured, including pension entitlements and any outstanding incentive awards

To facilitate buy-out awards outlined above, in the event of recruitment, the Committee may grant awards to a new executive director under Listing Rule 9.4.2 which allows for the granting of awards, to facilitate, in unusual circumstances, the recruitment of an executive director, without seeking prior shareholder approval or under any other appropriate Company incentive plan (including the 2015 Performance Share Plan).

The remuneration package for a newly appointed non-executive director would normally be in line with the structure set out in the policy table for non-executive directors. Remuneration for newly appointed non-executive directors may be paid in the form of cash or shares.

Remuneration outcomes in different performance scenarios

The remuneration package at Consort Medical is structured so that the majority of the package is related to the delivery of performance over the short and long term to ensure that reward is aligned with shareholder value creation.

The charts below show hypothetical values of the remuneration package for executive directors under three assumed performance scenarios.

CEOCFO
Maximum award opportunities percentage of salaryAnnual bonus150%110%
PSP100%100%
MinimumNo annual incentive pay-out
No vesting under the PSP
Mid performance50% annual incentive pay out (75% of salary for the CEO, 55% of salary for the CFO)
25% vesting under the PSP (25% of salary)
Maximum performance100% annual incentive pay out (150% of salary for the CEO, 110% of salary for the CFO)
100% vesting under the PSP (100% of salary)
CEO performance
CFO performance
Salary
£'000
(with effect from
1 August 2018)
Benefits
£'000
(paid in FY2018)
Pension
£'000
(based on salary with effect from1 August 2018)
Total fixed pay
£'000
CEO (Jonathan Glenn)50915102626
CFO (Paul Hayes)3281457399

Executive director service contracts and policy on payment for loss of office

When determining leaving arrangements for an executive director, the Committee takes into account any contractual agreements including the provisions of any incentive arrangements, typical market practice and the performance and conduct of the individual.

The service agreements are available to shareholders to view on request from the Company Secretary.

NOTICE PERIOD

Executive directors have service contracts with the Company which can be terminated on 12 months' notice by the Company and six months' notice by the executive directors.

Jonathan Glenn was appointed on 26 July 2006 and Paul Hayes was appointed on 1 May 2017.

PAYMENT IN LIEU OF NOTICE

The Company may at its discretion terminate any executive director's contract by making a payment in lieu of notice equal to the base salary, and benefits which would have been received during the notice period. Current CEO is also entitled to an amount in respect of bonus for their notice period (or remainder of the notice period). The Committee has the discretion to determine the level of such bonus. Previously, when directors have left the business the Committee determined that no bonus should be due for the notice period. The Committee's policy going forward (which is the approach adopted for the current CFO) is that when new contracts are agreed with new executive directors, any entitlement to bonus as part of any payment in lieu of notice will be removed. Executive directors are also entitled to a payment in respect of any accrued but untaken holiday at the time of termination of employment.

ANNUAL BONUSES

The executive director may, at the discretion of the Committee, remain eligible to receive an annual bonus for the financial year in which they ceased employment. Such annual bonuses will be determined by the Committee taking into account time in employment and performance.

2010 DEFERRED BONUS PLAN

Death

Awards shall vest at the time of death and, where awards are in the form of options, they may be exercised for a period of 12 months from death.

"Good leaver" by reason of injury, ill health or disability, redundancy, retirement, or the company for which the participant works leaves the Group and any other reasons determined by the Committee

Awards shall vest in full on the normal vesting date unless the Committee determines that awards should vest on the individual's cessation of employment. Where awards are in the form of nil-cost options they may be exercised during the normal exercise window or, where the Committee has determined that awards should vest on the participant's date of cessation of employment, for a period of six months from cessation of employment.

"Good leaver" by reason of the participant's employing business leaving the Group

Awards will vest in full at the time of the business leaving the Group. Awards in the form of options may be exercised for up to six months from the relevant business leaving the Group.

Leavers in other circumstances

Awards will normally lapse.

2015 PERFORMANCE SHARE PLAN

Death

Awards shall vest to the extent to which any performance condition has been met, and, unless the Committee determines otherwise, shall be prorated for the period of time that has elapsed since the award was granted until the date of death.

A participant's personal representatives have until 12 months from the date of death to exercise any vested awards.

"Good leaver" by reason of injury, ill health or disability, the sale of the participant's employing company and business out of the Group and any other reason determined by the Committee

Awards will usually continue until the usual vesting date unless the Committee determines that the award will vest as soon as reasonably practicable following the date on which the participant ceases to be an employee or officer of the Group.

The Committee shall determine the extent to which awards vest in these circumstances, taking into account the extent to which any performance condition has been satisfied. Unless the Committee determines otherwise, the period of time that has elapsed since the award was granted will also be taken into account. Participants will have six months following vesting to exercise awards.

Leavers in other circumstances

Awards will normally lapse.

2010 CSOP

Where options vest before the end of any relevant performance period, the Committee may assess any relevant performance condition on such modified basis as the Committee may determine.

Death

Options will become exercisable to the extent that the performance conditions have been met for a period of 12 months following death.

"Good leaver" by reason of injury, ill health or disability, redundancy, retirement, the company for which the participant works leaving the Group or any other reasons determined by the Committee

Options which have not vested at the time of cessation vest on the normal vesting date to the extent that the performance conditions have been met and can be exercised within six months. Unless the Committee determines otherwise, the period of time that has elapsed since the award was granted will also be taken into account. Options which have already vested at the time of cessation may be exercised for six months following cessation of employment.

"Good leaver" by reason of the participant's employing business leaving the Group

The Committee may notify participants when it becomes aware that a relevant business may be leaving the Group. If participants are given at least 14 days' notice of the transfer, options vest to the extent that the performance conditions have been met and may be exercised until the completion of the transfer. Unless the Committee determines otherwise, awards shall be prorated for the period of time that has elapsed since the award was granted. If such notice is not given, options vest on the normal vesting date to the extent that the performance conditions have been met and may be exercised for a period of 12 months thereafter.

Leavers in other circumstances

Options will normally lapse.

Change of control

In the event of a change of control or a voluntary winding-up of the Company:

  • Awards granted under the 2015 Performance Share Plan will vest subject to the achievement of any relevant performance conditions (which may be adjusted to reflect the reduced performance period), any other factors the Committee determines relevant and, if the Committee determines it appropriate, time prorating, in an internal reorganisation of the Group, share awards will "roll over" into awards over shares in the acquiring company, unless the Committee determines otherwise
  • Awards granted under the 2010 Deferred Bonus Plan will vest
  • Options granted under the 2010 Company Share Option Plan will vest and may be exercised within six months of the takeover taking place or the relevant resolution being passed. However, in an internal reorganisation of the Group, options may be "rolled over" into shares over shares in the acquiring company
  • In the event of a demerger, the Committee may determine that awards under the 2010 Deferred Bonus Plan and 2015 Performance Share Plan vest, and options granted under the 2010 Company Share Option Plan may be exercised early

Consulting with shareholders

The Committee believes that it is very important to maintain open dialogue with shareholders on remuneration matters. Where significant changes are proposed to the executive directors' reward framework, the Committee's policy is to consult with major shareholders (unless not practical).

Since the last Policy was approved by shareholders at the 2015 AGM, we have consulted with shareholders from time to time on various remuneration-related matters. In response to investor feedback, various minor changes have been made to the operation of remuneration arrangements for executive directors to ensure continued support from the Company's major shareholders and alignment with market and best practice.