124 ITV plc Annual Report and Accounts 2023 ITV plc Annual Report and Accounts 2023 125 REMUNERATION REPORT CONTINUED G O VE R NAN Performance measures and target setting C RESTRICTED SHARES The annual bonus is assessed against financial, strategic and individual targets determined by the Committee. This enables the Committee to E Purpose and link to strategy Incentivises Executive Directors to deliver the business strategy and aligns with longer-term Company performance and the reward annual financial performance delivered for shareholders, and performance against specific financial, operational or strategic shareholder experience. objectives set for each director, which are closely linked to the strategic priorities of the business. The Committee sets targets taking into account external forecasts, internal budgets and business priorities. Acts as a retention tool to retain the executives required to deliver the business strategy. Operation Awards may be structured as conditional rights or nil-cost options (or economic equivalent). Awards will normally be A key feature of Restricted Share awards is that the successful execution of the strategy and the success of the business is ultimately reflected granted annually with vesting after three years, subject to satisfaction of a performance underpin. Awards will normally be in the share price, therefore providing strong alignment with the interests of our shareholders. The vesting of Restricted Share awards is required to be held for an additional two year holding period so that the award is released after five years. During the holding subject to a performance underpin. For 2024 awards, the Committee will retain the ability to reduce vesting on the Restricted Shares (including period awards may be reduced or cancelled in certain circumstances. Further detail is provided in the Annual Report to nil) where adjusted Return on Capital Employed is below the Company’s cost of capital. In addition, the Committee has retained a broader on Remuneration. discretion to also enable reduction in vesting levels where there is a material weakness in the underlying financial health and sustainability of Dividends (or equivalents) may be earned in respect of any vested shares. the business. These underpins have been selected as they are considered to provide a robust and sustainable safeguard against payments for Maximum potential The maximum award level is 175% of salary. failure. Further detail on performance criteria is set out in the Annual Report on Remuneration. payment Our current operational policy is to make annual awards of 132.5% of salary to the Chief Executive and 112.5% to the When considering performance outcomes, the Committee will look beyond formulaic results to ensure the outcomes align with the overall Group CFO & COO. business or individual performance. The Committee may adjust the targets for awards or the calculation of performance measures and vesting Performance metrics The Committee may define the terms of the performance underpin. The criteria may be based on financial and/or non- outcomes for events not foreseen at the time the targets were set to ensure they remain a fair reflection of performance over the relevant financial metrics and include reference to corporate, divisional or individual performance. When determining vesting the period. Discretion will be exercised mindful of broader performance, and any change to the outcome will be disclosed in the next Annual Remuneration Committee will take into account all factors deemed relevant at the time (e.g. progress against execution of Report on Remuneration. the strategy, the nature of the wider trading environment). As the underpin is qualitative, there are no performance condition weightings applicable, nor is there a threshold-max vesing range. Application of Remuneration Policy Information on the individual award grants is set out in the Annual Report on Remuneration. The chart below provides an indication of the level of remuneration that would be received by each Executive Director under the following three assumed performance scenarios: SHAREHOLDING GUIDELINES Below threshold performance Fixed elements of remuneration only – base salary, benefits and pension Purpose and link to strategy To create alignment between Executive Directors and shareholders both during service and after departure. Mid-performance Assumes 50% pay-out under the annual bonus Operation Shareholding guidelines are in place which encourage Executive Directors to build up a holding in Company shares during the Assumes 100% vesting of the Restricted Shares course of tenure. The shareholding guideline for the Chief Executive is 400% of base salary and for the Group CFO & COO 225%. Maximum performance Assumes 100% pay-out under the annual bonus Assumes 100% vesting of the Restricted Shares Executive Directors will normally also be expected to retain an interest in Company shares for two years following departure. The expected holding requirement following departure will be equal to two times the Executive Director’s Restricted Shares grant level. Further details of current shareholdings of the Executive Directors, together with further detail on the operation of the Scenario charts shareholding guidelines are set out in the Annual Report on Remuneration. Carolyn McCall 100% £1.2m Minimum 0 10 20 30 40 50 60 70 Detailed provisions 33% 27% 40% £3.5m Mid performance 0 10 20 30 40 5070 60 The Committee may make any remuneration payments and payments for loss of office (including exercising any discretion available to it in 26% 43% 31% £4.4m connection with such payments) notwithstanding that they are not in line with the Policy set out above, where the terms of the payment were Maximum agreed either: (i) during the term of, and was consistent with any previous policy; or (ii) at a time when the relevant individual was not a director 0 1,000,000 2,000,000 3,000,000 4,000,000 of the Company and the payment was not in consideration for the individual becoming a director of the Company. This includes the ability to make payments in recognition of legacy Long Term Incentive Plan (LTIP) awards, awarded under any previous Policy. Chris Kennedy 100% £0.8m The Committee may adjust or amend Bonus and share awards only in accordance with the provisions of the relevant plan rules. This includes Minimum 0 10 20 30 40 50 60 70 making adjustment to reflect one-off corporate events, such as a change of control or a change in the Company’s capital structure. In accordance 36% 27% 37% £2.3m Mid performance with the plan rules, share awards may be settled in cash rather than shares where the Committee considers this appropriate (e.g. to comply 0 10 20 30 40 50 60 70 with securities law). 29% 42% 29% £2.9m Maximum 0 30 60 The Committee may make minor amendments to the Policy to aid its operation or implementation without seeking shareholder approvals 0 1,000,000 2,000,000 3,000,000 4,000,000 (e.g. for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) provided that any such change is not to the material advantage of the Director. Notes: 1. Fixed pay is the salary as at 1 January 2024, pension is per the Policy, and the value for benefits is equivalent to that included in the remuneration table on page 130. Malus and clawback 2. Annual bonus is based on 180% of salary for Carolyn McCall and 165% of salary for Chris Kennedy. 3. Based on Restricted Share grants of 132.5% for Carolyn McCall and 112.5% for Chris Kennedy. Malus and clawback provisions may be operated at the discretion of the Committee in respect of any cash and deferred share elements of the bonus, Restricted Share and legacy LTIP awards. Under malus, unvested share awards (including any Restricted Share or legacy LTIP awards subject to a post-vesting holding period) can be reduced (down to zero if considered appropriate) or be made subject to additional conditions. Clawback allows for repayment of bonuses previously paid and/or shares previously received following vesting. Malus/clawback can be operated up to four years following the start of the relevant bonus year for bonuses, and up to six years from the relevant date of grant for Restricted Share and legacy LTIP awards. For awards granted from 2020 onwards, the Committee has the discretion to apply malus and/or clawback in the event of the following circumstances: material misstatement of financial results; gross misconduct; fraud; payments based on an erroneous calculation or data; serious reputational damage; or material corporate failure.