2.18 The Chief Financial Officer's 2024 bonus is on twelve months' salary while his single figure salary runs only from his appointment on [date]
UK Company A · a UK-listed medical technology group · Regulator-style question
In brief
The Chief Financial Officer joined in [date] and became a director on [date]. His single figure shows salary of [amount], nine months, but an Annual Incentive Plan (AIP) award of [amount] calculated on his full twelve-month salary of [amount] for 2024. About [amount] of the bonus, on a time basis, relates to January to [date], before he was a director. The report does not say why that part is included. The 'remuneration at a glance' page repeats the point: its footnote says the Chief Financial Officer's amounts represent the period from [date], beside a bonus of [amount].
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2024, page 155; Annual Report 2024, page 157; Annual Report 2024, page 156; Annual Report 2024, page 141. Their wording or layout could lead back to the company even with names and figures masked; the evidence list below records what each page shows.
What the report shows, and what the rule requires
| What the annual report shows | What the rule requires |
|---|---|
| What the annual report shows Single figure 2024: salary [amount] (from [date]), AIP [amount] computed on salary for the 12 months to [date] ([amount]. At-a-glance page: footnote '[wording masked] [date]' beside 'Annual Incentive Plan (Bonus) [amount]'. | What the rule requires Either a single figure AIP for the period of service as a director, or a note explaining why the full-year bonus is treated as relating to qualifying services, with the at-a-glance footnote corrected to match. |
The rule
SI 2008/410 Schedule 8 paragraph 4(3)
Version relied on: Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), in force from April 2008, as amended (the directors’ remuneration report Schedule 8 as substituted from October 2013); revised text, legislation.gov.uk
Unless otherwise indicated the sums set out in the table are those in respect of the relevant financial year and relate to the director’s performance of, or agreement to perform, qualifying services.
SI 2008/410 Schedule 8 paragraph 7(1)(c)
Version relied on: Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), in force from April 2008, as amended (the directors’ remuneration report Schedule 8 as substituted from October 2013); revised text, legislation.gov.uk
money or other assets received or receivable for the relevant financial year as a result of the achievement of performance measures and targets relating to a period ending in that financial year
Why it applies here: Schedule 8 sums relate to the director's qualifying services; salary has been cut to the period as a director, the bonus has not, and no reason is given.
Why it matters
The Chief Financial Officer's single figure may include about [amount] earned before he was a director, which also feeds the totals shareholders compare year on year.
Exposure
A remuneration-report presentation question; no regulatory consequence expected.
Our workings
the single figure column is headed '(from [date])' and shows base salary [n] and total AIP [n]. The AIP table multiplies the weighted outcome and the maximum opportunity by '[amount] ([amount]' to give [amount] and its footnote says salary for bonus purposes is '[wording masked] 12-month period ended [date]'. He 'joined in [date] [wording masked] [date]'.
[n] / [n] = 75% of the full-year salary, i.e. nine months; [n] x 3/12 = [n] of the bonus relates on a time basis to the three months before appointment.
the 'remuneration at a glance' summary (p.141) shows the same [amount] bonus with a footnote that the Chief Financial Officer's amounts 'represent the period from [date]', so the summary states a basis that the bonus figure does not follow.
| Item | Computation | Result |
|---|---|---|
| Salary in single figure as share of full-year salary | [n] / [n] | 75% |
| Bonus relating to January-[date] on a time basis | [n] x 3/12 | [n] |
| In $ million | [n] / [n] | [n] |
Management’s best defence, and our reply
The company could say that the AIP is a single annual award, determined after the year end when he was a director, on performance measures for the whole year, and that he was recruited as Chief Financial Officer designate so the full year relates to an 'agreement to perform' qualifying services. Many companies show a new director's full-year bonus in this way. That reading is tenable, but the report itself pro-rates salary to the period as a director and gives no reason for treating the bonus differently, so the point is put as a question.
The fix
- State in a footnote whether the AIP shown covers the full year and why, or show the bonus pro-rated to the period as a director with the pre-appointment part disclosed separately.
Question for the company
Does the [amount] AIP shown for the Chief Financial Officer for 2024 include the bonus earned on his salary for [date] to [date], before he became a director, and if so on what basis is it treated as relating to his services as a director?
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | The single figure column runs from his appointment on [date] | Document | Annual Report 2024, page 155 |
| 2 | Salary in the single figure [amount] (nine months) | Document | Annual Report 2024, page 155 |
| 3 | AIP in the single figure [amount] | Document | Annual Report 2024, page 155 |
| 4 | Bonus computed on full-year salary [amount] | Document | Annual Report 2024, page 157 |
| 5 | 2024 bonus [amount] | Document | Annual Report 2024, page 157 |
| 6 | The bonus base is twelve months' salary | Document | Annual Report 2024, page 157 |
| 7 | He became a director on [date] | Document | Annual Report 2024, page 156 |
| 8 | At-a-glance footnote: the CFO's amounts are said to cover only the period from [date] | Document | Annual Report 2024, page 141 |
| 9 | The CFO's bonus of [amount] shown on the same page is the full twelve-month bonus | Document | Annual Report 2024, page 141 |
Prepared by Pramanex from the company’s published annual reports, without the company’s involvement, to show how an annual report review reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other assurance engagement, and not legal advice. A regulator-style question is a question, not a conclusion.
Want this on your own annual report, before it is published?
Start with three free findings on your latest published annual report, or talk to us about a fixed-fee pre-publication review.
Your annual report will be in draft before the year-end audit.
Have it read before it is published.
Under NDA, with our reviewer on your insider list under UK MAR.