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Howden Joinery Group Plc

Terms of Reference of the Remuneration Committee

Last approved: 7 November 2019

1.

Membership

1.1.Members of the Committee shall be appointed by the Board of directors (the “Board”), on the recommendation of the Nominations Committee and in consultation with the Chair of the Remuneration Committee.
1.2The Committee shall be made up of at least three members. Each Committee member shall be an independent non-executive director as determined by the Board (in accordance with the principles of the UK Corporate Governance Code). If the Board decides that a member of the Committee is no longer independent, and as a result a majority of the members of the Committee are not independent non-executive directors, that member will cease to be a member of the Committee.
1.3The Chair of the Board may also serve on the Remuneration Committee as an additional member provided they were considered independent on appointment as Chair.
1.4Only members of the Committee have the right to attend Committee meetings. However, other individuals, including, but not limited to, the Chair, Chief Executive, other Board members and external advisers may be invited to attend for all or part of any meeting as and when appropriate.
1.5Appointments to the Committee shall be for a period of up to three years, which may be extended, provided the director continues to be independent.
1.6The Board shall appoint the Committee Chair who shall be an independent non-executive director and who shall have previously served on a remuneration committee for at least 12 months. In the absence of the Committee Chair the remaining members present shall elect one of themselves to chair the meeting. The Chair of the Board shall not be the Chair of the Committee.
1.7The Board shall regularly review the membership of the Committee to ensure an appropriate balance of experience, skills and knowledge is maintained and to ensure that undue reliance is not placed on particular individuals.

2.

Secretary

2.1.The Company Secretary shall be the Secretary to the Committee and shall advise and support the Committee in its work.

3.

Quorum

3.1.The quorum necessary for the transaction of business shall be two members, present in person or by electronic communication (where each person is able to speak and to be heard by all those deemed to be present simultaneously). A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.

4.

Meetings

4.1.The Committee must meet as often as it deems necessary and at such times as the Chair of the Committee shall require, but in any case at least twice a year.

5.

Notice of Meetings

5.1.Meetings of the Committee shall be summoned by the Secretary of the Committee at the request of the Committee Chair.
5.2.Unless otherwise agreed by all Committee members, notice of each meeting confirming the venue, time and date (and dial-in details if required), together with an agenda of items to be discussed, shall be forwarded to each member of the Committee, any other person required to attend and all other non-executive directors, no later than 5 working days before the date of the meeting. Supporting papers shall be sent to Committee members and to other attendees as appropriate, at the same time. Notices, agendas and supporting papers may be sent in electronic form where the recipient has agreed to receive documents in such a way.
5.3The Secretary must ensure that the Committee receives information and materials in a timely manner to enable full and proper consideration to be given to them.

6.

Minutes of Meetings

6.1.The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance.
6.2Draft minutes of Committee meetings must be sent promptly to all members of the Committee. Once approved, minutes must be sent to all members of the Board, unless the Chair of the Committee thinks it is inappropriate to do so.

7.

Annual General Meeting

7.1The Chair of the Committee shall attend the Annual General Meeting (AGM) to respond to any shareholder questions on the Committee’s area of responsibility and activities and make a statement on the activities and achievements of the Committee over the year, as directed by the Chair of the Board.

8.

Duties

The Committee should carry out the duties below for the parent company, major subsidiary undertakings and the Group as a whole, as appropriate.

The Committee shall:
8.1have responsibility for setting the policy for executive director remuneration (the “Remuneration Policy” or the “Policy”) and for recommending its adoption to the Board. The objective of the Remuneration Policy shall be to reward executive directors fairly and responsibly, to clearly link corporate performance and individual performance, and to promote the long-term success of the Company. The Board itself or, where required by the Articles of Association the shareholders, should determine the remuneration of the non-executive directors (excluding the Company’s Chair) within the limits set in the Articles of Association. No director or executive shall be involved in any decisions as to their own remuneration;
8.2in consultation with the Chair and/or Chief Executive as appropriate, determine the remuneration structure and total individual remuneration package for the Company’s Chair, the executive directors, and each Executive Committee member (not including the executive directors) and the Company Secretary (together the “Senior Managers”), such remuneration to include pension rights (which shall be in compliance with provision 38 of the UK Corporate Governance Code (the “Code”)), any compensation payments, bonuses, incentive payments and share-based awards. Levels of remuneration for the Chair should reflect the time commitments and responsibility of the role. Where consultation with executive directors or Senior Managers is appropriate, the Committee shall exercise independent judgement of the views received;
8.3approve the design of, and determine targets for, any performance- related remuneration pay schemes for executive directors and Senior Managers and approve the total annual payments made under such schemes, ensuring discretion or independent judgment are exercised where necessary to ensure reasonable, fair and responsible outcomes in accordance with the Remuneration Policy;
8.4in determining the Remuneration Policy and approving the design of, and determining the targets for, any performance- related remuneration pay schemes for executive directors and Senior Managers, take into account all factors which it deems necessary including, but not limited to:
 8.4.1

relevant legal and regulatory requirements;

 8.4.2

the principles and provisions of the Code (in particular the factors set out in Provision 40 of the Code) and recommendations in associated guidance;

 8.4.3

the views and long-term interests of shareholders and other stakeholders;

 8.4.4

the remuneration and related policies of the wider workforce;

 8.4.5

the risk appetite of the Company; and

 8.4.6

the alignment of the Remuneration Policy to the Company’s purpose, values, culture and long-term strategy.

8.5Review and consider (at least annually)  remuneration and related policies in place across the Company or Group in order to:
 8.5.1

ensure the alignment of workforce remuneration with the Company’s culture and strategy;

 8.5.2

report how decisions on executive pay align with wider Company pay policy;

 8.5.3

enable the Committee to feedback to the Board on workforce reward, incentives and conditions and how these address any pay gaps and ratios between various quartiles within the business; and

 8.5.4

work with the Nominations Committee as appropriate regarding the structure of the workforce.

8.6review the ongoing appropriateness and relevance of the Remuneration Policy and consult with significant shareholders as appropriate with a view to obtaining approval of the Policy by the shareholders at the Annual General Meeting:
 8.6.1

At least every three years; or

 8.6.2

In any year in which there is a change to the Policy; or

 8.6.3

If majority shareholder approval was not secured when last put forward for approval.

8.7obtain reliable, up-to-date information about remuneration in other companies of comparable scale and complexity. To help it fulfill its obligations the Committee shall have full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary at the expense of the Company, within any budgetary restraints imposed by the Board;
8.8be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee. The Committee shall ensure independent judgement is exercised when evaluating advice of such consultants;
8.9review the design of all share-based incentive plans for approval by the Board and shareholders. For any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to executive directors, Senior Managers and the performance targets to be used;
8.10design and invoke agreed safeguards, such as malus and clawback provisions, to protect against rewards for failure through appropriate risk management of incentive arrangements and to ensure that any performance-related payments reflect actual achievements;
8.11ensure that contractual terms on termination, and any payments made, are fair to the individual and the Company, that failure is not rewarded, and that the duty to mitigate loss if fully recognised;
8.12agree the policy for authorising claims for expenses from the directors; and
8.13work and liaise as necessary with all other Board committees.

9.

Reporting Responsibilities

9.1.The Committee Chair shall, where appropriate, report to the Board on its proceedings, including with regards to workforce reward, incentives and conditions.
9.2.The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
9.3.The Committee shall ensure that provisions regarding disclosure of information, including pensions, as set out in the relevant legislation and the Code, are fulfilled and a report produced of the Company’s remuneration practices (the “Directors Remuneration Report” or “DRR”) to be included in the Company’s annual report (including the matters set out in Provision 41 of the Code). The Committee shall ensure each year that the DRR is put to shareholders for approval at the AGM. If the Committee has appointed remuneration consultants, the DRR should identify such consultants and state whether they have any other connection with the Company or individual directors. If any discretion has been applied to remuneration outcomes, the reasons for the use of discretion will be disclosed and explained in the DRR.
9.4Through the Chair of the Board, the Committee shall ensure that the Company maintains contact as required with its principal shareholders about remuneration and discloses in the DRR whether such engagement has impacted on the Remuneration Policy and its outcomes.

10.

Other Matters

The Committee shall:
10.1.have access to sufficient resources in order to carry out its duties, including access to the company secretariat and management for assistance as required;
10.2.be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
10.3.give due consideration to laws, regulations and and any published guidelines or recommendations regarding the remuneration of directors of listed/non listed companies and formation and operation of share schemes including but not limited to the provisions of the UK Corporate Governance Code, the requirements of the Listing, Prospectus and Disclosure Guidance and Transparency Rules as well as guidelines published
by the Investment Association and the Pensions and Lifetime Savings Association and any other applicable rules, as appropriate; and
10.4arrange for periodic reviews of its own performance and, at least annually, review its constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
11.Authority
11.1.The Committee is authorised by the Board to undertake any activity within its terms of reference and to obtain, at the Company’s expense, outside legal or other professional advice on any matters within its terms of reference.
11.2The Committee may sub-delegate any or all of its powers and authority as it thinks fit to one or more of its members or the Company Secretary, including, without limitation, the establishment of sub-committees which are to report back to the Committee.

 

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