Remuneration outcomes during the year ended 31 March 2008
Sections 1, 2, 3, 4 and 6 comprise the ‘auditable’ part of the Directors’ Remuneration Report, being the information required by Part 3 of Schedule 7A to the Companies Act 1985.
1. Directors’ emoluments
The following tables set out an analysis of the pre-tax emoluments for the years ended 31 March 2008 and 2007, including bonuses but excluding pensions, for individual Directors who held office in National Grid during the year ended 31 March 2008.
| Table 1A | Year ended 31 March 2008 | Year ended 31 March 2007 | |||||
|---|---|---|---|---|---|---|---|
| Salary £000s |
Annual bonus £000s |
Benefits in kind(i) (cash) £000s |
Benefits in kind(i) (non-cash) £000s |
Other emoluments £000s |
Total £000s |
Total £000s |
|
| Executive Directors | |||||||
| Steve Holliday (ii) | 850 | 1,190 | 6 | 16 | – | 2,062 | 1,292 |
| Bob Catell (iii) (iv) | 314 | 490 | – | 14 | – | 818 | – |
| Steve Lucas (v) | 498 | 659 | – | 26 | – | 1,183 | 928 |
| Nick Winser | 445 | 502 | – | 16 | – | 963 | 806 |
| Mark Fairbairn (ii) (v) | 420 | 567 | – | 23 | – | 1,010 | 189 |
| Tom King (iv) (vi) | 316 | 328 | 264 | 100 | 141 | 1,149 | – |
| Edward Astle (v) | 440 | 607 | 12 | 11 | – | 1,070 | 847 |
| Total | 3,283 | 4,343 | 282 | 206 | 141 | 8,255 | 4,062 |
(i) Benefits in kind comprise benefits such as private medical insurance, life assurance, either a fully expensed car or cash in lieu of a car and the use of a driver when required.
(ii) With effect from October 2007, Steve Holliday’s salary was increased to £875,000 per annum and Mark Fairbairn’s salary was increased to £440,000 per annum.
(iii) Bob Catell’s maximum potential bonus and long term incentive arrangements were significantly reduced from those applicable at KeySpan. Due to this contractual change, a buy out of
Bob’s contractual severance arrangements was paid equating to £6,277,547 (including excise tax of £2,022,290). Bob now has a National Grid contract which aligns his arrangements
to our other Executive Directors.
(iv) For US-based Executive Directors, the exchange rate averaged over the year 1 April 2007 to 31 March 2008 to convert US dollars to UK pounds sterling is US$2.01:£1.
(v) These Executive Directors participate in the UK flexible benefits plan which operates by way of salary sacrifice, therefore, their salaries are reduced by the benefits they have purchased.
The value of these benefits is included in the Benefits in kind (non-cash) figure. The values are: Steve Lucas £5,532, Mark Fairbairn £293.88 and Edward Astle £53.88.
(vi) On appointment to the Board, Tom King received a sign-on payment of £141,169 which is shown in the Other emoluments figure above. He also received a relocation cash payment of
£260,147 which is included in the Benefits in kind (cash) figure and relocation expenses of £96,045 included in the Benefits in kind (non-cash) figure.
Additional note: Mike Jesanis, who left National Grid on 31 December 2006, received £323,200 reflecting the remaining months (April 2007 to June 2007 inclusive) of a consultancy arrangement which was agreed as part of his termination package. The exchange rate used for this value was US$2.01:£1.
| Table 1B | Year ended 31 March 2008 | Year ended 31 March 2007 | ||
|---|---|---|---|---|
| Fees £000s |
Other emoluments £000s |
Total £000s |
Total £000s |
|
| Non-executive Directors | ||||
| Sir John Parker (i) | 500 | 59 | 559 | 553 |
| Ken Harvey | 79 | – | 79 | 68 |
| Linda Adamany | 77 | – | 77 | 25 |
| John Allan | 71 | – | 71 | 62 |
| Stephen Pettit | 79 | – | 79 | 68 |
| Maria Richter | 92 | – | 92 | 71 |
| George Rose | 82 | – | 82 | 71 |
| Paul Joskow (ii) | 33 | – | 33 | 80 |
| Total | 1,013 | 59 | 1,072 | 998 |
(i) Sir John Parker’s other emoluments comprise a fully expensed car, private medical insurance and life assurance.
(ii) Paul Joskow left the Board on 31 July 2007.
2. Directors’ pensions
The table below gives details of the Executive Directors’ pension benefits in accordance with both Schedule 7A of the Companies Act 1985 and the UK Listing Authority’s Listing Rules.
| Table 2 | Personal contributions made to the scheme during the year £000s |
Additional benefit earned during year ended 31 March 2008 pension £000s |
Accrued entitlement as at 31 March 2008 pension £000s |
Transfer value of accrued benefits as at 31 March (i) | Increase in transfer value less Director’s contributions £000s |
Additional benefit earned in the year ended 31 March 2008 (excluding inflation) pension £000s |
Transfer value of increase in accrued benefit in the year ended 31 March 2008 (excluding inflation & Director contributions) £000s |
|
|---|---|---|---|---|---|---|---|---|
| 2008 £000s |
2007 £000s |
|||||||
| Steve Holliday (ii) | 17 | 75 | 232 | 4,730 | 2,745 | 1,967 | 69 | 1,374 |
| Bob Catell (iii) | – | 147 | 1,087 | 12,774 | 11,807 | 967 | 147 | 1,730 |
| Steve Lucas | 30 | 26 | 225 | 3,680 | 3,535 | 115 | 19 | 286 |
| Nick Winser (iv) | 27 | 18 | 170 | 3,237 | 2,406 | 805 | 12 | 187 |
| Mark Fairbairn (v) | 25 | 44 | 160 | 3,340 | 2,014 | 1,300 | 40 | 783 |
| Tom King (vi) | – | 55 | 55 | 207 | – | 207 | 55 | 207 |
| Edward Astle | 17 | 18 | 97 | 1,997 | 1,416 | 562 | 15 | 301 |
(i) The transfer values shown at 31 March 2007 and 31 March 2008 respectively represent the value of each Executive Director’s accrued benefits based on total service compared to the
relevant date. The transfer values for the UK Executive Directors have been calculated in accordance with guidance note ‘GN11’ as adopted and amended by the Board of Actuarial
Standards. The transfer values for the US-based Executive Directors have been calculated using discount rates based on high yield US corporate bonds and associated yields at the
relevant dates.
(ii) The above information takes into account a lump sum benefit related to a previous transfer in. This means that as well as the pension quoted above, there is an accrued lump sum
entitlement of £100,000 as at 31 March 2008. The increase to the accumulated lump sum including inflation was £23,000 and excluding inflation was £20,000 in the year to 31 March
2008. The transfer value information above includes the value of the lump sum.
(iii) Bob Catell joined the Board on 25 September 2007. In accordance with the buy out of Bob Catell’s contractual severance arrangements, a payment of £4,769,306 (£3,232,670 net of
excise tax) was made on 10 January 2008. This amount reflected the present value of the change in Bob’s SERP benefit and is additional to the benefits shown in the table. The
exchange rate as at 10 January 2008 used to convert the figures from US dollars to pounds sterling was US$1.96:£1. Through participation in the Thrift Plan in the US, the Company
also made contributions worth £3,355 to a defined contribution pension arrangement. The exchange rate as at 31 March 2008 was US$1.98: £1 and as at 31 March 2007 was
US$1.97:£1.
(iv) The above information allows for the accrual of a pension benefit of two thirds at age 60 taking into account standard benefits earned prior to 1 September 1998. This means that, as
well as the pension above, there is an accrued lump sum entitlement of £250,000 as at 31 March 2008. The increase to the accumulated lump sum including inflation was £14,000 and
excluding inflation was £5,000 in the year to 31 March 2008. The transfer value information above includes the value of the lump sum.
(v) The above information takes into account a lump sum benefit relating to a previous transfer-in. This means that, as well as the pension above, there is an accrued lump sum entitlement
of £255,000 as at 31 March 2008. The increase to the accumulated lump sum including inflation was £58,000 and excluding inflation was £50,000 in the year to 31 March 2008. The
transfer value information above includes the value of the lump sum.
(vi) Tom King joined the Board on 13 August 2007. The above information takes into account a service credit of 9 years and 1 month. The exchange rate as at 31 March 2008 was US$1.98:
£1 and as at 31 March 2007 was US$1.97:£1.
3. Directors’ interests in share options
The table below gives details of the Executive Directors’ holdings of share options awarded under the Executive Share Option Plan (ESOP), the Share Matching Plan (Share Match) and Sharesave schemes.
| Table 3 | Options held at 1 April 2007 | Options exercised or lapsed during the year | Market price at end of exercise (pence) |
Options granted during the year | Options held at 31 March 2008 | Exercise price per share (pence) |
Normal exercise period |
|---|---|---|---|---|---|---|---|
| Steve Holliday | |||||||
| ESOP | 67,497 | – | – | – | 67,497 | 481.5 | June 2005 to June 2012 |
| Share Match | 10,350 | – | – | – | 10,350 | 100 in total | June 2005 to June 2012 |
| 14,083 | – | – | – | 14,083 | 100 in total | June 2006 to June 2013 | |
| 18,713 | – | – | – | 18,713 | nil | May 2007 to May 2014 | |
| 9,983 | – | – | – | 9,983 | nil | June 2008 to June 2015 | |
| Sharesave | 4,692 | – | – | – | 4,692 | 350 | Mar 2008 to Aug 2008 |
| – | – | – | 2,564 | 2,564 | 655 | Apr 2013 to Sep 2013 | |
| Total | 125,318 | – | 2,564 | 127,882 | |||
| Steve Lucas | |||||||
| ESOP | 54,404 | – | – | – | 54,404 | 434.25 | Dec 2005 to Dec 2012 |
| Share Match | 16,909 | 16,909(i) | 742 | – | – | nil | May 2007 to May 2014 |
| 14,778 | – | – | – | 14,778 | nil | June 2008 to June 2015 | |
| Sharesave | 1,693 | – | – | – | 1,693 | 558 | Apr 2010 to Sep 2010 |
| Total | 87,784 | 16,909 | – | 70,875 | |||
| Nick Winser | |||||||
| ESOP | 19,755 | – | – | – | 19,755 | 531.5 | June 2003 to June 2010 |
| Share Match | 14,059 | 14,059(ii) | 751 | – | – | nil | May 2007 to May 2014 |
| 11,581 | – | – | – | 11,581 | nil | June 2008 to June 2015 | |
| Total | 45,395 | 14,059 | – | 31,336 | |||
| Mark Fairbairn | |||||||
| ESOP | 8,649 | 8,649(iii) | 700.18 | – | – | 375.75 | June 2001 to June 2008 |
| 2,180 | – | – | – | 2,180 | 435.75 | July 2002 to July 2009 | |
| 33,489 | – | – | – | 33,489 | 531.5 | June 2003 to June 2010 | |
| 31,152 | – | – | – | 31,152 | 481.5 | June 2005 to June 2012 | |
| Share Match | 4,897 | 4,897(iii) | 743.5 | – | – | nil | May 2007 to May 2014 |
| 2,134 | – | – | – | 2,134 | nil | June 2008 to June 2015 | |
| Sharesave | 833 | 833 | 739 | – | – | 397 | Sep 2007 to Feb 2008 |
| 862 | – | – | – | 862 | 383 | Apr 2010 to Sep 2010 | |
| 1,760 | – | – | – | 1,760 | 558 | Apr 2012 to Sep 2012 | |
| – | – | – | 512 | 512 | 655 | Apr 2013 to Sep 2013 | |
| Total | 85,956 | 14,379 | 512 | 72,089 | |||
| Edward Astle | |||||||
| ESOP | 67,497 | – | – | – | 67,497 | 481.5 | June 2005 to June 2012 |
| 131,086 | 131,086(iv) | – | – | – | 400.5 | June 2006 to June 2013 | |
| Share Match | 6,553 | – | – | – | 6,553 | 100 in total | June 2005 to June 2012 |
| 13,812 | – | – | – | 13,812 | 100 in total | June 2006 to June 2013 | |
| 15,716 | – | – | – | 15,716 | nil | May 2007 to May 2014 | |
| 14,637 | – | – | – | 14,637 | nil | June 2008 to June 2015 | |
| Total | 249,301 | 131,086 | – | 118,215 |
(i) Steve Lucas exercised a Share Match award over 16,909 shares. The market price at the date of exercise was 742p. He also received £13,634.91 in respect of a cash payment
in lieu of dividends.
(ii) Nick Winser exercised a Share Match award over 14,059 shares. The market price at the date of exercise was 751p. He also received £12,031.79 in respect of a cash payment
in lieu of dividends.
(iii) Mark Fairbairn exercised an Executive Share Option over 8,649 shares. The market price at the date of exercise was 700.18p. He also exercised a Share Match award over 4,897
shares, the market price at the date of exercise for which was 743.5p. He received £4,379.13 in respect of a cash payment in lieu of dividends for the Share Match award.
(iv) The performance condition for the Executive Share Option granted in 2003 to Edward Astle over 131,086 shares was not satisfied at the end of the first three years of the performance
period. It has subsequently been re-tested on 31 March 2007 and 31 March 2008; and the performance condition has not been satisfied. As a result the option has lapsed in full.
Executive Share Option Plan (ESOP)
No further awards will be made under this plan but there are outstanding options granted in previous years. Such options will normally be exercisable between the third and tenth anniversary of the date of grant, subject to a performance condition. The performance condition attached to the outstanding ESOP options is set out below. If the performance condition is not satisfied after the first three years, it will be re-tested as indicated.
Options worth up to 100% of an optionholder’s base salary will become exercisable in full if TSR, measured over the period of three years beginning with the financial year in which the option is granted, is at least median compared with a comparator group of companies. Grants in excess of 100% of salary vest on a sliding scale, becoming fully exercisable if the Company’s TSR is in the top quartile.
Grants made in 2000
The performance condition attached to options granted in June 2000 is tested annually throughout the lifetime of the option. These options remain unvested.
The comparator group for the 2000 award is unaudited and this information follows below. The Remuneration Committee at that time believed the group to be an appropriate mix of energy distribution sector companies, including UK and international utilities.
| Allegheny Energy, Inc. | Niagara Mohawk Holdings, Inc. |
| BG Group plc | NSTAR |
| British Energy plc | Powergen plc |
| Central & South West Corporation | Progress Energy, Inc. |
| Consolidated Edison, Inc. | Public Service Enterprise Group, Inc. |
| Duke Energy Corporation | Scottish & Southern Energy plc |
| Energy East Corporation | Scottish Power plc |
| FPL Group, Inc. | The Southern Company, Inc. |
| GPU, Inc. | TXU, Corp |
| Innogy Holdings plc | United Utilities plc |
| International Power plc | Xcel Energy, Inc. |
Grants made in 2003
In June 2003, Edward Astle received a grant of Executive Share Options on the basis of 1.5 times base salary at that time, as a one-off award, to fulfil an existing contractual commitment made on his recruitment. He was the only participant to receive such an award in 2003. The first test of the performance criterion was undertaken in March 2006. The performance criterion was not met and was, therefore, re-tested in March 2007 and March 2008 where the performance criterion was not met again. The award has now lapsed.
4. Directors’ interests in the PSP, DSP and SRA
The table below gives details of the Executive Directors’ holdings of conditional shares awarded under the PSP whereby Executive Directors receive a conditional award of shares, up to a current maximum of 200% of salary, which is subject to performance criteria over a three year performance period (see here for further details). Shares are then released on the fourth anniversary of the date of grant, following a retention period. The table includes conditional share awards under the DSP, where Executive Directors receive an award of shares representing one half of any bonus earned in the year. The deferred shares are held in trust for three years before release. As part of a contractual commitment made at the time of Tom King’s recruitment, Tom received a SRA. The one-off award of National Grid ADSs will vest in equal tranches, over three years, on the anniversary of the award (commencing November 2008 through to November 2010) subject to continued employment. There are no performance conditions attached to the award.
| Table 4 | Type of award | PSP, DSP and SRA conditional awards at 1 April 2007 | Awards lapsed during year | Awards vested in year | Awards granted during year | Market price at award (pence except#) | Date of award | Conditional awards at 31 March 2008 | Release date |
|---|---|---|---|---|---|---|---|---|---|
| Steve Holliday | PSP | 117,681 | 117,681(i) | – | – | 424.875 | June 2004 |
– | – |
| PSP | 100,801 | – | – | – | 527.03 | June 2005 |
100,801 | June 2009 | |
| PSP | 126,788 | – | – | – | 591.5382 | June 2006 |
126,788 | June 2010 | |
| PSP | – | – | – | 139,217 | 740.75 | June 2007 |
139,217 | June 2011 | |
| PSP | – | – | – | 77,247(ii) | 800.9919 | Nov 2007 |
77,247 | Nov 2011 | |
| DSP | 36,389 | – | – | – | 583.96 | June 2006 |
36,389 | June 2009 | |
| DSP | – | – | – | 42,435 | 726.87 | June 2007 |
42,435 | June 2010 | |
| Total | 381,659 | 117,681 | – | 258,899 | 522,877 | ||||
| Bob Catell | PSP | – | – | – | ADSs 17,084(iii) | $83.3121# | Nov 2007 |
ADSs 17,084 | Nov 2011 |
| Total ADSs | – | – | – | ADSs 17,084 | ADSs 17,084 | ||||
| Steve Lucas | PSP | 116,210 | 116,210(i) | – | – | 424.875 | June 2004 |
– | – |
| PSP | 99,615 | – | – | – | 527.03 | June 2005 |
99,615 | June 2009 | |
| PSP | 101,430 | – | – | – | 591.5382 | June 2006 |
101,430 | June 2010 | |
| PSP | – | – | – | 84,930 | 740.75 | June 2007 |
84,930 | June 2011 | |
| PSP | – | – | – | 47,125(ii) | 800.9919 | Nov 2007 |
47,125 | Nov 2011 | |
| DSP | 34,882 | – | – | – | 583.96 | June 2006 |
34,882 | June 2009 | |
| DSP | – | – | – | 29,276 | 726.87 | June 2007 |
29,276 | June 2010 | |
| Total | 352,137 | 116,210 | – | 161,331 | 397,258 | ||||
| Nick Winser | PSP | 98,558 | 98,558(i) | – | – | 424.875 | June 2004 |
– | – |
| PSP | 91,314 | – | – | – | 527.03 | June 2005 |
91,314 | June 2009 | |
| PSP | 88,751 | – | – | – | 591.5382 | June 2006 |
88,751 | June 2010 | |
| PSP | – | – | – | 75,008 | 740.75 | June 2007 |
75,008 | June 2011 | |
| PSP | – | – | – | 41,620(ii) | 800.9919 | Nov 2007 |
41,620 | Nov 2011 | |
| DSP | 31,316 | – | – | – | 583.96 | June 2006 |
31,316 | June 2009 | |
| DSP | – | – | – | 25,596 | 726.87 | June 2007 |
25,596 | June 2010 | |
| Total | 309,939 | 98,558 | – | 142,224 | 353,605 | ||||
| Mark Fairbairn | PSP | 47,072 | 47,072(i) | – | – | 424.875 | June 2004 |
– | – |
| PSP | 40,225 | – | – | – | 527.03 | June 2005 |
40,225 | June 2009 | |
| PSP | 40,572 | – | – | – | 591.5382 | June 2006 |
40,572 | June 2010 | |
| PSP | – | – | – | 67,499 | 740.75 | June 2007 |
67,499 | June 2011 | |
| PSP | – | – | – | 37,453(ii) | 800.9919 | Nov 2007 |
37,453 | Nov 2011 | |
| DSP | 10,800 | – | – | – | 583.96 | June 2006 |
10,800 | June 2009 | |
| DSP | – | – | – | 13,867 | 726.87 | June 2007 |
13,867 | June 2010 | |
| Total | 138,669 | 47,072 | – | 118,819 | 210,416 | ||||
| Tom King | PSP | – | – | – | ADSs 24,006(iii) | $83.3121# | Nov 2007 |
ADSs 24,006 | Nov 2011 |
| SRA | – | – | – | ADSs 35,487(iv) | $84.5360# | Nov 2007 |
ADSs 35,487 | Nov 2008 to Nov 2010 |
|
| Total ADSs | – | – | – | ADSs 59,493 | ADSs 59,493 | ||||
| Edward Astle | PSP | 110,326 | 110,326(i) | – | – | 424.875 | June 2004 |
– | – |
| PSP | 94,872 | – | – | – | 527.03 | June 2005 |
94,872 | June 2009 | |
| PSP | 88,751 | – | – | – | 591.5382 | June 2006 |
88,751 | June 2010 | |
| PSP | – | – | – | 74,249 | 740.75 | June 2007 |
74,249 | June 2011 | |
| PSP | – | – | – | 41,198(ii) | 800.9919 | Nov 2007 |
41,198 | Nov 2011 | |
| DSP | 28,769 | – | – | – | 583.96 | June 2006 |
28,769 | June 2009 | |
| DSP | – | – | – | 27,927 | 726.87 | June 2007 |
27,927 | June 2010 | |
| Total | 322,718 | 110,326 | – | 143,374 | 355,766 |
i) The performance condition was not satisfied at the end of the three year performance period for PSP awards granted in 2004. As a result, the awards have lapsed in full.
(ii) Due to shareholder approval being required to increase the maximum PSP award to Executive Directors, from 125% to 200% of salary, which could only be sought at the 2007 AGM,
a top up PSP award was made in November 2007.
(iii) Bob Catell and Tom King were appointed after the main June 2007 PSP award, therefore, they received full awards in November 2007. Awards were made over ADSs. Each ADS
represents five ordinary shares.
(iv) Tom King received a Special Retention Award as part of a contractual commitment made at the time of his recruitment. The award was made over ADSs. Each ADS represents five
ordinary shares. The award vests in equal parts over 3 years.
5. Directors’ beneficial interests
The Directors’ beneficial interests (which include those of their families) in National Grid ordinary shares of 11 17⁄43 pence each are shown below.
| Table 5 | Ordinary shares at 31 March 2008 or, if earlier, on retirement†(i) | Ordinary shares at 1 April 2007 or, if later, on appointment* | Options/awards over ordinary shares at 31 March 2008 | Options/awards over ordinary shares at 1 April 2007 or, if later, on appointment* |
|---|---|---|---|---|
| Sir John Parker | 77,115 | 63,994 | – | – |
| Steve Holliday (ii) (iii) | 28,488 | 28,293 | 650,759 | 506,977 |
| Bob Catell | 15,000 | –* | 85,420 | –* |
| Steve Lucas (ii) (iv) | 79,438 | 69,412 | 468,133 | 439,921 |
| Nick Winser (ii) | 69,937 | 60,624 | 384,941 | 355,334 |
| Mark Fairbairn (ii) (iii) | 28,584 | 20,838 | 282,505 | 224,625 |
| Tom King | – | –* | 297,465 | –* |
| Edward Astle (ii) | 28,428 | 28,428 | 473,981 | 572,019 |
| Ken Harvey | 3,740 | 3,399 | – | – |
| Linda Adamany | 2,000 | – | – | – |
| John Allan | 2,000 | 2,000 | – | – |
| Stephen Pettit | 2,632 | 2,632 | – | – |
| Maria Richter | 3,255 | 1,755 | – | – |
| George Rose | 4,852 | 4,409 | – | – |
| Paul Joskow | 4,385† | 4,385 | – | – |
(i) There has been no other change in the beneficial interests of the Directors in ordinary shares between 1 April 2008 and 14 May 2008, except in respect of routine monthly purchases
under the SIP (see note (iii) below).
(ii) Each of the Executive Directors, with the exception of Bob Catell and Tom King, was for Companies Act purposes deemed to be a potential beneficiary under the National Grid plc 1996
Employee Benefit Trust and the National Grid Employee Share Trust and thereby to have an interest in 25,836 and 155,768 ordinary shares respectively, as at 31 March 2008.
(iii) Beneficial interest includes shares purchased under the monthly operation of the SIP in the year to 31 March 2008. In April and May 2008 a further 35 shares were purchased on behalf
of Steve Holliday and Mark Fairbairn respectively.
(iv) Steve Lucas was for Companies Act purposes deemed to be a potential beneficiary in 8,880 ordinary shares held by Lattice Group Trustees Limited as trustee of the Lattice Group
Employee Share Ownership Trust as at 31 March 2008.
6. National Grid share price range
The closing price of a National Grid ordinary share on 31 March 2008 was 691.5p. The range during the year was 863p (high) and 686p (low). Please note the Register of Directors’ Interests contains full details of shareholdings and options/awards held by Directors as at 31 March 2008.
On behalf of the Board
Helen Mahy
Company Secretary & General Counsel
14 May 2008