REG - abrdn PLC - Final Results - Part 3 of 8
28/02/2023 07:16
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RNS Number : 2293R abrdn PLC 28 February 2023
abrdn plc
Full Year Results 2022
Part 3 of 8
2. Board of Directors
Our business is overseen by our Board of Directors. Biographical details (and
shareholdings)
of the Directors as at 28 February 2023 are listed below.
Sir Douglas Flint CBE - Stephen Bird - Stephanie Bruce -
Chairman
Chief Executive Officer
Chief Financial Officer
Appointed to the Board Age Appointed to the Board Age Appointed to the Board Age
November 2018 67 July 2020 56 June 2019 54
Nationality Shares Nationality Shares Nationality Shares
British 200,000 British 782,355 British 545,960
Board committees: NC C
Sir Douglas' extensive experience of board leadership in global financial Stephen brings a track record of delivering exceptional value to clients, Stephanie joined the Board of abrdn plc in June 2019 as Chief Financial
services helps to focus Board discussion and challenge on the design and creating high-quality revenue and earnings growth in complex financial Officer. Stephanie is also our representative director on the Board of
delivery of our strategy. His wide-ranging expertise in international, markets, and deep experience of business transformation during periods of Phoenix Group Holdings.
financial and governance matters is an important asset to abrdn, while his technological disruption and competitive change.
collaborative approach helps to facilitate open and constructive boardroom
Stephanie is a highly experienced financial services practitioner with
discussion. Stephen joined the Board in July 2020 as Chief Executive-Designate, becoming significant sector knowledge, both commercial and technical. She brings wide
Chief Executive Officer in September 2020. He is an abrdn representative ranging experience of working with boards and management teams of financial
In other current roles, Sir Douglas is chairman of IP Group plc, chairman of director to the US closed-end fund boards and the SICAV fund boards where institutions in respect of specialist areas that include capital, financial
the Royal Marsden hospital and charity and is a member of a number of advisory abrdn is the appointed investment manager. and commercial management, reporting, risk and control frameworks and
boards and trade associations through which he keeps abreast of industry,
regulatory requirements.
regulatory and international affairs of relevance to his public company Previously, Stephen served as chief executive officer of global consumer
responsibilities. banking at Citigroup from 2015, retiring from the role in November 2019. His Before joining abrdn, Stephanie was a partner at PwC from 2002, where she led
responsibilities encompassed all consumer and commercial banking businesses in the financial services assurance practice and was a member of the Assurance
Previously, Sir Douglas served as Group Chairman of HSBC Holdings plc from 19 countries, including retail banking and wealth management, and operations Executive. Her responsibilities comprised strategy and business growth, client
2010 to 2017. For 15 years prior to this he was HSBC's group finance director, and technology supporting these businesses. Prior to this, he was chief service, product development, operations and talent management across the UK
joining from KPMG where he was a partner. From 2005 to 2011 he also served as executive for Citigroup's Asia Pacific business across 17 markets, including business. Previously, she led various business areas in PwC, with the primary
a non-executive director of bp plc. He has extensive experience of business in India and China. responsibilities being for clients, business growth and people.
Asia, having been a member of both the Mayor of Shanghai and Mayor of
Beijing's Advisory Boards. He also served as HM Treasury's Special Envoy for Stephen joined Citigroup in 1998. Over 21 years he held leadership roles in During her career, she has specialised in the financial services sector
Financial and Professional Services to China's Belt and Road Initiative banking, operations and technology across its Asian and Latin American working extensively with organisations across asset management, insurance and
between 2017 and 2022. businesses. Before this, he held management positions at GE Capital, where he banking, with national and international operations. She has also undertaken
was director of UK operations from 1996 to 1998, and at British Steel. directorships with HDFC Life and Virgin Money Investments.
Sir Douglas was awarded the CBE in 2006 and his knighthood in 2018, both in
recognition of his service to the finance industry. In June 2022, he was Stephen is a member of the Investment Association's board of directors, the Stephanie is a member of the Institute of Chartered Accountants of Scotland
awarded an honorary degree by the University of Glasgow, his alma mater, in Confederation of British Industry's President's Committee, and the Financial and served as chair of the Audit Committee. She is an associate of the
recognition of his services to the business community. Services Growth and Development Board in Scotland. He holds an MBA in Association of Corporate Treasurers and holds a Bachelor of Laws (LLB) from
Economics and Finance from University College Cardiff and is an Honorary the University of Edinburgh. She is also a trustee of the digital education
Fellow. charity Hello World.
Appointed to the Board Age
July 2020 56
Nationality Shares
British 782,355
Appointed to the Board Age
June 2019 54
Nationality Shares
British 545,960
Sir Douglas' extensive experience of board leadership in global financial
services helps to focus Board discussion and challenge on the design and
delivery of our strategy. His wide-ranging expertise in international,
financial and governance matters is an important asset to abrdn, while his
collaborative approach helps to facilitate open and constructive boardroom
discussion.
In other current roles, Sir Douglas is chairman of IP Group plc, chairman of
the Royal Marsden hospital and charity and is a member of a number of advisory
boards and trade associations through which he keeps abreast of industry,
regulatory and international affairs of relevance to his public company
responsibilities.
Previously, Sir Douglas served as Group Chairman of HSBC Holdings plc from
2010 to 2017. For 15 years prior to this he was HSBC's group finance director,
joining from KPMG where he was a partner. From 2005 to 2011 he also served as
a non-executive director of bp plc. He has extensive experience of business in
Asia, having been a member of both the Mayor of Shanghai and Mayor of
Beijing's Advisory Boards. He also served as HM Treasury's Special Envoy for
Financial and Professional Services to China's Belt and Road Initiative
between 2017 and 2022.
Sir Douglas was awarded the CBE in 2006 and his knighthood in 2018, both in
recognition of his service to the finance industry. In June 2022, he was
awarded an honorary degree by the University of Glasgow, his alma mater, in
recognition of his services to the business community.
Stephen brings a track record of delivering exceptional value to clients,
creating high-quality revenue and earnings growth in complex financial
markets, and deep experience of business transformation during periods of
technological disruption and competitive change.
Stephen joined the Board in July 2020 as Chief Executive-Designate, becoming
Chief Executive Officer in September 2020. He is an abrdn representative
director to the US closed-end fund boards and the SICAV fund boards where
abrdn is the appointed investment manager.
Previously, Stephen served as chief executive officer of global consumer
banking at Citigroup from 2015, retiring from the role in November 2019. His
responsibilities encompassed all consumer and commercial banking businesses in
19 countries, including retail banking and wealth management, and operations
and technology supporting these businesses. Prior to this, he was chief
executive for Citigroup's Asia Pacific business across 17 markets, including
India and China.
Stephen joined Citigroup in 1998. Over 21 years he held leadership roles in
banking, operations and technology across its Asian and Latin American
businesses. Before this, he held management positions at GE Capital, where he
was director of UK operations from 1996 to 1998, and at British Steel.
Stephen is a member of the Investment Association's board of directors, the
Confederation of British Industry's President's Committee, and the Financial
Services Growth and Development Board in Scotland. He holds an MBA in
Economics and Finance from University College Cardiff and is an Honorary
Fellow.
Stephanie joined the Board of abrdn plc in June 2019 as Chief Financial
Officer. Stephanie is also our representative director on the Board of
Phoenix Group Holdings.
Stephanie is a highly experienced financial services practitioner with
significant sector knowledge, both commercial and technical. She brings wide
ranging experience of working with boards and management teams of financial
institutions in respect of specialist areas that include capital, financial
and commercial management, reporting, risk and control frameworks and
regulatory requirements.
Before joining abrdn, Stephanie was a partner at PwC from 2002, where she led
the financial services assurance practice and was a member of the Assurance
Executive. Her responsibilities comprised strategy and business growth, client
service, product development, operations and talent management across the UK
business. Previously, she led various business areas in PwC, with the primary
responsibilities being for clients, business growth and people.
During her career, she has specialised in the financial services sector
working extensively with organisations across asset management, insurance and
banking, with national and international operations. She has also undertaken
directorships with HDFC Life and Virgin Money Investments.
Stephanie is a member of the Institute of Chartered Accountants of Scotland
and served as chair of the Audit Committee. She is an associate of the
Association of Corporate Treasurers and holds a Bachelor of Laws (LLB) from
the University of Edinburgh. She is also a trustee of the digital education
charity Hello World.
R Remuneration Committee
RC Risk and Capital Committee
Key to Board committees A Audit Committee
NC Nomination and Governance Committee
C Committee Chair
Jonathan Asquith - Catherine Bradley CBE - John Devine -
Non-executive Director and Senior Independent Director
Non-executive Director
Non-executive Director
Appointed to the Board Age Appointed to the Board Age Appointed to the Board Age
September 2019 66 January 2022 63 July 2016 64
Nationality Shares Nationality Shares Nationality Shares
British 153,714 British and French 12,181 British 28,399
Board committees: R C NC Board committees: A C NC RC Board committees: RC C A NC
Jonathan has considerable experience as a non-executive director within the Catherine has more than 30 years of executive experience advising global John's previous roles in asset management, his experience in the US and Asia
investment management and wealth industry. This brings important insight to financial institutions and industrial companies on complex transactions and and his background in finance, operations and technology, are all areas of
his roles as Senior Independent Director and Chair of our Remuneration strategic opportunities. She brings knowledge from working across Europe and importance to our strategy. John's experience is important to the Board's
Committee. Asia, serving on the boards of leading consumer-facing companies and working discussions of financial reporting and risk management.
with regulators and standard setters.
Jonathan is a non-executive director of CiCap Limited and its regulated
John was appointed a Director of our business in July 2016, at that time
subsidiary Coller Capital Limited. He is also a non-executive director of Catherine is a non-executive director of Johnson Electric Holdings Limited and Standard Life plc. From April 2015 until August 2016, he was non-executive
BFlexion Group Holdings SA, the parent company of Swiss private investment of easyJet plc, where she chairs the finance committee. She is also senior Chairman of Standard Life Investments (Holdings) Limited.
firm BFlexion, and a number of its subsidiaries including Capital Four Holding independent director of Kingfisher plc.
A/S and Vantage Infrastructure Holdings. Previously, he has been deputy
He is non-executive chairman of Credit Suisse International and of Credit
chairman of 3i Group plc and chairman of Citigroup Global Markets Limited, Previously, Catherine has served on the boards of leading industrial and Suisse Securities (Europe) Limited, and a non-executive director of Citco
Citibank International Limited, Dexion Capital PLC and AXA Investment consumer-facing companies in the UK, France and Hong Kong. She was appointed Custody Limited and Citco Custody (UK) Limited.
Managers. He has also been a non-executive director of Tilney, Ashmore Group by HM Treasury to the Board of the Financial Conduct Authority in 2014 and
plc and AXA UK PLC. played an important role in establishing the FICC Markets Standards Board in From 2008 to 2010, John was chief operating officer of Threadneedle Asset
2015. Catherine stepped down from these boards in 2020. Between 2021 and 2022 Management Limited. Prior to this, he held a number of senior executive
In his executive career Jonathan worked at Morgan Grenfell for 18 years, she was also a board member of the Value Reporting Foundation, where she positions at Merrill Lynch in London, New York, Tokyo and Hong Kong.
rising to become group finance director of Morgan Grenfell Group, before going co-chaired the audit committee.
on to take the roles of chief financial officer and chief operating officer at
He holds an MBA in Banking from Bangor University, is a Fellow of the
Deutsche Morgan Grenfell. From 2002 to 2008 he was an executive director of In her executive career, Catherine has held a number of senior finance roles Chartered Institute of Public Finance and Accounting and a member of the
Schroders plc, during which time he was chief financial officer and later in investment banking and risk management: in the US with Merrill Lynch, in Chartered Banker Institute.
executive vice chairman. the UK and Asia with Credit Suisse, and finally in Asia with Société
Générale. She returned to Europe in 2014 to start her non-executive career.
He holds an MA from the University of Cambridge.
Catherine graduated from the HEC Paris School of Management with a major in
Finance and International Economics. She was awarded a CBE in 2019.
Hannah Grove - Pam Kaur - Brian McBride -
Non-executive Director
Non-executive Director
Non-executive Director
Appointed to the Board Age Appointed to the Board Age Appointed to the Board Age
September 2021 59 June 2022 59 May 2020 67
Nationality Shares Nationality Shares Nationality Shares
British and American 33,000 British Nil British Nil
Board committees: NC R Board committees: A RC Board committees: R
Hannah brings more than 20 years of leadership experience in the global Pam has more than 20 years' experience of leadership roles in business, risk, Brian brings a wealth of digital experience and global leadership experience
financial services industry. Her expertise includes leading brand, client and compliance and internal audit within several of the world's largest and most in both executive and non-executive directorship roles. His direct experience
digital marketing and communications strategies, including those for major complex financial institutions, during periods of significant change and of developing digital strategies and solutions in consumer-facing businesses,
acquisitions, which she combines with deep knowledge of regulatory and public scrutiny. She brings considerable expertise in leading the development in rapidly evolving markets, is of great benefit to the Board's discussions.
governance matters. She is also our designated non-executive Director for and implementation of compliance, audit and risk frameworks and adapting these
employee engagement, and sits as a non-executive director on the boards of to changing regulatory expectations. Brian is currently chair of Trainline PLC and the lead non-executive director
Standard Life Savings Limited and Elevate Portfolio Services Limited.
on the board of the UK Ministry of Defence. He is also a senior adviser to
Pam currently holds the role of Group Chief Risk and Compliance Officer at Scottish Equity Partners. In June 2022 he was appointed as president of the
Before joining our Board, Hannah enjoyed a 22-year career at State Street. HSBC. Between 2019 and 2022, she served as a non-executive director on the Confederation of British Industry, having held the role of vice president
This included 12 years as Chief Marketing Officer, retiring from the role in board of Centrica, where she was also a member of the audit and risk since February 2022.
November 2020. She was a member of the company's management committee, its committee, the nomination committee and the safety, environment and
business conduct & risk and conduct standards committees, and a board sustainability committee. In his executive career, Brian has worked for IBM, Crosfield Electronics and
member for its China legal entity.
Dell before serving as chief executive officer of T-Mobile UK and then
Since qualifying as a chartered accountant with Ernst & Young, Pam has managing director of Amazon.co.uk. As a non-executive director, Brian has
Before joining State Street, Hannah was marketing director for the Money progressed through a range of technical, compliance, anti-fraud and risk roles served on the boards of AO.com, the BBC, Celtic Football Club PLC,
Matters Institute, supported by the United Nations, the World Bank and private with Citigroup, Lloyds TSB, Royal Bank of Scotland, Deutsche Bank and HSBC. Computacenter PLC, Kinnevik AB and S3 PLC, and as chair of ASOS PLC. He has
sector companies to foster sustainable development in emerging economies. These positions have given her extensive insight into the benefits of also served as a non-executive director on the boards of Standard Life Savings
effective internal control systems that recognise external regulatory Limited and Elevate Portfolio Services Limited.
In other current roles, Hannah is a member of the advisory board of Irrational requirements.
Capital. She has also received significant industry recognition as a champion
He holds an MA (Hons) in Economic History and Politics from the University of
of diversity and inclusion and is a member of the board of advisors for She holds an MBA and B.Comm in Accountancy from Punjab University, and is a Glasgow.
reboot, an organisation that aims to enhance dialogue around race both at work Fellow of the Institute of Chartered Accountants of England and Wales.
and across society.
Michael O'Brien - Cathleen Raffaeli -
Non-executive Director
Non-executive Director
Appointed to the Board Age Appointed to the Board Age
June 2022 59 August 2018 66
Nationality Shares Nationality Shares
Irish Nil American 9,315
Board committees: A RC Board committees: R RC
Mike has held executive leadership roles within a number of leading global Cathi has strong experience in the financial technology sector and background
asset managers in London and New York. He brings extensive asset management in the platforms sector, as well as international board experience. She brings
experience, with a key focus throughout his career on innovation and these insights as non-executive chairman of the boards of Standard Life
technology-driven change in support of better client outcomes. A qualified Savings Limited and Elevate Portfolio Services Limited. Her role provides a
actuary, during his executive career with JP Morgan Asset Management, direct link between the Board and the platform businesses that help us connect
BlackRock Investment Management and Barclays Global Investors, he was with clients and their advisers.
responsible for developing and leading global investment solutions,
distribution and relationship management strategies. Cathi is managing partner of Hamilton White Group, LLC which offers advisory
services, including business development, to companies in financial services
Mike is a non-executive director of Carne Global Financial Services Limited, growth markets. In addition, she is managing partner of Soho Venture Partners
and he is a senior adviser to Osmosis Investment Management. He is also an Inc, which offers third party business advisory services.
investment adviser to the British Coal Pension Funds.
Previously, Cathi was lead director of E*Trade Financial Corporation,
Previously, Mike served on the board of the UK NAPF and was a member of the UK non-executive director of Kapitall Holdings, LLC and president and chief
NAPF Defined Benefit Council. He retired in 2020 from his role as Co-Head, executive officer of ProAct Technologies Corporation. She was also a
Global Investment Solutions at JP Morgan Asset Management. Prior to his move non-executive director of Federal Home Loan Bank of New York - where she was a
to BlackRock in 2000, Mike qualified as an actuary with Towers Watson, where member of the executive committee, and vice chair of both the technology
he served as an investment and risk consultant. committee and the compensation and human resources committee.
Mike graduated from Limerick University with a BSc in Applied Mathematics. He She holds an MBA from New York University and a BS from the University of
is also a Chartered Financial Analyst and a Fellow of the Institute of Baltimore.
Actuaries.
Key to Board committees
R Remuneration Committee
RC Risk and Capital Committee
A Audit Committee
NC Nomination and Governance Committee
C Committee Chair
Jonathan Asquith -
Non-executive Director and Senior Independent Director
Catherine Bradley CBE -
Non-executive Director
John Devine -
Non-executive Director
Appointed to the Board Age
September 2019 66
Nationality Shares
British 153,714
Board committees: R C NC
Appointed to the Board Age
January 2022 63
Nationality Shares
British and French 12,181
Board committees: A C NC RC
Appointed to the Board Age
July 2016 64
Nationality Shares
British 28,399
Board committees: RC C A NC
Jonathan has considerable experience as a non-executive director within the
investment management and wealth industry. This brings important insight to
his roles as Senior Independent Director and Chair of our Remuneration
Committee.
Jonathan is a non-executive director of CiCap Limited and its regulated
subsidiary Coller Capital Limited. He is also a non-executive director of
BFlexion Group Holdings SA, the parent company of Swiss private investment
firm BFlexion, and a number of its subsidiaries including Capital Four Holding
A/S and Vantage Infrastructure Holdings. Previously, he has been deputy
chairman of 3i Group plc and chairman of Citigroup Global Markets Limited,
Citibank International Limited, Dexion Capital PLC and AXA Investment
Managers. He has also been a non-executive director of Tilney, Ashmore Group
plc and AXA UK PLC.
In his executive career Jonathan worked at Morgan Grenfell for 18 years,
rising to become group finance director of Morgan Grenfell Group, before going
on to take the roles of chief financial officer and chief operating officer at
Deutsche Morgan Grenfell. From 2002 to 2008 he was an executive director of
Schroders plc, during which time he was chief financial officer and later
executive vice chairman.
He holds an MA from the University of Cambridge.
Catherine has more than 30 years of executive experience advising global
financial institutions and industrial companies on complex transactions and
strategic opportunities. She brings knowledge from working across Europe and
Asia, serving on the boards of leading consumer-facing companies and working
with regulators and standard setters.
Catherine is a non-executive director of Johnson Electric Holdings Limited and
of easyJet plc, where she chairs the finance committee. She is also senior
independent director of Kingfisher plc.
Previously, Catherine has served on the boards of leading industrial and
consumer-facing companies in the UK, France and Hong Kong. She was appointed
by HM Treasury to the Board of the Financial Conduct Authority in 2014 and
played an important role in establishing the FICC Markets Standards Board in
2015. Catherine stepped down from these boards in 2020. Between 2021 and 2022
she was also a board member of the Value Reporting Foundation, where she
co-chaired the audit committee.
In her executive career, Catherine has held a number of senior finance roles
in investment banking and risk management: in the US with Merrill Lynch, in
the UK and Asia with Credit Suisse, and finally in Asia with Société
Générale. She returned to Europe in 2014 to start her non-executive career.
Catherine graduated from the HEC Paris School of Management with a major in
Finance and International Economics. She was awarded a CBE in 2019.
John's previous roles in asset management, his experience in the US and Asia
and his background in finance, operations and technology, are all areas of
importance to our strategy. John's experience is important to the Board's
discussions of financial reporting and risk management.
John was appointed a Director of our business in July 2016, at that time
Standard Life plc. From April 2015 until August 2016, he was non-executive
Chairman of Standard Life Investments (Holdings) Limited.
He is non-executive chairman of Credit Suisse International and of Credit
Suisse Securities (Europe) Limited, and a non-executive director of Citco
Custody Limited and Citco Custody (UK) Limited.
From 2008 to 2010, John was chief operating officer of Threadneedle Asset
Management Limited. Prior to this, he held a number of senior executive
positions at Merrill Lynch in London, New York, Tokyo and Hong Kong.
He holds an MBA in Banking from Bangor University, is a Fellow of the
Chartered Institute of Public Finance and Accounting and a member of the
Chartered Banker Institute.
Hannah Grove -
Non-executive Director
Pam Kaur -
Non-executive Director
Brian McBride -
Non-executive Director
Appointed to the Board Age
September 2021 59
Nationality Shares
British and American 33,000
Board committees: NC R
Appointed to the Board Age
June 2022 59
Nationality Shares
British Nil
Board committees: A RC
Appointed to the Board Age
May 2020 67
Nationality Shares
British Nil
Board committees: R
Hannah brings more than 20 years of leadership experience in the global
financial services industry. Her expertise includes leading brand, client and
digital marketing and communications strategies, including those for major
acquisitions, which she combines with deep knowledge of regulatory and
governance matters. She is also our designated non-executive Director for
employee engagement, and sits as a non-executive director on the boards of
Standard Life Savings Limited and Elevate Portfolio Services Limited.
Before joining our Board, Hannah enjoyed a 22-year career at State Street.
This included 12 years as Chief Marketing Officer, retiring from the role in
November 2020. She was a member of the company's management committee, its
business conduct & risk and conduct standards committees, and a board
member for its China legal entity.
Before joining State Street, Hannah was marketing director for the Money
Matters Institute, supported by the United Nations, the World Bank and private
sector companies to foster sustainable development in emerging economies.
In other current roles, Hannah is a member of the advisory board of Irrational
Capital. She has also received significant industry recognition as a champion
of diversity and inclusion and is a member of the board of advisors for
reboot, an organisation that aims to enhance dialogue around race both at work
and across society.
Pam has more than 20 years' experience of leadership roles in business, risk,
compliance and internal audit within several of the world's largest and most
complex financial institutions, during periods of significant change and
public scrutiny. She brings considerable expertise in leading the development
and implementation of compliance, audit and risk frameworks and adapting these
to changing regulatory expectations.
Pam currently holds the role of Group Chief Risk and Compliance Officer at
HSBC. Between 2019 and 2022, she served as a non-executive director on the
board of Centrica, where she was also a member of the audit and risk
committee, the nomination committee and the safety, environment and
sustainability committee.
Since qualifying as a chartered accountant with Ernst & Young, Pam has
progressed through a range of technical, compliance, anti-fraud and risk roles
with Citigroup, Lloyds TSB, Royal Bank of Scotland, Deutsche Bank and HSBC.
These positions have given her extensive insight into the benefits of
effective internal control systems that recognise external regulatory
requirements.
She holds an MBA and B.Comm in Accountancy from Punjab University, and is a
Fellow of the Institute of Chartered Accountants of England and Wales.
Brian brings a wealth of digital experience and global leadership experience
in both executive and non-executive directorship roles. His direct experience
of developing digital strategies and solutions in consumer-facing businesses,
in rapidly evolving markets, is of great benefit to the Board's discussions.
Brian is currently chair of Trainline PLC and the lead non-executive director
on the board of the UK Ministry of Defence. He is also a senior adviser to
Scottish Equity Partners. In June 2022 he was appointed as president of the
Confederation of British Industry, having held the role of vice president
since February 2022.
In his executive career, Brian has worked for IBM, Crosfield Electronics and
Dell before serving as chief executive officer of T-Mobile UK and then
managing director of Amazon.co.uk. As a non-executive director, Brian has
served on the boards of AO.com, the BBC, Celtic Football Club PLC,
Computacenter PLC, Kinnevik AB and S3 PLC, and as chair of ASOS PLC. He has
also served as a non-executive director on the boards of Standard Life Savings
Limited and Elevate Portfolio Services Limited.
He holds an MA (Hons) in Economic History and Politics from the University of
Glasgow.
Michael O'Brien -
Non-executive Director
Cathleen Raffaeli -
Non-executive Director
Appointed to the Board Age
June 2022 59
Nationality Shares
Irish Nil
Board committees: A RC
Appointed to the Board Age
August 2018 66
Nationality Shares
American 9,315
Board committees: R RC
Mike has held executive leadership roles within a number of leading global
asset managers in London and New York. He brings extensive asset management
experience, with a key focus throughout his career on innovation and
technology-driven change in support of better client outcomes. A qualified
actuary, during his executive career with JP Morgan Asset Management,
BlackRock Investment Management and Barclays Global Investors, he was
responsible for developing and leading global investment solutions,
distribution and relationship management strategies.
Mike is a non-executive director of Carne Global Financial Services Limited,
and he is a senior adviser to Osmosis Investment Management. He is also an
investment adviser to the British Coal Pension Funds.
Previously, Mike served on the board of the UK NAPF and was a member of the UK
NAPF Defined Benefit Council. He retired in 2020 from his role as Co-Head,
Global Investment Solutions at JP Morgan Asset Management. Prior to his move
to BlackRock in 2000, Mike qualified as an actuary with Towers Watson, where
he served as an investment and risk consultant.
Mike graduated from Limerick University with a BSc in Applied Mathematics. He
is also a Chartered Financial Analyst and a Fellow of the Institute of
Actuaries.
Cathi has strong experience in the financial technology sector and background
in the platforms sector, as well as international board experience. She brings
these insights as non-executive chairman of the boards of Standard Life
Savings Limited and Elevate Portfolio Services Limited. Her role provides a
direct link between the Board and the platform businesses that help us connect
with clients and their advisers.
Cathi is managing partner of Hamilton White Group, LLC which offers advisory
services, including business development, to companies in financial services
growth markets. In addition, she is managing partner of Soho Venture Partners
Inc, which offers third party business advisory services.
Previously, Cathi was lead director of E*Trade Financial Corporation,
non-executive director of Kapitall Holdings, LLC and president and chief
executive officer of ProAct Technologies Corporation. She was also a
non-executive director of Federal Home Loan Bank of New York - where she was a
member of the executive committee, and vice chair of both the technology
committee and the compensation and human resources committee.
She holds an MBA from New York University and a BS from the University of
Baltimore.
3. Corporate governance statement
The Corporate governance statement and the Directors' remuneration report,
together with the cross references to the relevant other sections of the
Annual report and accounts, explain the main aspects of the Company's
corporate governance framework and seek to give a greater understanding as to
how the Company has applied the principles and reported against the provisions
of the UK Corporate Governance Code 2018 (the Code).
Statement of application of and compliance with the Code
For the year ended 31 December 2022, the Board has carefully considered the
principles and provisions of the Code (available at www.frc.org.uk) and has
concluded that its activities during the year and the disclosures made within
the Annual report and accounts comply with the requirements of the Code, with
one minor exception as noted below(1). The statement also explains the
relevant compliance with the FCA's Disclosure Guidance and Transparency Rules
Sourcebook. The table on page 136 sets out where to find each of the
disclosures required in the Directors' report in respect of all of the
information required by Listing Rule 9.8.4 R.
(i) Board leadership and company purpose
Purpose and Business model
The Board ratifies the Company's purpose set out on page 3 of the Strategic
report, and oversees implementation of the Group's business model, which it
has approved, and which is set out on pages 10 and 11. Pages 2 to 67 show how
the development of the business model in 2022 supports the protection and
generation of shareholder value over the long term, as well as underpinning
our strategy for growth. A significant development in 2022 supporting these
objectives was the diversification of the business model through sharpening
the focus of the Investments vector, continued investment in the Adviser
vector and the acquisition of ii. The Board's consideration of current and
future risks to the success of the Group is set out on pages 64 to 67,
complemented by the report of the Risk and Capital Committee on pages 95 to
98.
Oversight of culture
The Board and the Nomination and Governance Committee play a key role in
overseeing how the management of the Group assesses and monitors the Group's
culture. Through engagement surveys and the Board Employee Engagement
programme, the Board acquires a clear view on the culture evident within the
Group's businesses and how successfully expected behaviour is being embedded
across the group in ways that will contribute to our success.
The Board hold management to account for a range of engagement and diversity,
equity and inclusion outcomes, which are seen as important indicators of
culture, and which form a key part of the executive scorecard.
The Board and the executive leadership team (ELT) have defined a set of
Commitments - Client First, Empowered, Ambitious and Transparent - which
embody our cultural aspirations at abrdn and are designed to create the best
working environment for our colleagues, so contributing to better customer
experience and outcomes. Our culture is defined by these Commitments and the
behaviours which underpin them, which are set out on page 42.
Stakeholder engagement
The Annual report and accounts explains how the Directors have complied with
their duty to have regard to the matters set out in section 172 (1) (a)-(f) of
the Companies Act 2006. These matters include responsibilities with regard to
the interests of customers, employees, suppliers, the community and the
environment, all within the context of promoting the success of the Company.
The table on pages 76 and 77 sets out the Board's focus on its key
relationships and shows how the relevant stakeholder engagement is reported up
to the Board or Board Committees.
Engaging with investors
The Group's Investor Relations and Secretariat teams support the direct
investor engagement activities of the Chairman, Senior Independent Director
(SID), CEO, CFO and, as relevant, Board Committee chairs. During 2022, we
carried out an extensive programme of meetings with domestic and international
investors, with greater face-to-face contacts as Covid restrictions were
lifted. The wide range of issues discussed included progress on the
integration of ii into the Group, the delivery of transformation to drive
revenue growth and productivity, business strategy, financial performance and
share price, capital allocation and strategy for returns to shareholders, the
realisation of the value from stakes in HDFC Asset Management and HDFC Life,
the relationship with Phoenix and the role of the share stake, the plans for
refocusing the Investments vector, and corporate governance, including
diversity, equity and inclusion. The Chairman, SID, CEO and CFO bring relevant
feedback from this engagement to the attention of the Board.
1. Jutta af Rosenborg and Martin Pike stood down from the Audit Committee
and the Board on 18 May 2022. Mike O'Brien and Pam Kaur were appointed to the
Committee on their appointment to the Board on 1 June 2022. Consequently, for
the period 19 May to 31 May the Audit Committee consisted of two members,
rather than three as required under Provision 24 of the Code. The Committee
did not meet nor consider any matters during this period.The Board ensures its
outreach activities encompass the interests of the Company's circa one million
individual shareholders. Given the nature of this large retail shareholder
base, it is impractical to communicate with all shareholders using the same
direct engagement model followed for institutional investors. Shareholders are
encouraged to receive their communications electronically and around 400,000
shareholders receive all communications this way. The Company actively
promotes self service via the share portal, and more than 180,000 shareholders
have signed up to this service. Shareholders have the option to hold their
shares in the abrdn Share Account where shares are held electronically and
around 90% of individual shareholders hold their shares in this way.
To give all shareholders easy access to the Company's announcements, all
information reported via the London Stock Exchange's regulatory news service
is published on the Company's website. The CEO and CFO continue to host formal
presentations to support both the full year and half year financial results
with the related transcript and webcast available from the Investors' section
of the Company's website. During 2023, we intend to publish regular online
versions of our Shareholder News to give shareholders access to Company
updates in an easily accessible format.
The 2022 Annual General Meeting (AGM) was held in Edinburgh on 18 May 2022.
Shareholders were invited to submit questions in advance via the Company's
website and arrangements were made for an 'enhanced webcast'. This allowed
shareholders to view the meeting live, and to submit questions during the
meeting via a 'chat box', many of which were then posed to the Chairman by a
moderator. The Chairman and CEO presentations addressed the main themes of the
questions which had been submitted prior to the meeting. 48% of the shares in
issue were voted and all resolutions were passed by at least 80% of votes
cast.
Our 2023 AGM will be held on 10 May in Edinburgh. The AGM Guide 2023 will be
published online at www.abrdn.com in advance of this year's meeting. The
voting results, including the number of votes withheld, will be published on
the website at www.abrdn.com after the meeting.
Engaging with employees
Hannah Grove continued as our designated non-executive Director to support
workforce engagement. The Board Employee Engagement (BEE) programme, led by
Hannah, is designed to both ensure that views from employees are heard and
understood by the Directors and help to inform their decision-making, and that
employees understand the role of the Board. During 2022, the programme
comprised four primary pillars: (i) Listening Sessions to engage employees
across all levels of the organisation in informal gatherings - both virtual
and in person - and gather feedback on matters including culture, strategy,
engagement and business trends; (ii) 'Meet the NEDs' events for employees to
meet with Board members and ask questions about everything from business to
markets to career paths; (iii) Employee Resource Group/Network gatherings -
focused on abrdn's six employee networks/affinity groups to garner feedback as
well as to show appreciation for the role the networks play in abrdn's overall
culture; and lastly (iv) floor walks and informal office visits to meet as
many team members as possible. Based on this strategy, below is a summary of
activity:
- Ten 'Listening sessions' were held spanning all businesses and
geographies. A major outcome of these sessions was to ramp up overall abrdn
executive visibility and communications, particularly at a time of significant
change both within abrdn as well as in the broader market.
- Three 'Meet the NEDs' sessions were held: (i) with abrdn's
'Future Leaders' cohort - a new programme to help drive greater internal
development and mobility and to help nurture top talent; (ii) with Finimize
colleagues, who joined abrdn as a result of acquisition; and (iii) a panel
Q&A for Edinburgh-based employees.
- Meetings were held with all six Network Chairs individually to
understand priorities, challenges and how the Board can better support
diversity, equity and inclusion: a mid-year Network appreciation event was
held; and lunch with Diversity, Equity and Inclusion Networks in
Philadelphia.
- Quarterly meetings with the Employee Forum leads to understand
employee issues and provide another lens into sentiment.
- Lastly, office visits and floor walks were carried out in
Boston, Edinburgh, London, New York and Philadelphia.
Hannah provided regular updates on the BEE programme to the Board throughout
the year, including on the issues that had been raised through the
discussions, and the Board considered how abrdn's ELT were actioning the
points raised. This included particular attention being paid to the process
and outcomes from cost of living salary adjustments as well as the impacts of
the Company's ongoing transformation on our colleagues.
The programme will continue to evolve in 2023 to take account of feedback
received over the year. As well as continuing to do regular 'Listening
sessions', Hannah plans to further increase NED visibility, for example with
plans for her to visit local offices such as Tokyo and the ii office in
Manchester, and provide more frequent updates on the programme to employees.
Summary of Stakeholder engagement activities
In line with their obligations under s.172 of the Companies Act 2006, the
Directors consider their responsibilities to stakeholders in their discussions
and decision-making. The table below illustrates direct and indirect Board
engagement with various stakeholders. More details of stakeholder engagement
activities can be found on pages 41 to 45.
- - -
Key stakeholders Direct Board engagement Indirect Board engagement Outcomes
Clients - The CEO meets with key clients as required and reports - The CEOs of the Vectors report at Board meetings on - Engagement supported the development of the key client
to the Board on such meetings. key client engagement, support programmes and client strategies. management process, and our client solutions and ESG approaches.
- The CEO takes part in key client pitches to hear - Market share data and competitor activity are reported - The Vectors position the business around client needs
directly from clients on their requirements. to the Board. with performance accountability measured on that basis.
- The Chairman meets with peers and key clients at - Results of client perceptions survey/customer - Investment processes are driven by understanding
conferences and industry membership and advisory boards where he represents sentiment index are reported. client needs and designing appropriate solutions taking into account client
the Group. risk appetite and sophistication.
- Board members feed into Board discussions any feedback
received directly from clients.
Our people - 'Meet the NEDs' BEE sessions for a diverse mix of - The Chief People Officer (CPO) reports to the - Engagement feedback recognised in Board discussions on
staff at all levels allows direct feedback in informal settings. Nomination and Governance Committee meeting on key hires and employee issues new ways of working.
including development needs to support succession planning.
- Employee engagement NED in place and active with the
- Engagement feedback is a key input to talent and
employee diversity networks as well as with employees through their - The CPO produces reporting for the Board drawing out development programmes and the design of reward philosophy.
representatives. The BEE NED reports regularly to the CEO and the Board. key factors influencing staff turnover, morale and engagement.
- Each year, the Chairman and NEDs all mentor one or two - Viewpoints and employee surveys collect aggregate,
CEO-1 or -2 level emerging talent. regional and functional trend data which is reported to the Board.
- The CEO and CFO run 'Town Hall' sessions.
Direct Board engagement Indirect Board engagement Outcomes
Key stakeholders
Community Business partners/ supply chain - CEO oversees the Phoenix, FNZ and Citigroup - The Board hears reports on first line key supplier - The development of our business through our
relationships and meets with his opposite numbers as required. relationships and their role in transition and transformation activities. relationships with partners is a critical element of the Board's strategy.
- CFO representation on the Phoenix board and the Virgin - Supplier due diligence surveys are undertaken. - Transformation discussions have included a focus on
Money Unit Trust Managers Limited Board.
the quality, service provision, availability and costs of relevant suppliers.
- Tendering process includes smaller level firms.
- ED direct meetings with core suppliers.
- The overriding guidelines for business partnerships
- Access and audit rights in place with key suppliers. have been established as working for both parties and creating efficient
- The Risk and Capital Committee reviews the dependency
operations.
on critical suppliers and how they are managed. - Modern slavery compliance process in place.
- The Board sought executive assurance on the operation
- The Audit Committee leads an assessment of external - Procurement/payment principles and policies in place. and working practice of key suppliers.
audit performance and service provision.
- Certain key suppliers regularly discussed at Audit
- The Board received detailed papers supporting the Committee, Risk and Capital Committee and Board.
outsourcing of technology and business services.
- Oversight of key outsourcing arrangements reported to
the Board.
Communities - Board members present at relevant events and - Stewardship/sustainability teams report regularly to -
conferences. the Board and Committees.
- Chairman/CEO/CFO represent the Group on public policy - Feedback on annual Stewardship and TCFD reports.
and industry organisations.
- Review of charitable giving strategy.
- Board is kept up to date with the activities of the
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- Results, AGM presentations and Q&A. - Regular updates from the EDs/ Investor Relations - In advance of recommending the remuneration policy to
Director/ Chairman/Chair of Remuneration Committee summarising the output from shareholders as part of the business at the 2023 AGM, the chair of the
- Chairman, CEO and CFO meetings with investors. their programmes of engagement. Remuneration Committee undertook direct consultation with our top 15
institutional shareholders and relevant proxy/ shareholder representatives to
- Chairman, Committee Chairs, Senior Independent - Analyst/Investor reports distributed to the Board. gather their views on the terms of the proposed policy.
Director and BEE NED round table with governance commentators.
- As relevant, feedback from corporate brokers.
- Remuneration Committee Chair meetings with
institutional investors. - Publication of Shareholder News.
- Chairman/CEO direct shareholder correspondence. - Dedicated mailbox and shareholder call centre team.
Shareholders
Speaking up
The workforce has the means to raise concerns in confidence and anonymously,
and these means are well communicated. The Audit Committee's oversight of the
whistleblowing policy and the Audit Committee Chair's role to report to the
Board on whistleblowing matters is covered in the Audit Committee report on
page 86.
Outside appointments and conflicts of interest
The Board's policy encourages executive Directors to take up one external
non-executive director role, as the Directors consider this can bring an
additional perspective to the Director's contribution. At the moment, Stephen
Bird and Stephanie Bruce have representative director roles, either on the
board of one of our charity partners, on fund boards where abrdn is the
appointed investment manager or on industry bodies such as the Investment
Association. For part of 2022, Stephanie Bruce served as a director on one our
joint venture boards (VMUTM) and, since July 2022, as a result of the
strategic partnership agreement, she has been a shareholder representative
director on the board of Phoenix Group Holdings plc.
Any proposed additional appointments of the non-executive Directors are
firstly discussed with the Chairman and then reported to the Nomination and
Governance Committee prior to being considered for approval. The Senior
Independent Director takes that role in relation to the Chairman's outside
appointments. The register of the Board's collective outside appointments is
reviewed annually by the Board. Directors' principal outside appointments are
included in their biographies on pages 70 to 73. These appointments form part
of the Chairman's annual performance review of individual non-executive
Directors' contribution and time commitment, and similarly that of the Senior
Independent Director of the Chairman.
The Directors continued to review and authorise Board members' actual and
potential conflicts of interest on a regular and ad hoc basis in line with the
authority granted to them in the Company's Articles. As part of the process to
approve the appointment of a new Director, the Board considers and, where
appropriate, authorises their potential or actual conflicts. The Board also
considers whether any new outside appointment of any current Director creates
a potential or actual conflict before, where appropriate, authorising it. All
appointments are approved in accordance with the relevant group policies. At
the start of every Board and Committee meeting, Directors are requested to
declare any actual or potential conflicts of interests and in the event a
declaration is made, conflicted Directors can be excluded from receiving
information, taking part in discussions and making decisions that relate to
the potential or actual conflict.
(ii) Division of responsibilities
The Group operates the following governance framework.
Governance framework
Board
The Board's role is to organise and direct the affairs of the Company and the
Group in accordance with the Company's constitution, all relevant laws,
regulations, corporate governance and stewardship standards. The Board's role
and responsibilities, collectively and for individual Directors, are set out
in the Board Charter. The Board Charter also identifies matters that are
specifically reserved for decision by the Board. During 2022, the Board's key
activities included approving, overseeing and challenging:
- The updated strategy and the 2023 to 2025 business - Significant corporate transactions including the
plan to implement the strategy. acquisition of interactive investor.
- Capital adequacy and allocation decisions including - Succession planning, in particular in the Investments
the decision to sell stakes in Phoenix, HDFC Life and HDFC Asset Management. vector in relation to the appointment of a Chief Investment Officer.
- Oversight of culture, our standards and ethical - The quarterly performance of the Investments vector.
behaviours.
- The ESG approach, both as a corporate and as an asset
- Dividend policy including the decision framework manager.
governing when to return the dividend to growth.
- Significant external communications.
- Financial reporting.
- The work of the Board Committees.
- Risk management, including the Enterprise Risk
Management (ERM) framework, risk strategy, risk appetite limits and internal - Appointments to the Board and to Board Committees.
controls and in particular how this was adapted for blended working including
working from home. - Matters escalated from subsidiary boards to the Board
for approval.
The Board regularly reviews reports from the Chief Executive Officer and from
the Chief Financial Officer on progress against approved strategies and the
business plan, as well as updates on financial market and global economic
conditions. There are also regular presentations from the Vector CEOs and
business functional leaders.
Chairman - Chief Executive Officer (CEO) Senior Independent Director (SID)
- Leads the Board and ensures that its principles and - The CEO operates within authorities delegated by the The SID is available to talk with our shareholders about any concerns that
processes are maintained. Board to: they may not have been able to resolve through the channels of the Chairman,
the CEO or Chief Financial Officer, or where a shareholder was to consider
- Promotes high standards of corporate governance. - Develop strategic plans and structures for presentation these channels as inappropriate.
to the Board.
- Together with the Company Secretary, sets agendas for
The SID leads the annual review of the performance of the Chairman.
meetings of the Board. - Make and implement operational decisions.
- Ensures Board members receive accurate, timely and - Lead the other executive Director and the ELT in the
quality information on the Group and its activities. day-to-day running of the Group.
- Encourages open debate and constructive discussion and - Report to the Board with relevant and timely
decision-making. information.
- Leads the performance assessments and identification of - Develop appropriate capital, corporate, management and
training needs for the Board and individual Directors. succession structures to support the Group's objectives.
- Speaks on behalf of the Board and represents the Board - Together with the Chairman, represent the Group to
to shareholders and other stakeholders. external stakeholders, including shareholders, customers, suppliers,
regulatory and governmental authorities, and the local and wider communities.
Non-executive Directors (NEDs)
The role of our NEDs is to participate fully in the Board's decision-making
work including advising, supporting and challenging management as appropriate.
- Nomination and Governance Committee (N&G) - - Audit Committee (AC) - - Remuneration Committee (RC) - - Risk and Capital Committee (RCC)
- Board and Committee composition and appointments. - Financial reporting. - Development and implementation of remuneration - Risk management framework.
philosophy and policy.
- Succession planning. - Internal audit.
- Compliance reporting.
- Incentive design and setting of executive Director
- Governance framework. - External audit. targets. - Risk appetites and tolerances.
- Culture, Diversity, Equity & Inclusion (DEI). - Whistleblowing. - Employee benefit structures. - Transactional risk assessments.
- Regulatory financial reporting. - Capital adequacy.
- Non-financial reporting (ESG). - Anti-financial crime.
Executive leadership team (ELT)
The ELT supports the CEO by providing clear leadership, line of sight and
accountability throughout the business. The ELT is responsible to the CEO for
the development and delivery of strategy and for leading the organisation
through challenges and opportunities.
Vectors Talent Efficient Operations Control
Vector CEOs support the CEO to deliver growth across the business: The Chief People Officer (CPO) supports the CEO in developing talent Strategy, Technology, Legal and Finance ELT members, including the CFO, The Chief Risk Officer (CRO) supports the ELT and the CEO in their first line
management and succession planning and culture initiatives. support the CEO by overseeing global functions and the delivery of functional management of risk.
- Investments. priorities.
- Adviser.
- Personal.
The framework is formally documented in the Board Charter which also sets out
the Board's relationship with the boards of the key subsidiaries in the Group.
In particular, it specifies the matters which these subsidiaries refer to the
Board or to a Committee of the Board for approval or consultation.
You can find the Board Charter on our website www.abrdn.com
(http://www.abrdn.com)
Board balance and director independence
The Directors believe that at least half of the Board should be made up of
independent non-executive Directors. As at 28 February 2023, the Board
comprises the Chairman, eight independent non-executive Directors and two
executive Directors. The Board is made up of six men (55%) and five women
(45%) (2021: men 50%, women 50%).
Cecilia Reyes stepped down from the Board on 30 September 2022. As announced,
Brian McBride will retire on 10 May 2023 and will not offer himself for
re-election.
The Chairman was independent on his appointment in December 2018. The Board
carries out a formal review of the independence of non-executive Directors
annually. The review considers relevant issues including the number and nature
of their other appointments, any other positions they hold within the Group,
any potential conflicts of interest they have identified and their length of
service. Their individual circumstances are also assessed against independence
criteria, including those in the Code. Following this review, the Board has
concluded that all the non-executive Directors are independent and
consequently, the Board continues to comprise a majority of independent
non-executive Directors.
Jonathan Asquith served as Senior Independent Director throughout 2022. In
this role, he is available to provide a sounding board to the Chairman and
serve as an intermediary for the other Directors and the shareholders. He also
led the process to review the Chairman's performance.
The roles of the Chairman and the CEO are separate and are summarised on page
79. Each has clearly defined responsibilities, which are described in the
Board Charter.
The Directors have access to the governance advice of the Company Secretary
whose appointment and removal is a matter reserved to the Board.
You can find out more about our Directors in their biographies in Section 2.
The Board's policy is to appoint and retain non-executive Directors who bring
relevant expertise as well as a wide perspective to the Group and its
decision-making framework. The Board continues to support its Board Diversity
statement which states that the Board:
- Believes in equity and supports the principle that the best
person should always be appointed to the role with due regard given to the
benefits of diversity, including gender, ethnicity, age, and educational and
professional background when undertaking a search for candidates, both
executive and non-executive.
- Recognises that diversity can bring insights and behaviours that
make a valuable contribution to its effectiveness.
- Believes that it should have a blend of skills, experience,
independence, knowledge, ethnicity and gender amongst its individual members
that is appropriate to its needs.
- Believes that it should be able to demonstrate with conviction
that any new appointee can make a meaningful contribution to its
deliberations.
- Is committed to maintaining its diverse composition.
- Supports the CEO's commitment to achieve and maintain a diverse
workforce and an inclusive workplace, both throughout the Group, and within
the ELT.
- Has a zero tolerance approach to unfair treatment or
discrimination of any kind, both throughout the Group and in relation to
clients and individuals associated with the Group.
Board Diversity
Gender
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Nationality
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Diversity activities and progress to meet our targets are covered in the Our
people section of the Strategic report on page 41. The ELT's diversity policy
is covered in the Diversity, equity and inclusion section of the Directors'
report on page 134.
Board changes during the period are covered above and in the Directors' report
on page 133.
Ethnicity
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Board appointment process, terms of service and role
Board appointments are overseen by the Nomination and Governance Committee and
more information can be found on page 101.
Each non-executive Director is appointed for a three-year fixed term and
shareholders vote on whether to elect/re-elect them at every AGM. Once a
three-year term has ended, a non-executive Director can continue for a maximum
of two further terms, if the Board is satisfied with the non-executive
Director's performance, independence and ongoing time commitment. Taking
account of their appointment dates the current average length of service of
the non-executive Directors is three years. For any non-executive Directors
who have already served two three-year terms, the Nomination and Governance
Committee considers any factors which have the potential to impact their
independence or time commitment prior to making any recommendation to the
Board. During 2022, the Committee reviewed and supported the recommendation
that Jonathan Asquith and John Devine's appointments be continued for a second
and third term respectively. When considering John Devine's continued
appointment in particular, the Committee discussed and agreed that the
knowledge and experience he had gained from his time on the Board would be
very beneficial to the newer board members, and there were no indications that
his six years of service had impacted the independence of his views in any
way. They also reviewed his other appointments and time commitments, and based
on this, agreed that it was appropriate to recommend his continued appointment
to the Board.
External search consultants may be used to support Board appointments. As
disclosed in last year's report, MWM Consulting was engaged to support the
appointments of Mike O'Brien and Pam Kaur. The Group has additionally used the
services of MWM Consulting to support other senior management searches. MWM
Consulting has no other connection to the Group or the Directors.
Time commitment
The letter of appointment confirms that the amount of time each non-executive
Director is expected to commit to each year, once they have met all of the
approval and induction requirements, is a minimum of 35 days.
When appointing a non-executive Director, the Nomination and Governance
Committee carefully considers time commitments, investor guidelines and voting
policies and their application on current directorships. The Committee also
reviews in detail the planned changes to a non-executive Director's portfolio
and overall capacity, including the balance of listed and non-listed
non-executive Director roles. Having carefully reviewed each non-executive
Director's contribution and capacity in 2022, the Committee concluded that all
non-executive Directors continue to have sufficient time to dedicate to their
role as independent non-executive Directors of abrdn plc.
The service agreements/letters of appointment for Directors are available to
shareholders to view on request from the Company Secretary at the Company's
registered address (which can be found in the Shareholder information section)
and will be accessible for the 2023 AGM. Non-executive Directors are required
to confirm that they can allocate sufficient time to carry out their duties
and responsibilities effectively. Their letters of appointment confirm that
their primary roles include challenging and holding to account the executive
Directors as well as appointing and removing executive Directors.
Director election and re-election
At the 2023 AGM, all of the Directors will retire and stand for re-election.
As announced, Brian McBride will stand down from the Board on 10 May 223. As
well as in Section 2, the AGM Guide 2023 includes background information about
the Directors, including the reasons why the Chairman, following the
Directors' annual reviews, believes that their individual skills and
contribution support their election or re-election.
Details of Directors' outside appointments can be found in their biographies
in Section 2.
Advice
Directors may sometimes need external professional advice to carry out their
responsibilities. The Board's policy is to allow them to seek this where
appropriate and at the Group's expense. Directors also have access to the
advice and services of the Company Secretary. With the exception of
professional advice obtained by the Remuneration Committee, as detailed in
page 118, no independent professional advice was sought in 2022.
Board effectiveness
Review process
The Board commissions externally facilitated reviews regularly. Following two
internally facilitated reviews in 2020 and 2021, Independent Board
Evaluation (IBE) was appointed as the external facilitator and carried out the
2022 review. IBE has no other connection to the Group or the Directors.
To carry out the review, a senior representative of IBE was in attendance and
observed a Board meeting and a meeting of each Board Committee in December
2022. They also had access to the papers for each of these meetings. In
addition to this observation and analysis, they held individual meetings with
each Board member, members of the ELT who are regular attendees at Board
meetings and the key members of the Board and Committee support teams.
Following this, IBE prepared a draft report for review and discussion. A
representative of lBE presented the report and recommendations
at a standalone session attended by a number of the Directors, ahead of
it being reviewed and discussed at the Board.
The main report covered the Board and its Committees. The tone of the feedback
received was positive overall, recognising the effective Board
dynamics and Committee structure, and the knowledge and experience of
recent appointments to the Board. The report noted the number of changes to
the Board since the last external review, the current macroeconomic
environment and the continued transformation and reshaping of the Group. In
this context, the report highlighted the need to continue to evolve
management information and reporting to support Board and Committee oversight
as well as the effective delegation to Committees. This work is in train, with
information flows supported by the appointment of abrdn plc directors to the
boards of certain principal subsidiaries.
As part of its conclusions, the report noted the strong levels of Board
engagement and participation, both in formal meetings and other Board
initiatives, such as Board mentoring involving certain senior management and
the BEE programme.
Chairman
The review of Sir Douglas's performance as Chairman was led by the SID,
Jonathan Asquith, supported by IBE. It was based on feedback given in
individual interviews between the external facilitator and each Director as
well as focused discussions between the SID and the other non-executive
Directors. The feedback was summarised into a report which was reviewed by the
SID and distributed to all non-executive Directors, except Sir Douglas. The
Directors, led by Jonathan Asquith and without Sir Douglas being present, met
to consider the report. They concluded that the Chairman's industry
experience, style and development of the Board continued to be of significant
benefit to the Group. Jonathan Asquith met with Sir Douglas to pass feedback
from the review directly to him.
Directors
As part of the review, IBE prepared an individual evaluation of each member
of the Board to support the Chairman's annual round of feedback to Directors
and to assist him in leading the Nomination and Governance Committee's
ongoing succession planning. Sir Douglas discussed the individual results with
each Director. These discussions also considered overall time commitment and
capacity and individual training, development and engagement opportunities.
Director induction and development
The Chairman, supported by the Company Secretary, is responsible for arranging
a comprehensive preparation and induction programme for all new Directors. The
programme takes their background, knowledge and experience into account. If
relevant, Directors are required to complete the FCA's approval process before
they are appointed and Directors self-certify annually that they remain
competent to carry out this aspect of their role. These processes continue to
adapt to meet evolving best practice in respect of the Senior Managers and
Certification Regime.
The formal preparation and induction programme includes:
- Meetings with the executive Directors and the members of the
ELT.
- Focused technical meetings with internal experts on specific
areas including the three Vectors, regulatory reporting, ESG, conduct risk,
risk and capital management, and financial reporting.
- Visits to business areas to meet our people and gain a better
insight into the operation of the business and its culture.
- Meetings with the external auditors and contact with the FCA
supervisory teams.
- Meetings with the Company Secretary on the Group's corporate
governance framework and the role of the Board and its Committees.
- Meetings with the Chief Risk Officer on the risk management
framework as well as meetings on their individual responsibilities as holders
of a Senior Management Function role.
Background information is also provided including:
- Key Board materials and information, stakeholder and shareholder
communications and financial reports.
- The Group's organisational structure, strategy, business
activities and operational plans.
- The Group's key performance indicators, financial and
operational measures and industry terminology.
The induction programme provides the background knowledge new Directors need
to perform to a high level as soon as possible after joining the Board and its
Committees and to support them as they build their knowledge and strengthen
their performance further.
When Directors are appointed to the Board, they make a commitment to broaden
their understanding of the Group's business. The Secretariat, Finance, Risk
and Reward teams monitor relevant external governance and risk management,
financial and regulatory developments and keep the ongoing Board training and
information programme up to date. Specific Board and Committee awareness and
deep-dive sessions took place on:
- Enterprise Technology strategy.
- Cyber resilience.
- abrdn's Internal Capital and Risk Assessment (being a risk
management process introduced by the Investment Firm Prudential Regime).
- Operational resilience self-assessment.
(iv) Audit, risk and internal control
The Directors retain the responsibility to state that they consider the Annual
report and accounts, taken as a whole, is fair, balanced and understandable,
presents an assessment of the Company's position and prospects and presents
the necessary information for shareholders to assess the business and
strategy. They also recognise their responsibility to establish procedures to
manage risk and oversee the internal control framework. The Directors'
responsibilities statement is on page 137. The reports from the Audit
Committee and the Risk and Capital Committee Chairs show how the Committees
have supported the Board in meeting these responsibilities.
The Board's view of its principal and emerging risks and how they are being
managed is contained in the risk management section of the Strategic report on
pages 64 to 67.
Annual review of internal control
The Directors have overall responsibility for the governance structures and
systems of the group, which includes the ERM framework and system of internal
control, and for the ongoing review of their effectiveness. The framework is
designed to manage, rather than eliminate, risk and can only provide
reasonable, not absolute, assurance against material misstatement or loss. The
framework covers all of the risks as set out in the risk management section of
the Strategic report.
In line with the requirements of the Code, the Board has reviewed the
effectiveness of the system of internal control. The Audit Committee undertook
the review on behalf of the Board and reported the results of its review to
the Board. The system was in place throughout the year and up to the date of
approval of the Annual report and accounts 2022.
The review of abrdn's risk management and internal control systems was carried
out drawing on inputs across the three lines of defence. The first line
management conducted risk and control self-assessments (RCSAs) throughout
2022; Risk & Compliance undertook a review of the effectiveness of the ERM
framework (including RCSAs) and how internal controls were operating within
the first line; and internal audit produced a Control Environment Assessment
using abrdn's risk taxonomy. Collectively these provide a view of the firm's
control environment from each of the three lines of defence. Where the review
identified weaknesses in the system of controls, the relevant root causes have
been investigated and actions are in train to strengthen the relevant controls
and to reinforce the application of the ERM framework.
2022 has seen the business continue to strengthen controls within its
operating model through better definition of accountability and processes.
Technology advances and regulatory developments such as IFPR, the Operational
Resilience regulation and UK SoX continue to drive further change in the
design of operational processes and internal controls.
The Finance function operates a set of defined processes which operate over
all aspects of financial reporting, which includes the senior review and
approval of financial results, controlled processes for the preparation of the
IFRS consolidation, and the monitoring of external policy developments to
ensure these are adequately addressed. These processes include the operation
of a Technical Review Committee and the Financial Reporting Executive Review
Group to provide senior review, challenge and approval of relevant
disclosures, accounting policies, and changes required to comply with external
developments.
The Board's going concern statement is on page 136 and the Board's viability
statement is on page 62.
(v) Remuneration
The Directors' remuneration report (DRR) on pages 103 to 130 sets out the work
of the Remuneration Committee and its activities during the year, the levels
of Directors' remuneration and the shareholder approved remuneration policy.
The Company's approach to investing in and rewarding its workforce is set out
on page 114 of the DRR. The Board believes that its remuneration policies and
practices are designed to support the Company's strategy and long-term
sustainable success. More information about the policies and practices can be
found in the DRR. An updated Remuneration Policy will be put to shareholders
for their approval at the Company's Annual General Meeting on 10 May 2023.
Other information
You can find details of the following, as required by FCA Disclosure and
Transparency Rule 7.2.6, in the Directors' report and in the Directors'
remuneration report:
Share capital
- Significant direct or indirect holdings of the Company's
securities.
- Confirmation that there are no securities carrying special
rights with regard to control of the Company.
- Confirmation that there are no restrictions on voting rights in
normal circumstances.
- How the Articles can be amended.
- The powers of the Directors, including when they can issue or
buy back shares.
Directors
- How the Company appoints and replaces Directors.
- Directors' interests in shares.
Board meetings and meeting attendance
The Board and its Committees meet regularly, operating to an agreed timetable.
Meetings are usually held in Edinburgh or London. During the year, the Board
held specific sessions to consider the Group's strategy and business planning.
The Chairman and the non-executive Directors also met during the year,
formally at each Board meeting, and informally, without the executive
Directors present and where matters including executive performance and
succession and Board effectiveness were discussed. The Board scheduled eight
formal meetings and a focused strategy meeting in 2022. An additional Board
meeting was called in 2022 in relation to Board decisions regarding the
recommendation to acquire the interactive investor business.
Directors are required to attend all meetings of the Board and the Committees
they serve on, and to devote enough time to the Company to perform their
duties. Board and Committee papers are distributed before meetings other than,
by exception, urgent papers which may need to be tabled at the meeting. If
Directors are not able to attend a meeting because of conflicts in their
schedules, they receive all the relevant papers and have the opportunity to
submit their comments in advance to the Chairman or to the Company Secretary.
If necessary, they can follow up with the Chairman of the meeting. Recognising
that some Directors may have existing commitments they cannot change at very
short notice, the Board has established the Standing Committee as a formal
procedure for holding unscheduled meetings. The Standing Committee meets when,
exceptionally, decisions on matters specifically reserved for the Board need
to be taken urgently. All Directors are invited to attend Standing Committee
meetings. The Standing Committee did not meet during 2022.
The Chairman is not a member of the Audit, Risk and Capital, or Remuneration
Committees. He is invited to attend meetings of all Committees, by invitation,
in order to keep abreast of their discussions and routinely does so. The table
below reflects the composition of the Board and Board Committees during 2022
and records the number of meetings and members' attendance.
Board Group Audit Committee Nomination and Governance Committee Remuneration Committee Risk and Capital Committee
Chairman
Sir Douglas Flint 10/10 -- 4/4 - -
Executive Directors
Stephanie Bruce 10/10 - - - -
Stephen Bird 10/10 - - - -
Non-executive Directors
Jonathan Asquith 10/10 - 4/4 8/8 -
Brian McBride 10/10 - - 7/8 -
John Devine 9/10 6/7 4/4 - 8/8
Hannah Grove(1) 10/10 - 4/4 3/3 -
Pam Kaur(2) 6/6 4/4 - - 4/4
Cathleen Raffaeli 10/10 - - 8/8 8/8
Catherine Bradley(3) 10/10 7/7 2/2 - 2/2
Mike O'Brien(4) 6/6 4/4 - - 4/4
Former members
Jutta af Rosenborg (stood down on 18 May 2022) 4/4 3/3 - 3/3 -
Martin Pike (stood down on 18 May 2022) 4/4 3/3 2/2 - 4/4
Cecilia Reyes (stood down on 30 September 2022) 7/8 - - 5/5 6/6
1. Hannah Grove was appointed to the Remuneration Committee on 1 October
2022.
2. Pam Kaur was appointed to the Board and the Audit and Risk and Capital
Committees on 1 June 2022.
3. Catherine Bradley was appointed to the Nomination and Governance
Committee on 18 May 2022 and the Risk and Capital Committee on 1 October 2022.
The Board appointed Catherine Bradley as Chair of the Audit Committee,
effective from 18 May 2022.
4. Mike O'Brien was appointed to the Board and the Audit and Risk and
Capital Committees on 1 June 2022.
Tenure as at February 2023
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Executive and Non-executive mix
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viewed in full in the pdf document
Board Committees
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
The Board has established Committees that oversee, consider and make
recommendations to the Board on important issues of policy and governance. At
each Board meeting, the Committee chairs provide reports of the key issues
considered at recent Committee meetings, and minutes of Committee meetings are
circulated to the appropriate Board members. This includes reporting from the
Chair of the Audit Committee on any whistleblowing incidents which have been
escalated to them. The Committees operate within specific terms of reference
approved by the Board and kept under review by each Committee.
These terms of reference are published within the Board Charter on our website
at www.abrdn.com
All Board Committees are authorised to engage the services of external
advisers at the Company's expense, whenever they consider this necessary. With
the exception of fees paid to external advisers of the Remuneration Committee,
as detailed on page 118, no such expense was incurred during 2022.
Committee reports
This statement includes reports from the chairs of the Audit Committee, the
Risk and Capital Committee and the Nomination and Governance Committee. The
report on the responsibilities and activities of the Remuneration Committee
can be found in the Directors' remuneration report in Section 3.4.
The Committee Chairs are happy to engage with you on their reports. Please
contact them via questions@abrdnshares.com (mailto:questions@abrdnshares.com)
3.1 Audit Committee report
The Audit Committee assists the Board in discharging its responsibilities for
external financial reporting, internal controls over financial reporting and
the relationship with the external auditors.
I am pleased to present my first report as Audit Committee (the Committee)
Chair, having taken on the role from John Devine in May 2022. John remains a
member of the Audit Committee and has taken on the role of Chair of the Risk
and Capital Committee, of which I am also a member. This ensures a high degree
of connectivity between the Audit and Risk responsibilities of the Board.
During the year and up to the date of issuing the annual report, the
Committee:
- Discussed and reviewed the impact on financial reporting of the
ii acquisition, having assessed the financial information required to be
included in the related Class 1 Circular.
- Considered the impact on the internal audit function of Chief
Internal Auditor changes.
- Reviewed the plans for sustainability and ESG reporting.
- Reviewed reporting on financial crime and anti-money laundering
controls. (Duty now transferred to the RCC).
- Received reports on compliance with the FCA Client Assets
Sourcebook (CASS) rules in the Company's CASS permissioned regulated legal
entities.
The Committee also continued to focus on the quality of financial reporting.
In July 2022 we received a letter from the FRC informing us that they had
carried out a review of our Annual report and accounts 2021. I am pleased to
report that the FRC letter noted there were no questions or queries they
wished to raise with us at this stage, and did not require a substantive
response to their letter. The FRC asked us to make clear the inherent
limitations of their review, which we have set out in the financial reporting
section of this report.
The report is structured in four parts:
1. Governance
2. Report on the year
3. Internal audit
4. External audit
Catherine Bradley
Chair, Audit Committee
3.1.1 Governance
Membership
All members of the Audit Committee are independent non-executive Directors.
For their names, the number of meetings and committee member attendance during
2022, please see the table on page 84.
The Board believes Committee members have the necessary range of financial,
risk, control and commercial expertise required to provide effective challenge
to management, and have competence in accounting and auditing as well as
recent and relevant financial experience. Catherine Bradley is a non-executive
director of Johnson Electric Holdings Limited and of easyJet plc, where she
chairs the finance committee. She is also senior independent director of
Kingfisher plc. Catherine has previously chaired the audit committees of
Groupe Peugeot Citroen and of the Financial Conduct Authority. John Devine is
a member of the Chartered Institute of Public Finance and Accounting. Pam Kaur
is a qualified chartered accountant. Mike O'Brien is a fellow of the Institute
and Faculty of Actuaries. The Committee members are also members of audit
committees related to their other non-executive Director roles.
Invitations to attend Committee meetings are extended on a regular basis to
the Chairman, the Chief Executive Officer, the Chief Financial Officer, the
Group Financial Controller, the Chief Internal Audit Officer and the Group
Chief Risk Officer.
The Audit Committee meets privately for part of its meetings and also has
regular private meetings separately with the external auditors and the Chief
Internal Audit Officer. These meetings address the level of co-operation and
information exchange and provide an opportunity for participants to raise any
concerns directly with the Committee.
Key responsibilities
The Audit Committee's responsibilities are to oversee, and report to the Board
on:
- The appropriateness of the Group's accounting and accounting
policies, including the going concern presumption and viability statement.
- The findings of its reviews of the financial information in the
Group's annual and half year financial reports.
- The clarity of the disclosures relating to accounting judgements
and estimates.
- Its view of the 'fair, balanced and understandable' reporting
obligation.
- The findings of its review of certain Group prudential external
disclosures.
- Internal controls over financial reporting.
- ESG disclosures relating to financial and quantitative
information.
- Outcomes of investigations resulting from whistleblowing.
- The appointment or dismissal of the Chief Internal Audit
Officer, the approved internal audit work programme, key audit findings and
the quality of internal audit work.
- The skills of the external audit team and their compliance with
auditor independence requirements, the approved audit plan, the quality of the
firm's execution of the audit, and the agreed audit and non-audit fees.
In carrying out its duties, the Committee is authorised by the Board to obtain
any information it needs from any Director or employee of the Group. It is
also authorised to seek, at the expense of the Group, appropriate external
professional advice whenever it considers this necessary. The Committee did
not need to take any independent advice during the year.
In accordance with the Senior Managers and Certification Regime the Audit
Committee Chair is responsible for the oversight of the independence, autonomy
and effectiveness of our policies and procedures on whistleblowing including
the procedures for the protection of employees who raise concerns related to
detrimental treatment. Throughout the year the Audit Committee Chair met
regularly with the Chief Internal Auditor, the Chief Sustainability Officer -
Investments and the Global Head of Corporate Sustainability to discuss their
work, findings and current developments.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to papers and interviews
with Committee members. A representative of IBE provided feedback on the
performance of the Committee directly to the Chair and the report and
recommendations were discussed by the Committee. Details of the 2022 review
are on page 81 and reflect the themes raised across the Board and its
Committees.
3.1.2 Report on the year
Audit agenda
As well as regular reporting, agenda items were aligned to the annual
financial cycle as set out below:
Jan - Mar - Annual report and accounts 2021.
- Strategic report and financial highlights 2021.
- Discussed the financial information required to be
included in the Class 1 Circular in relation to the proposed acquisition of
ii.
- Financial reporting judgements.
- Liaison with the Remuneration Committee on any
financial reporting matters related to the achievement of targets and
measures.
- External auditors' review of Full year results.
- CASS reporting update.
- Financial crime and whistleblowing.
Apr - Jun - Internal audit findings.
- Regulatory reporting including Pillar 3.
- Initial financial reporting matters for Half year
2022.
- Financial crime and whistleblowing.
- External auditors' management letter, and audit
strategy including fees.
Jul - Sep - Half year results 2022.
- External auditors' review of Half year results.
- External auditors' independence.
- Internal audit findings.
- Sustainability and ESG reporting.
- Whistleblowing.
Oct - Dec - Initial financial reporting matters for Full year
2022, including pension scheme assumptions.
- Non-audit services policy.
- The internal audit plan and charter.
- Internal audit findings.
- Effectiveness of the external auditors and related
non-audit services.
- Effectiveness of the internal audit function.
- Whistleblowing.
- Sustainability and ESG reporting.
- Risk management and internal control system annual
review and future plans.
- CASS reporting update.
The indicative proportion of time spent on the business of the Committee is
illustrated below:
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viewed in full in the pdf document
Detail of work
The focus of work in respect of 2022 is described below.
Financial and non-financial reporting
Our accounts are prepared in accordance with International Financial Reporting
Standards (IFRS). The Committee believes that some Alternative Performance
Measures (APMs), which are also called non-GAAP measures, can add insight to
the IFRS reporting and help to give shareholders a fuller understanding of the
performance of the business. The Committee considered the presentation of APMs
and related guidance as discussed further in the 'Fair, balanced and
understandable' section below.
The Committee reviewed the Group accounting policies and confirmed they were
appropriate to be used for the 2022 Group financial statements. This year
there were no new accounting standards which had a significant impact on the
Group accounting policies.
The Committee reviewed the basis of accounting and in particular the
appropriateness of adopting the going concern basis of preparation of the
financial statements. In doing so, it considered the Group's cash flows
resulting from its business activities and factors likely to affect its future
development, performance and position together with related risks, as set out
in more detail in the Strategic report. The Committee recommended the going
concern statement to the Board.
In addition, the Committee considered the form of the viability statement and
in particular whether the three-year period remained appropriate, and
concluded that it did. This reflects both our internal planning cycle and the
timescale over which changes to major regulations and the external landscape
affecting our business typically take place. In formulating the statement, the
Committee considered the result of stress testing and reverse stress testing
presented to the Risk and Capital Committee. The Committee recommended the
viability statement to the Board.
During 2022, the Committee reviewed the Annual report and accounts 2021 and
the Half year results 2022. For both periods it received written and/or oral
reports from the Chief Financial Officer, the Company Secretary, the Chief
Internal Audit Officer and the external auditors. The Committee used these
reports to aid its understanding of the composition of the financial
statements, to confirm that the specific reporting standards and compliance
requirements had been met and to support the accounting judgements and
estimates. Following its reviews, the Committee was able to recommend the
approval of each of the reports to the Board, being satisfied that the full
and half year financial statements complied with laws and regulations and had
been appropriately compiled.
In July 2022 we received a letter from the FRC informing us that they had
carried out a full scope review of our Annual report and accounts 2021 and
there were no questions or queries they wished to raise with us at this stage.
The FRC asked us to note that their letter provides no assurance that our
report and accounts are correct in all material respects, and that the FRC's
role is not to verify the information provided but to consider compliance with
reporting requirements. The FRC noted that their review is based on our report
and accounts and does not benefit from detailed knowledge of our business or
an understanding of the underlying transactions entered into.
The Committee recognises the importance of sustainability and ESG reporting.
During 2022 the Committee discussed and reviewed the sustainability reporting
landscape and the related governance framework at a number of meetings. In
particular, as part of the review of the Annual report and accounts 2022, the
Committee reviewed Task Force on Climate-Related Financial Disclosures (TCFD).
The Committee 's review focused on ensuring metrics and outcomes were
appropriately explained and validated.
Accounting estimates and judgements
The Audit Committee considered all estimates and judgements that Directors
understood could be material to the 2022 financial statements. The Committee
also focused on disclosure of these key accounting estimates and judgements.
Significant accounting estimates, judgements and assumptions for the year How the Audit Committee addressed
ended 31 December 2022
these significant accounting estimates and assumptions
Acquisition of interactive investor (ii)
On 27 May 2022 abrdn completed the acquisition of ii. The Committee spent time discussing the acquisition and the related purchase
price allocation at two meetings.
The identification and valuation of intangible assets arising from the
acquisition and determination of the related useful lives is a key area of The most significant area of judgement related to the valuation of the
judgement. customer relationships intangible asset relating to ii's customer base at the
date of acquisition. The Committee challenged the underlying assumptions,
including those related to revenue per customer growth, and market interest
rate assumptions which impact ii's expected treasury income. The Committee
agreed that the assumptions were within a reasonable range and supported the
disclosure of these assumptions. See Notes 1 and 13 for further details.
Goodwill impairment reviews
Goodwill is required to be tested annually for impairment and the The Committee spent time reviewing and challenging recoverable amount
determination of recoverable amounts for this impairment assessment is a key assumptions at three meetings. For asset management the Committee considered a
area of estimation. The impairment assessment is performed by comparing the number of different valuation approaches and discussed that the key
carrying amount of each cash-generating unit (CGU) with its recoverable assumptions related to the FVLCD discounted cash flow approach were future
amount, being the higher of its value in use (VIU) and fair value less costs earnings forecasts and the discount rate. The Committee considered that these
of disposal (FVLCD). In 2022 impairments of goodwill were recognised in assumptions and the resulting goodwill impairment were within the range of
relation to the asset management group of CGUs in the Investments segment reasonable outcomes. The Committee noted that the asset management VIU was
(impairment of £299m) and in relation to the Finimize CGU in the Investments significantly reduced by the IFRS requirement to exclude cost savings related
segment (impairment of £41m) and therefore the determination of the to future restructuring, and therefore that the VIU was less than the FVLCD.
recoverable amount for these CGUs was a key judgement which directly impacted
the amount of the impairment. The impairments reflect lower projected revenues
as a result of the lower markets, macroeconomic conditions and 2022 results
being below previous expectations. For Investments, the key impairment drivers For Finimize the Committee noted that the business is inherently difficult to
also include the expected reduction in Phoenix revenue from asset strategy and value as there are few directly comparable companies and therefore there are a
related pricing changes, and further work being required to reduce costs given range of reasonable valuations. The Committee discussed the valuation
the level of revenue and to grow to a net inflow position. assessment with management and agreed that recoverable amount was within the
reasonable range.
The recoverable amount for the asset management group of CGUs was determined
based on FVLCD, with the primary approach being a discounted cash flow The Committee agreed with management's view that the goodwill for interactive
approach. The recoverable amount for Finimize was also determined based on investor and the abrdn financial planning CGUs was not impaired. The Committee
FVLCD, with the primary approach being a revenue multiple valuation approach. noted the inherent sensitivity of the recoverable amounts and supported the
disclosure of appropriate sensitivities.
Goodwill relating to the interactive investor CGU was also required to be
tested for impairment following the acquisition during 2022 and the Further details on goodwill impairment reviews are disclosed in Note 13 of the
recoverable amount, based on FVLCD, indicated that no impairment was required. Group financial statements.
Goodwill relating to the abrdn financial planning business CGU was also tested
with no impairment arising, but with no headroom in relation to future
downside sensitivities.
Significant accounting estimates, judgements and assumptions for the year How the Audit Committee addressed
ended 31 December 2022
these significant accounting estimates and assumptions
Investments in subsidiaries
In relation to the abrdn plc Company only accounts, an assessment is made at The Committee discussed the investment in subsidiaries impairment assessment
each reporting date as to whether there are any indicators of impairment in with management and noted that the judgements in relation to these assessments
relation to investments in subsidiaries. At year end 2022 management noted were materially the same as the judgements relating to the goodwill impairment
that the Company's net assets attributable to shareholders of £4.9bn (post reviews. The Committee supported that relevant disclosures were made in the
impairments) were higher than the Company's market capitalisation of £3.8bn. Company only accounts including disclosure that appropriate consideration had
This, together with lower projected future asset management earnings, was been given to the Company net assets being higher than the abrdn market
considered to be an indicator of impairment of the Company's investment in its capitalisation. The Committee noted that the Company's distributable profits
asset management subsidiaries, abrdn Holdings Limited (formerly named Aberdeen were £3.2bn following the 2022 impairments which continued to provide support
Asset Management PLC ) and abrdn Investment Holdings Limited (aIHL). All other for the dividend policy.
material investment in subsidiaries (with the exception of abrdn Financial
Planning Limited) were supported by financial assets or other relevant Further details on the impairment assessment of investments in subsidiaries
analysis. are set out in Note A of the Company financial statements in Section 8.
Impairments were recognised in 2022 in relation to the Company's investment in
its subsidiaries abrdn Holdings Limited (impairment of £847m), aIHL
(impairment of £51m) and abrdn Financial Planning Limited (impairment of
£25m).
UK defined benefit pension plan
In compiling a set of financial statements, it is necessary to make some The Committee considered the proposed assumptions taking into account market
judgements and estimates about outcomes that are dependent on future events. data and information from pension scheme advisors. The Committee concurred
This is particularly relevant to the defined benefit pension plan surplus with management and their actuarial advisors that mortality assumptions should
which is inherently dependent on how long people live and future economic not be updated for COVID-19 at this point as the impact on long-term mortality
outcomes. rates for pension scheme members was not clear.
For the principal UK defined benefit pension plan, the Committee reviewed the Note 31 of the Group financial statements provides further details on the
assumptions for mortality, discount rate and inflation. actuarial assumptions used, and sets out the impact of mortality, discount
rate and inflation sensitivities. Note 31 also provides details on the
accounting policy applied and accounting policy judgements relating to the
Group's assessment that it has an unconditional right to a refund of a
surplus, and the treatment of tax relating to this surplus.
Tritax contingent consideration fair value
In 2021, the abrdn group purchased 60% of the membership interests in Tritax The Committee analysed and discussed management's assumptions underlying the
Management LLP. Subject to certain conditions, an additional contingent fair value of the contingent consideration at 31 December 2022 and agreed that
deferred earn-out is expected to be payable to acquire the remaining 40% of the fair value was within the reasonable range. The Committee reviewed and
membership interests in Tritax should the selling partners choose to exercise supported that disclosure of sensitivities to key assumptions should be
put options in respect of each of the years ended 31 March 2024, 31 March 2025 provided given the inherent uncertainties in the valuation. See Note 37 for
and 31 March 2026. The amount payable is linked to the EBITDA of the Tritax further details.
business in the relevant period. abrdn has the right to purchase any
outstanding interests at the end of 2026 through exercising a call option.
The contingent consideration liability is required to be recognised at fair
value, which is primarily dependant on future earnings projections.
Principal risks are disclosed in the Strategic report and recommended to the
Board by the Risk and Capital Committee. The Committee was satisfied that the
estimates and quantified risk disclosures in the financial statements were
consistent with the Strategic report. The Committee concluded that appropriate
judgements had been applied in determining the estimates and that sufficient
disclosure had been made to allow readers to understand the uncertainties
surrounding outcomes.
Fair, balanced and understandable
The Committee supported management's continued aim to compile the Annual
report and accounts to be 'fair, balanced and understandable'.
abrdn's principles
To create clarity on fair, balanced and understandable for abrdn a set of
principles is applied, as set out below:
Fair - The narrative contained in the Annual report and
accounts is honest, accurate and comprehensive.
'We are being open and honest in the way we present our discussions and
analysis, and are providing what we believe to be an accurate assessment of - The key messages in the narrative in the Strategic
business and economic realities.' report and Governance sections of the Annual report and accounts reflect the
financial reporting contained in the financial statements.
- The Key Performance Indicators (KPIs) for the period
are consistent with the key messages outlined in the Strategic report.
Balanced - The Annual report and accounts presents both successes
and challenges experienced during the year and, as appropriate, reflects those
'We are fully disclosing our successes, the challenges we have faced in the expected in the future.
period, and the challenges and opportunities we anticipate in the future; all
with equal importance and at a level of detail that is appropriate for our - The level of prominence we give to successes in the
stakeholders.' year versus challenges faced is appropriate.
- The narrative and analysis contained in the Annual
report and accounts effectively balances the information needs and interests
of each of our key stakeholder groups.
Understandable - The layout is clear and consistent and the language
used is simple and easy to understand (industry specific terms are defined
'The language we use and the way we structure our report is helping us present where appropriate).
our business and its performance clearly; in a way that someone with a
reasonably informed knowledge of financial statements and our industry would - There is a consistent tone across and good linkage
understand.' between all sections in a manner that reflects a complete story and clear
signposting to where additional information can be found.
Activities
An Internal Review Group (IRG) is in place which reviews the Annual report and
accounts specifically from a fair, balanced and understandable perspective and
provides feedback to our financial reporting team on whether it conforms to
our standards. The members of the IRG are independent of the financial
reporting team and include colleagues from Investor Relations, ESG reporting,
Risk, Internal Audit, Communications and Strategy.
The key points discussed by the IRG covered:
- The impact of markets on profitability, particularly in relation
to the Investments vector.
- The balance of reporting relating to financial and strategic
performance across the group.
- How previously reported matters had been updated.
Fair, balanced and understandable guidance was provided to relevant
stakeholders involved in the Annual report and accounts production process.
The Audit Committee, reviewed the messaging in the Annual report and accounts,
taking into account material received and Board discussions during the year.
Three drafts of the Annual report and accounts 2022 were reviewed by the Audit
Committee at three meetings. The Committee complemented its knowledge with
that of executive management and internal audit. An interactive process
allowed each draft to embrace contributions.
The Annual report and accounts goes through an extensive internal verification
process of all content to verify accuracy.
The Committee also reviewed the use and presentation of APMs which complement
the statutory IFRS results. This review considered guidelines issued by the
European Securities and Markets Authority in 2016 and the thematic reviews by
the Financial Reporting Council (FRC). A Supplementary information section is
included in the Annual report and accounts to explain the rationale for using
these metrics and to provide reconciliations of these metrics to IFRS measures
where relevant. This section also provides increased transparency over the
calculation of reported financial ratios.
Adjusted operating profit and adjusted profit before tax are key profit APMs.
The Committee considered whether the allocation of items to adjusted operating
profit was in line with the defined accounting policies, consistent with
previous practice and appropriately disclosed. Where there were judgemental
areas, such as in relation to certain interactive investor related costs, the
Committee specifically reviewed the proposed treatments and ensured that the
Annual report and accounts provided appropriate disclosures.
The Audit Committee agreed to recommend to the Board that the Annual report
and accounts 2022, taken as a whole, is fair, balanced and can be understood
by someone with a reasonably informed knowledge of financial statements and
our industry.
Prudential reporting
In H1 2022 abrdn published 2021 Pillar 3 reporting under CRD IV. The Committee
reviewed the Pillar 3 report and papers which set out the control and
verification processes followed in the compilation of the report.
The Committee also considered disclosures relating to IFPR (Investment Firm
Prudential Regime) results included in the Strategic report and notes sections
of the Annual report and accounts and half year reporting, together with
related assurance over these disclosures.
Internal controls
As noted earlier, the Directors have overall responsibility for abrdn's
internal controls and for ensuring their ongoing effectiveness. This does not
extend to associates and joint ventures. Together with the Risk and Capital
Committee, the Committee provides comfort to the Board of their ongoing
effectiveness.
Internal audit regularly reviews the effectiveness of internal controls and
reports to the Committee and the Risk and Capital Committee.
The Finance function sets formal requirements for financial reporting which
apply to the Group as a whole, defines the processes and detailed controls for
the consolidation process and reviews and challenges reporting submissions.
Further, the Finance function runs a Technical Review Committee and is
responsible for monitoring external technical developments. The Committee
focuses on ensuring appropriate sign-offs on financial results are provided,
and a mechanism for the escalation of issues from major regulated subsidiary
Boards is in place.
The control environment around financial reporting will continue to be
monitored closely.
In early 2023, the Committee discussed the implications of a significant
process execution event. The Committee were satisfied that this was
appropriately reflected in 2022 financial reporting. See Note 34 of the
financial statements for further details.
Financial crime and whistleblowing
After May 2022, oversight of anti-Financial Crime compliance moved to the Risk
and Capital Committee. Until this point the Committee received regular updates
from the Head of Anti-Financial Crime who reports on compliance with the
Group's Anti-Financial Crime and Anti-Bribery policy, and any other activities
associated with financial crime, including fraud risk.
Our people are trained via mandatory training modules to detect the signs of
possible fraudulent or improper activity and how to report concerns either
directly or via our independent whistleblowing hotline. The Committee Chair is
the designated whistleblower's champion and the Committee receives regular
updates on the operation of the whistleblowing procedures (Speak Up) from the
Conduct and Conflicts Oversight Manager. The anonymised reports include a
summary of the incidents raised as whistleblowing, and information on
developments of the arrangements in place, to ensure concerns can be raised in
confidence about possible malpractice, wrongdoing and other matters.
The Committee oversees the findings of investigations and required follow-up
action. If there is any allegation against the Risk or internal audit
functions, the Committee directs the investigation. The Committee is satisfied
that the Group's procedures are currently operating effectively. The Committee
Chair reports to the Board on the updates the Committee receives.
3.1.3 Internal audit
The role and mandate of the internal audit function is set out in its Charter,
which is reviewed and approved by the Committee annually. Whilst internal
audit maintains a relationship with the external auditors, in accordance with
relevant independence standards, the external auditors do not place reliance
on the work of internal audit.
The internal audit plan is reviewed and approved by the Committee annually,
but is flexed during the year to respond to internal and external
developments. The function's coverage aligns to the Group's activities and
footprint, taking account of local internal audit requirements.
The Committee assesses the independence and quality assurance practices of the
Internal Audit function and agrees the effectiveness of the function,
aligned to the Group's objectives. Independent external reviews are also
undertaken at regular intervals. The most recent one was completed in H2 2021
by Deloitte who assessed the abrdn internal audit function as having the
highest overall rating with conformance against all aspects of the Institute
of Internal Auditors' International Professional Practices Framework (IPPF)
and the Internal Audit Financial Services Code of Practice (the Standards).
Two areas for improvement were identified against the Standards (skillset and
resourcing and scope of quality assurance) and actions are underway to address
them. The Committee met specifically to review the results of the external
report and to agree the proposed actions of the internal audit team to take
forward the recommendations.
Regular reporting is provided to the Committee to illustrate plan progress,
and the status of implementation of recommendations. The Committee's own
review of the function in 2022 was positive and supports the continuous
evolution and enhancement of the function.
The Committee Chair meets the Chief Internal Audit Officer periodically,
without management being present.
3.1.4 External auditors
The appointment
The Committee has responsibility for making recommendations to the Board on
the reappointment of the external auditors, determining their independence
from the Group and its management and agreeing the scope and fee for the
audit. Following its review of KPMG's performance, the Committee concluded
that there should be a resolution to shareholders to recommend the
reappointment of KPMG at the 2023 AGM.
The Committee complies with the UK Corporate Governance Code, the FRC Guidance
on Audit Committees with regard to the external audit tendering timetable, the
provisions of the EU Regulation on Audit Reform, and the Competition and
Markets Authority Statutory Audit Services Order with regard to mandatory
auditor rotation and tendering. The Committee will continue to follow the
annual appointment process but does not currently anticipate re-tendering the
audit before 2026. This is currently considered to be in the best interests of
the Company taking into account the results of the formal review of the
effectiveness of the KPMG audit discussed in this section. The audit was last
subject to a tender for the financial year ended 31 December 2017. The audit
for the year ended 31 December 2022 is therefore KPMG's 6th year as auditor.
The Senior Statutory Auditor is Richard Faulkner who succeeded Jonathan Mills,
as the lead audit partner for the year ended 31 December 2022.
Auditor independence
The Board has an established policy (the Policy) setting out which non-audit
services can be purchased from the firm appointed as external auditors. The
Committee monitors the implementation of the Policy on behalf of the Board.
The aim of the Policy, which is reviewed annually, is to support and safeguard
the objectivity and independence of the external auditors and to comply with
the revised FRC Ethical standards for auditors (Ethical Standards). It does
this by prohibiting the auditors from carrying out certain types of non-audit
services, and by setting out which non-audit services are permitted. It also
ensures that where fees for approved non-audit services are significant, they
are subject to the Committee Chair's prior approval. KPMG has implemented its
own policy preventing the provision by KPMG of most non-audit services to FTSE
350 companies which are audit clients. A 70% fee cap on non-audit services to
audit clients is in place.
The services prohibited by the Policy are as set out in the FRC Revised
Ethical Standard 2019.
The Policy permits non-audit services to be purchased, following approval,
when they are closely aligned to the external audit service and when the
external audit firm's skills and experience make it the most suitable
supplier.
These include:
- Audit related services, such as regulatory reporting.
- Investment circular reporting accountant engagements.
- Attesting to services not required by statute or regulation
(e.g. controls reports).
- Other reports required by a regulator or assurance services
relating to regulatory returns.
- Sustainability and TCFD report audits/reviews.
- Fund merger assurance engagements, where the engagement is with
the manager and the external auditor is also the auditor of the fund.
KPMG has reviewed its own independence in line with these criteria and its own
ethical guideline standards. KPMG has confirmed to the Committee that
following its review it is satisfied that it has acted in accordance with
relevant regulatory and professional requirements and that its objectivity is
not impaired.
Having considered compliance with our Policy and the fees paid to KPMG, the
Committee is satisfied that KPMG has remained independent.
Audit and non-audit fees
The Group audit fee payable to KPMG in respect of 2022 was £6.2m (2021: KPMG
£5.1m). In addition, £2.3m (2021: £2.0m) was incurred on audit related
assurance services. Fees for audit related assurance services are primarily in
respect of client money reporting and the half year review. The Committee is
satisfied that the audit fee is commensurate with permitting KPMG to provide a
quality audit and monitors regularly the level of audit and non-audit fees.
Non-audit work can only be undertaken if the fees have been approved in
advance in accordance with the Policy for non-audit fees. Unless fees are
small (which we have defined as less than £75,000), the approval of the
Committee Chair is required.
Non-audit fees amounted to £1.3m (2021: £2.1m), of which £1.0m (2021:
£1.2m) related to other assurance services and £0.3m (2021: £0.9m) related
to other non-audit fee services. Other assurance services in 2022 primarily
related to control assurance reports, which are closely associated with audit
work. The external auditors were considered the most suitable supplier for
these services taking into account the alignment of these services to the work
undertaken by external audit and the firm's skill sets. Other non-audit fee
services fees in 2022 all related to residual Reporting Accountant work on the
interactive investor Class 1 Circular as discussed in the prior year report.
The Committee also monitors audit and non-audit services provided to
non-consolidated funds and were satisfied fees for those services did not
impact auditor independence.
Further details of the fees paid to the external auditors for audit and
non-audit work carried out during the year are set out in Note 7 of the Group
financial statements.
The ratio of non-audit fees to audit and audit related assurance fees is 15%
(2021: 30%). The total of audit related assurance fees (£2.3m) and non-audit
fees (£1.3m) is £3.6m, and the ratio of these audit related assurance fees
and non-audit fees to audit fees is 58% (2021: 80%). As noted above the audit
related assurance fees are primarily fees in relation to required regulatory
reporting, where it is normal practice for the work to be performed by the
external auditor.
The Committee is satisfied that the non-audit fees do not impair KPMG's
independence.
Audit quality and materiality
The Committee places great importance on the quality of the external audit and
carries out a formal annual review of its effectiveness.
The Committee looks to the audit team's objectivity, professional scepticism,
continuing professional education and its relationship with management, all in
the context of regulatory requirements and professional standards.
Specifically:
- The Committee discussed the scope of the audit prior to its
commencement.
- The Committee reviewed the annual findings of the Audit Quality
Review team of the FRC in respect of KPMG's audits and requested a formal
report from KPMG of the applicability of the findings to abrdn both in respect
of generally identified failings and failings specific to individual audits.
The Committee was satisfied insofar as the issues might be applicable to
abrdn's audit, that KPMG had proper and adequate procedures in place for our
audit.
- The Committee approved a formal engagement with the auditor and
agreed its audit fee.
- The Committee Chair had regular meetings with the lead audit
partner to discuss Group developments.
- The Committee receives updates on KPMG's work and its findings
and compliance with auditor independence requirements.
- The Committee reviewed and discussed the audit findings
including audit differences prior to the approval of the financial statements.
See the discussion on materiality in the following paragraphs for more detail.
- The Committee also continued to monitor and discuss relevant
external matters in relation to KPMG as a firm.
The Committee discussed the accuracy of financial reporting with KPMG both as
regards accounting errors that would be brought to the Committee's attention
and as regards amounts that would need to be adjusted so that the financial
statements give a true and fair view. Differences can arise for many reasons
ranging from deliberate errors (fraud etc.) to good estimates that were made
at a point in time that, with the benefit of more time, could have been more
accurately measured. KPMG have set overall audit materiality at £14m (2021:
£19m) based on revenue (as set out in the KPMG independent auditors' report).
This is within the range in which audit opinions are conventionally thought to
be reliable. To manage the risk that aggregate uncorrected differences become
material, the Committee supported that audit testing would be performed to a
lower materiality threshold for individual reporting units. Furthermore, KPMG
agreed to draw the Committee's attention to all identified uncorrected
misstatements greater than £0.7m (2021: £0.95m). The aggregated net
difference between the reported pre-tax profit and the auditor's judgement of
pre-tax profit was less than £9m which was less than audit materiality. The
gross differences were attributable to various individual components of the
consolidated income statement and balance sheet. No audit difference was
material to any line item in either the income statement or the balance sheet.
Accordingly, the Committee did not require any adjustment to be made to the
financial statements as a result of the audit differences reported by the
external auditors.
KPMG has confirmed to the Committee that the audit complies with their
independent review procedures.
Audit reform
The Committee reviewed the Government's response to the consultation on
strengthening the UK's audit, corporate reporting and corporate governance
systems, published in May 2022, and the intended establishment of the Audit,
Reporting and Governance Authority (ARGA) and associated frameworks. The
Committee will remain engaged in the audit reform discussion during 2023.
3.2 Risk and Capital Committee report
I am pleased to present my report as Chair of the Risk and Capital Committee
(the "Committee").
The Risk and Capital Committee supports the Board in providing effective
oversight and challenge of risk management and the use of capital across the
Group so as to ensure that we meet the expectations of our clients,
shareholders and regulators.
During 2022 the Committee placed particular focus on two areas: (i) the
financial and strategic implications of the challenging market and economic
environment, amplified by the impact of the Russia-Ukraine war; and (ii)
prudential matters, with the first year of operation of the UK's Investment
Firms Prudential Regime (IFPR).
Throughout 2022 the Committee continued to review and challenge key activities
undertaken by the business and advise the Board on these, including:
- Evolution of the Enterprise Risk Management (ERM) framework.
- Key components of the Group's ICARA and the Group's capital and
liquidity.
- Conduct risks across our three vectors and implementation of the
FCA's new Consumer Duty.
- Key project updates from the transformation activity across the
Group.
- The framework for anti-financial crime and anti-money laundering
activity across the Group.
- Work to develop our approach to managing cyber resilience in
line with the US National Institute of Standards and Technology (NIST)
framework.
- The expansion of the direct to customer proposition through the
acquisition of interactive investor (ii).
- The Group's exposure to emerging risks, including climate
change.
Furthermore, the Committee has closely monitored developments from our
regulators across the world as they have progressed their regulatory agendas,
including the areas of ESG, operational resilience and liquidity.
Further details on these and other activities carried out by the Committee
during the year can be found in the report that follows.
On behalf of the Board I wish to record our gratitude to Martin Pike, my
predecessor as Chair of the Risk and Capital Committee, who stood down in May
2022.
John Devine
Chair, Risk and Capital Committee
Membership
All members of the Risk and Capital Committee are independent non-executive
Directors. For their names, the number of meetings and Committee member
attendance during 2022, please see the table on page 84.
The Committee meetings are attended by the Chief Risk Officer. Others invited
to attend on a regular basis include the Chief Executive Officer, the Chief
Financial Officer, the Group General Counsel and the Chief Internal Auditor,
as well as the External auditors.
Regular private meetings of the Committee's members were held during the year,
providing an opportunity to raise any issues or concerns with the Chair of the
Committee. The Committee's members also held regular private meetings with the
Chief Risk Officer and were given additional access to management and subject
matter experts outside of the Committee meetings in order to support them in
gaining an in-depth understanding of specific topics.
Key responsibilities
The Company's purpose results in opportunities and exposures to a range of
risks and uncertainties. Understanding and actively managing the sources and
scale of these opportunities and risks are key to fulfilling this purpose.
The role of the Committee is to provide oversight and advice to the Board, and
where appropriate, the Board of each relevant Group company on the following:
- The Group's current risk strategy, material risk exposures and
their impacts on the levels and allocations of capital.
- The structure and implementation of the Group's ERM framework
and its ability to react to forward-looking issues and the changing nature of
risks.
- Changes to the risk appetite framework and quantitative risk
limits.
- Risk aspects of major investments and product developments, as
well as other corporate transactions.
- Regulatory compliance across the Group.
Further detail on the work performed in each of these areas is set out in the
report below.
In addition, in January 2022 the Committee also took on responsibility to act
as the board risk committee for the Group's two main UK investment companies,
abrdn Investment Management Limited (aIML) and abrdn Investments Limited
(aIL).
In carrying out its duties, the Committee is authorised by the Board to obtain
any information it requires from any Director or employee of the Group. It is
also authorised to seek, at the expense of the Group, appropriate external
professional advice whenever it considers this necessary. The Committee did
not need to take any independent advice during the year.
The Committee's work in 2022
Overview
The Committee operates a dynamic agenda and uses each meeting to consider a
range of recurring items as well as other items that are more ad hoc and/or
forward-looking in nature. An indicative breakdown as to how the Committee
spent its time is shown below:
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
The key recurring items which were considered by the Committee are:
- The 'Views on Risk' report - this provides a holistic assessment
from the Chief Risk Officer of the key risks and uncertainties faced by the
Group's businesses and the actions being taken to manage them.
- Ongoing activity to enhance and develop abrdn's ERM framework,
for example the Risk Appetite and Policy frameworks.
- Performance of the Group's ICARA processes in accordance with
IFPR, including the firm's stress and scenario testing programme. The ICARA
supports the Committee in understanding changes to both the risk profile of
the Group and the capital position over time.
Through these recurring activities the Committee was able to challenge
management's assessment of risks and oversee the key actions being taken to
manage these risks.
In addition to reviewing these recurring items the Committee provided
oversight of a broad range of topics in 2022. This included consideration of:
Jan - Mar - Advice provided to the Remuneration Committee
regarding the delivery of performance in 2021 relative to risk appetites
- 2021 findings from the abrdn Investment Management
vector Internal Controls Report
- 2022 deliverables from the ICARA process
- Emerging risks to the Group
- Operational resilience programme activity
- Review of abrdn's principal risks and risk disclosures
for the annual report and accounts
Apr - Jun - Conduct risks for the Personal vector
- Conduct risks for the Adviser vector
- Corporate and reputational risks for the Group
- Anti-financial crime-related activity
- Contingency planning process in the event of the
failure of a critical third-party supplier
Jul - Sep - Investment risk and related reporting
- Proposed changes to the risk appetite framework
- Finance strategy for the Group
- Cyber risks, including the Group's resilience maturity
against the NIST framework
Oct - Dec - The Group ICARA documents
- Management of IT obsolescence
- The remit of the Risk & Compliance function
- Implementation of the new Consumer Duty
- The Senior Managers and Certification Regime
- abrdn wind-down plan and triggers
- Data privacy management
- 2023 combined second- and third-line Assurance Plan
After each meeting, the Committee Chair reports to the Board, summarising the
key points from the Committee's discussions and any specific recommendations.
Risk exposures and risk strategy
abrdn's risk appetite framework enables the communication, understanding and
control of the types and levels of risk that the Board is willing to accept in
its pursuit of the strategy of the Group. This includes the business plan
objectives and the capital and liquidity it requires.
The Committee has received regular reporting through the 'Views on Risk'
report on each of the Group's 12 principal risks, including risk dashboards,
commentary and management information.
The Committee reviewed and proposed updates to the risk appetite framework to
ensure that the risk appetites and limits reflected changes to the risk
profile in view of the external environment and ongoing transformation of the
business. Notable changes to the risk appetite framework in 2022 include new
appetites on operational resilience; and revised appetites relating to
anti-financial crime risks.
Through reviewing the 'Views on Risk' reporting the Committee supports the
Board by monitoring risks relative to applicable risk appetites and the
resilience of the capital position under current and stressed conditions. Key
items that the Committee discussed during the year in this context included:
- The risks associated with the delivery of the business plan.
- Enhancements to components of the Group's risk appetite
framework.
- The delivery of the abrdn ICARA document.
- Improvements to anti-financial crime processes.
- The strengthening of the conduct risk framework.
- The management of cyber risk and operational resilience across
the Group.
Stress testing and scenario analysis has also supported the Committee in
understanding, monitoring and managing the capital and liquidity risk profile
of the business under stressed conditions. This has provided the Committee
with a forward-looking assessment of the Group's financial resilience in
response to potentially significant adverse events affecting key risk
exposures. The information presented to the Committee included combined stress
scenarios which looked at simultaneous stresses impacting on economic
conditions, flows and idiosyncratic factors specific to the Group.
Reverse stress testing analysis - i.e. considering extreme but plausible
events that have the potential to cause the business to become unviable - has
also been provided to the Committee to allow it to consider the ability of the
Group to prevent and mitigate the risk of business failure. This year's
reverse stress testing explored the possible economic conditions that could
lead to non-viability, augmenting previous reverse stress testing which
explored operational, conduct and reputational risks.
The Committee reviewed the results of the stress testing exercise and noted
that the possible economic conditions that could lead to non-viability were
extremely remote.
Based on the stress testing and scenario analysis results and the reverse
stress testing exercise, the Committee concluded there was no requirement for
the business to reduce its risk exposures. The business was resilient to
extreme events given the robust controls, monitoring and triggers in place to
identify events quickly and the range of management actions available to help
mitigate their effects.
Enterprise Risk Management (ERM) framework
To ensure the consistent focus on the delivery of client outcomes, during
2022, the business continued to evolve the ERM framework used to identify,
assess, control and monitor the Group's risks.
The Committee has obtained assurance regarding the operation of the ERM
framework through its review of regular content within the 'Views on Risk'
report. In particular we have used our review of the various risk and capital
dashboards, including the consolidated dashboard on key conduct risk
indicators and Board risk appetite metrics, to understand the Group's risk
profile and the effectiveness of the framework in supporting the management of
these risks.
The Committee receives reporting from the Risk and Compliance function on the
results of the quarterly risk management survey of regional and functional
executives which is used to support the identification of key risks facing the
business. The completion of this survey, along with subsequent discussion of
the results by the Executive Leadership Team, helps to drive greater risk
awareness and accountability. Furthermore, through reviewing the results of
the survey, the Committee has been able to ensure there is appropriate focus
on the key risks facing the business.
Exceptions-based reporting is provided to the Committee through the 'Views on
Risk' report. This sets out any matters of significance in respect of the
results of Policy compliance reporting and actions being taken in response to
risk events. These two items also support the Committee in performing its
oversight of the ERM framework.
In relation to the significant process execution event mentioned earlier, the
RCC has thoroughly considered how the ERMF operated and what remedial actions
need to be taken.
Regulatory developments and compliance
The Committee reviews and assesses regulatory compliance plans which detail
the planned schedule of monitoring activities to be performed by the Risk and
Compliance function to ensure there is appropriate coverage. Regular updates
on key findings from regulatory compliance activity and progress against the
plans were reported to the Committee through the 'Views on Risk' report.
As a Committee we have closely monitored global regulatory developments to
understand and anticipate potential implications for the Group and the wider
financial services sector. In particular the Committee paid close attention to
geopolitical risks and their operational implications, notably in relation to
sanctions and anti-financial crime. The Committee has also closely followed
regulatory developments and implementation activity in relation to the new
Consumer Duty, operational resilience and new sustainability regulations
globally.
Governance arrangements
The Committee has continued to refer to the work of those non-executive risk
committees operating in subsidiary companies to provide oversight and
challenge of risks within those subsidiaries. This has included the risk
committees in place for abrdn Life and Pensions Limited, Standard Life Savings
Limited and Elevate Portfolio Services Limited.
The Committee receives updates from, and reviews the minutes of, these
committees in order to maintain awareness and oversight of risks across the
Group. In addition to the Committee reviewing reporting from the subsidiary
risk committees, arrangements also exist for the Committee's Chair to attend
these subsidiary risk committees on request.
In its capacity since January 2022 as the board risk committee to the Group's
two main UK investment firms, the Committee routinely considered the
implications of Group risk management activities for these two firms and
identified any significant risk concerns to be brought to the attention of the
respective Boards, The Chair of the two investment firm Boards has a standing
invitation to attend the Risk and Capital Committee.
During the year the Committee provided advice to the Remuneration Committee
regarding the delivery of performance in the context of incentive packages. In
particular, the Committee considered whether performance had been delivered in
a manner that was consistent with the Group's strategy, risk appetite and
tolerances, and capital position. The provision of this advice helps to ensure
that the Group's overall remuneration practices are aligned to the business
strategy, objectives, culture and long-term interests of the Group and that
individual remuneration is consistent with, and promotes, effective risk
management.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to papers and interviews
with Committee members. A representative of IBE provided feedback on the
performance of the Committee directly to the Chair and the report and
recommendations were discussed by the Committee. Details of the 2022 review
are on page 81 and reflect the themes raised across the Board and its
Committees.
3.3 Nomination and Governance Committee report
I am pleased to present the Nomination and Governance Committee (the
Committee) report for the year ended 31 December 2022.
The Committee's key priorities this year were to support the succession
planning for the Board and the executive, maintain effective board governance
processes and continue to oversee initiatives supporting the development of
talent, leadership and diversity, equity and inclusion. Also, during the year,
the remit of the Committee was expanded to include oversight of culture,
recognising this as an important enabler of the Company's transformation. The
Committee and the Board held deep-dives on engagement survey results, action
plans and the development of the Company's cultural commitments. Further
detail on this can be found on pages 41to 42.
Governance Framework
We have continued to review our governance framework against the Code
principles and provisions. The framework in place effectively supported the
review, completion and integration of the ii acquisition and no material
changes were proposed to its operation during 2022.
Board evaluation
Having conducted internally-facilitated reviews in 2020 and 2021 our 2022
Board review was facilitated externally and more information about what the
process involved and its outcomes can be found on page 81.
Culture, Diversity, Equity and Inclusion
Continuing to build on transformation activity across our businesses, the
Committee has received regular updates on the work being done to implement the
Group's culture, diversity, equity and inclusion programmes and considered the
ELT's initiatives to implement these throughout the organisation. Diversity,
Equity and Inclusion remains a key focus and commitment of the Board,
especially in areas such as fund management, which, as an industry, is
typically underrepresented. There is more detail about this below and on pages
41 and 42. The Committee wants to use this opportunity to pay tribute to Lynne
Connolly who headed our Diversity, Equity and Inclusion (DEI) programmes for
six years and sadly passed away in early 2023 after living with incurable
cancer for many years. The Group plans to establish an award scheme in Lynne
Connolly's name to recognise the foundations for DEI that Lynne created and
the inspiration she represented to all of our colleagues.
Talent and Leadership
The Committee received regular reports from teams involved with Talent and
Organisation Effectiveness, oversighting their plans to deliver effective
leadership, talent and performance management across the Group. During the
year we have spent particular time on the talent pipeline. It is particularly
pleasing that following the launch of a new future leaders programme this has
already led to the role expansion/promotion of 20% of the introductory cohort.
Enterprise-wide, significant improvements in the diversity of early talent,
senior leaders and in our talent pipelines as well as reduction in our UK
gender pay and bonus gaps for the fifth consecutive year continue to
demonstrate the success of our programmes.
Board composition
The Committee, on behalf of the Board, assesses the balance of executive and
non-executive Directors, and the composition of the Board in terms of skills,
experience, diversity and capacity. These factors are important to the Board
in reviewing overall composition and during the year were reviewed by the
Committee, covered in my 1:1 discussions with Directors, and considered by the
external Board effectiveness review.
As I have covered already in my Chairman's statement, I was pleased to welcome
Catherine Bradley, Pam Kaur and Mike O'Brien to the Board during 2022. We said
farewell to Cecilia Reyes during 2022 and I want to record here our gratitude
for her strong contribution during her three years on the Board. The Board's
practice of succession planning over time was reflected in Committee
appointments and movements during the year, with Catherine Bradley assuming
the Chair of the Audit Committee on appointment and John Devine, moving from
Audit to take on the Chair of the Risk and Capital Committee.
Brian McBride has advised that he will not seek re-election at the Company's
Annual General Meeting on 10 May 2023 and will stand down from that date. I
and all my colleagues will miss Brian's insights and guidance and I would like
to thank Brian for his contribution to the Board and to the subsidiary boards
he served on.
The Board believes strongly in the importance of strong governance to
successful value creation and I look forward to demonstrating this in future
reports.
Sir Douglas Flint
Chairman and Chair of the Nomination and Governance Committee
Membership
The members of the Committee are the Chairman, the Chairs of Board Committees
and the NED responsible for Employee Engagement. For their names, the number
of meetings and committee member attendance during 2022, please see the table
on page 84.
Stephen Bird, in his CEO role, is invited to Committee meetings to discuss
relevant topics, such as the roles within and membership of the ELT, talent
development and management succession.
Key responsibilities
The Committee's primary role is to support the composition and effectiveness
of the Board, and to oversee the Group's activities to strengthen its talent
pipeline. It also oversees ongoing development and implementation of the
Group's governance framework and its work to embed appropriate diversity and
inclusion policies.
The Committee's key responsibilities are:
- Identifying and recommending Directors to be appointed to the
Board and the Board Committees and ensuring relevant training is provided on
appointment and throughout their tenure.
- Reviewing and assisting in the development and implementation of
initiatives to embed the Board's desired outcomes for diversity, equity and
inclusion within the Group and to define, monitor and performance manage the
behaviours expected of all employees that will be seen to represent the
Group's culture.
- Reviewing Board diversity, skills and experience.
- Supporting the process and output of the Board's effectiveness
review.
- Overseeing succession planning, and leadership and talent
management development throughout the Group.
- Considering how the Group should comply with current and
upcoming corporate governance requirements, guidance and best practice and
relevant directors' duties.
The Committee reports regularly to the Board so that all Directors can be
involved in discussing these topics as appropriate.
The Committee's work in 2022
An indicative breakdown as to how the Committee spent its time is shown below:
Jan - Mar - Reviewed compliance with the UK Corporate Governance
Code for the 2021 ARA.
- Reviewed the results of the Committee Effectiveness
Review and reviewed the Board Charter and Committees' terms of reference.
- Reviewed progress on Talent and Leadership development
activities.
- Recommended the appointments of Mike O'Brien and Pam
Kaur.
- Reviewed approach to ESG external reporting, and
reviewed TCFD report and Sustainability report.
Apr - Jun - Reviewed the recommendations to shareholders to re/elect
Directors at the AGM.
- Reviewed and recommended the continued appointment of
John Devine and Jonathan Asquith at the end of their three-year terms.
- Reviewed the group's Culture and Talent Strategy plan.
- Received an update on Diversity, Equity and Inclusion
progress and action plans.
- Reviewed ELT succession planning.
- Reviewed the Group's annual Stewardship Code Report.
Jul - Sep - Reviewed executive succession plan and talent pipeline.
- Approved proposed executive leadership changes.
- Received an update on abrdn's cultural commitments.
- Received an update on Diversity, Equity and Inclusion
progress and action plans.
- Reviewed the process to oversee Board skills analysis
and considered Board succession planning.
Oct - Dec - Received an update on 2023 plans to further embed
cultural commitments.
- Received an update on Diversity, Equity and Inclusion
progress and 2023-24 priorities.
- Reviewed progress on Talent and Leadership development
activities.
- Received the regular update on the activities of the
abrdn Financial Fairness Trust.
An indicative breakdown as to how the Committee spent its time is shown below:
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Board and committee appointments and composition
The Committee keeps under constant review the skills, experience and
capabilities needed for particular Board roles. This recognises the need to
secure a pipeline of potential successors to be able to chair the Board
Committees, and also the need to plan ahead to take account of the length of
time served on the Board by the current independent non-executive Directors.
In addition, it also recognises the skills which the Board will need as it
moves forward to oversee the implementation of the Group's approved strategy
and takes account of the Group's commitments to achieve and maintain its
published Board diversity targets.
Where Board augmentation is needed, an external search consultant is then
requested to prepare a list of suitable candidates. From that, the Committee
agrees a shortlist. Following interviews with potential candidates, the
Committee makes recommendations to the Board on any proposed appointment,
subject always to the satisfactory completion of all background checks and
regulatory notifications or approvals. Part of this includes considering
existing or planned external commitments of candidates to assess their ability
to meet the necessary time commitment and whether there are any conflicts of
interest to address.
In light of the Committee's review of the Board composition and skills
analysis carried out in 2021, and following the process as outlined above to
identify and consider potential candidates, the Committee was pleased to
recommend Mike O'Brien and Pam Kaur be appointed to the Board, each as a
member of the Audit and Risk and Capital Committees. Both Mike and Pam were
appointed as Non-executive Directors and members of the Audit and Risk and
Capital Committees with effect from June 2022.
The Committee also recommended the appointments of John Devine as Chair of the
Risk and Capital Committee and Catherine Bradley as Chair of the Audit
Committee, which took effect, following Board approval, from conclusion of the
AGM on 18 May 2022.
The Committee believes that, as well as strengthening the collective skills
and experience of the Board, these appointments build resilience into the
membership of the Board Committees, aid succession planning for Committee
Chair roles, and support our commitment to Board diversity.
The Committee also oversees the process that recommends continuation of
appointments; members of the Committee do not, however, take part in
discussions when their own performance - or continued appointment - is being
considered. John Devine and Jonathan Asquith's continued appointments were
reviewed during the year and the Committee agreed that they continued to meet
all independence and time commitment expectations and recommended to the Board
that they should continue their appointments for further terms.
Succession planning and talent management activities
The Committee regularly reviews succession planning activities, including
identifying key person and retention risk, and talent development programmes
across the Group.
During 2022, in particular, the Committee discussed the future leadership and
talent needs of the Group and how the current programmes could be revised to
take account of the skills and expertise required by both the Board and the
ELT. These programmes are designed to recognise the changing shape of the
Group, and also to identify both the talent available within the Group and the
need/benefits of external recruitment. Diversity was considered as a core part
of these discussions, and progress was reviewed against our diversity goal to
achieve minimum 40% women on ELT succession plans.
The Talent and Change agenda is led by the CPO, in conjunction with the CEO.
The Committee spent time during 2022 looking at the strategic priorities of
the talent team to:
- Bring the best possible people into the organisation.
- Enable people to be the best they can.
- Create the best possible environment for our people to thrive.
The Committee discussed the team's progress to deliver initiatives to support
early careers, talent acquisition, future talent, core capabilities and
behaviours and effective performance management. The Committee discussed the
inclusive design of the initiatives such as early careers, talent acquisition
and future talent and considered the diversity of talent this achieved.
The Committee reviewed the effectiveness of its NED mentoring programme which
allows each NED to get to know members of the next generation of talent
through individual meetings which take place over the course of the year and
evolve based on the needs of each individual being mentored. Having received
positive feedback from both mentors and mentees, this will continue in 2023.
During the year, the Committee reviewed and approved a number of proposed
changes to the Group's ELT. Following the acquisition of ii, the Group took
the opportunity to consolidate its personal wealth propositions under a single
vector and leadership team. Given the scale and importance of ii to the Group
strategy, the Committee approved the appointment of Richard Wilson to the
position of CEO, Personal from August 2022. Following an assessment of the
Group's strategic requirements, the role of Chief Enterprise Technology
Officer was created. David Scott (formerly Chief Security and Resilience
Officer) was promoted to the role, effective from August 2022, and took on
responsibility for building and maintaining a technology infrastructure which
is commensurate to the Group's growth plans. The Committee also approved the
appointment of Sarah Moody to Chief Corporate Affairs and Investor Relations
Director, effective January 2023.
Board evaluation
The Committee has a key role in supporting the Board evaluation process.
Details of the 2022 review are on page 81.
Culture, Diversity, Equity and inclusion
In recognition of the oversight activities already undertaken by the Committee
relating to the Group's culture, in January 2022 the Committee determined that
it should have oversight of the metrics in place to help to assess and monitor
culture across the Group.
The Committee and the Board spent time with both the CEO and the Chief People
Officer understanding their plans to strengthen meaningful measurement and
reporting of culture across the Group. The Board and the ELT have defined a
set of commitments which define the Group's culture - Client First, Empowered,
Ambitious and Transparent. Details of the cultural commitments and the
behaviours that underpin them can be found on page 42. We have a comprehensive
plan in place to embed our commitments across the colleague experience and
track progress in 2023. We measure overall progress against our cultural
ambitions through our listening strategy and our employee engagement online
platform.
The Committee also received the annual update from the Chairman and the CEO of
the abrdn Financial Fairness Trust and discussed how grants were made and how
these were contributing to informing public policy choices.
The Board's diversity statement is on page 80. The Committee has a key role in
supporting publication of this statement through its oversight of DEI
activities. The DEI Team attends the Committee at least twice a year to report
on progress to deliver against Committee-approved framework, action plans and
initiatives. The Committee reviewed progress against the Group's DEI framework
priorities, being:
- Making diversity and inclusion part of our purpose.
- Maintaining inclusive ways of working.
- Attracting and developing diverse talent.
- Ensuring colleagues feel included and valued every day.
ESG reporting
During the year, the Committee supported the Group's ESG external reporting by
reviewing the various reports in advance of their publication. The ESG reports
issued were:
- UK Stewardship report - this shows how the Group has applied the
UK Stewardship Code as an investor. The Group is a signatory to the
Stewardship Code.
- TCFD report - this includes a summary of the Group's approach to
climate change, including our approach to scenario analysis, refreshed net
zero goals and case studies.
- Sustainability report - this is an annual report with ESG data,
activity and achievements across the Group's operations and vectors, to bring
to life our brand values and our ESG priorities.
The Committee members considered these reports in terms of their quality,
consistency and alignment with other relevant information.
Committee effectiveness
The effectiveness review was conducted externally by IBE.
The review included observation of a meeting, access to papers and interviews
with Committee members. A representative of IBE provided feedback on the
performance of the Committee directly to the Chair and the report and
recommendations were discussed by the Committee. Details of the 2022 review
are on page 81 and reflect the themes raised across the Board and its
Committees.
3.4 Directors' remuneration report
Remuneration Committee Chair's statement
This report sets out what the Directors of abrdn were paid in 2022 together
with an explanation of how the Remuneration Committee reached its
recommendations.
Also set out are the proposed updates to our Directors' Remuneration Policy
('Policy') and its implementation from 2023. Where tables and charts in this
report have been audited by KPMG LLP we have marked them as 'audited' for
clarity.
The report is structured in the following sections and corresponding page
numbers:
Page
At a glance - 2022 remuneration outcomes 106
At a glance - 2023 proposed Policy summary and implementation in 2023 107
2022 annual remuneration report 108
Shareholdings and outstanding share awards 110
Executive Directors' remuneration in context 113
Remuneration for non-executives 116
The Remuneration Committee 118
The proposed Directors' Remuneration Policy 120
Approval
The Directors' Remuneration Report was approved by the Board and signed on its
behalf by:
Jonathan Asquith
Chair of the Remuneration Committee
28 February 2023
Dear shareholder
On behalf of the Board I am pleased to present the Directors' Remuneration
Report for the year ended 31 December 2022 and the proposed updated Policy to
commence in 2023.
Introduction
Our Directors' Remuneration Report for 2021 received a 96% vote in favour at
the 2022 AGM. I would like to thank our shareholders for their continued
strong support of our approach to remuneration matters and their ongoing
dialogue on these issues. I would also like to thank Cecilia
Reyes for her contributions to the Committee's work over the last three years
and welcome Hannah Grove who joined in October.
As you will no doubt be aware, our Policy is due for renewal at the 2023 AGM.
This has given the Committee a chance to reflect on the current Policy and how
it has been operating. We concluded collectively that the Policy has worked
well and continues to support an appropriate level of alignment between the
interests of shareholders, executive management and other stakeholders in the
Group.
In this context, we do not propose any material changes to the structure or
the quantum of incentives. Within that unchanged envelope we are, however,
proposing a limited change of emphasis in our annual bonus measures. This
change comprises an increase in the maximum weighting allocated to
non-financial measures from 25% to 35% to allow the Board greater flexibility
to target the delivery of strategic change in the business, the results of
which may not be immediately reflected in its financial results. The majority,
at least 65%, will remain weighted towards financial measures. More detail can
be found in the section titled Key features of our new Policy on page 105.
In what has been one the toughest investment markets for many years, we have
continued to drive our Remuneration Philosophy. Our end-of-year processes
incorporated careful consideration of financial and non-financial performance,
reflecting the growing resilience of our diversified model, the strides
achieved in addressing sustainability issues and our continued focus on our
people, culture and customers in a challenging market environment.
How our Policy was applied in 2022
Significant advances at a strategic level in the year, including the
acquisition of ii, were balanced by shortfalls in the Group's financial
performance in a hostile market environment. With 40% of the annual bonus and
100% of the LTIP driven directly by profit and total shareholder return
measures, the reduction in executive Director rewards mirrored subdued returns
for shareholders and other stakeholders.
Annual bonus (detail on pages 108 to 109)
Financial performance (75%)
Financial targets were set with reference to the Board-approved plan including
measures on net flows, Investment performance and adjusted operating profit
before tax. Against the backdrop of weak investment markets and significant
macro and geopolitical headwinds, financial performance was necessarily held
back.
Investment performance: Our longer term equities performance remains robust,
while over a three-year time period we have consistently delivered strong
performance in alternatives as well as fixed income. Real asset valuations
have weakened, given the higher interest rate backdrop, although long-term
sector conviction remains strong. The overall outcome was between threshold
and target.
Net flows: Negative market sentiment had an adverse impact on flows, with
significant number of withdrawals experienced from equity funds across the
industry. The impacts were largely felt across public markets in the
Investments vector, with real assets and our other two vectors Personal and
Adviser proving to be much more resilient. Aggregate performance on net flows
nonetheless fell below the threshold required to qualify for payouts under the
annual bonus plan.
Adjusted operating profit before tax: This was 19% lower than the prior year,
at £263m (£196m excluding ii). Performance in the Personal and Adviser
vectors was strong, contributing over 50% of adjusted operating profit in the
year, with the aggregate decline concentrated in the Investments vector.
Overall, performance did not meet the threshold required.
The outcomes for the financial element of the 2022 annual bonus are summarised
below.
Financial performance measure Weighting 2022 outcome
(% of total scorecard) (% of total scorecard)
Investment performance 20% 8.25%
Net flows 15% 0%
Adjusted operating profit before tax 40% 0%
This resulted in an overall assessment of 8.25% out of a maximum of 75% on
financial measures.
Non-financial performance (25%)
In 2022 we assessed non-financial performance against two baskets of measures,
ESG (comprising Environment and Social categories) and Customer.
Environment: There have been material advances in the delivery of our global
climate solutions, where we have identified our clients with net zero goals
and have a Climate product strategy group shaping our net zero offering. We
are building the tools to track carbon intensity and we have a clear stance on
our climate priorities as investors. For our own operational net zero, we are
firmly on track to meet our long term net zero carbon emission target of 50%
less than our 2018 baseline by 2025. Full details of our progress on these
matters are disclosed in our Sustainability and TCFD report, available on our
website. The Committee took into account more than 10 qualitative and
quantitative performance indicators in assessing that performance in this area
was strong with the outcome being agreed as 5% out of 5%.
Social: Despite the challenges posed by enacting a major change agenda against
the backdrop of difficult markets, engagement levels at the end of 2022 held
up at 50% (2021: 51%). Whilst we are not where we need to be, we have clear
plans in place and are committed to continued efforts to build engagement
through 2023. 2022 has been a year of transformation on culture coupled with
meaningful achievement across our DEI levers of change. Our culture change
programme has been designed and rolled out, engaging over 600 of our global
leaders. There has been an increase in female representation in senior
leadership roles and succession plans as well as an increase in ethnic
minorities in early career roles. Taking into account more than 20 qualitative
and quantitative performance indicators, the Committee determined the final
outcome of 6% out of 8%.
Customer: In the Investments vector, independent client survey feedback
covering global clients across all asset classes rated abrdn favourably on a
number of areas across the various client experience steps. Overall client
service and trust were amongst the areas of noteworthy recognition. The
Committee also noted improved RFP hit rate conversions and more importantly,
no increase in redemptions. In the Adviser vector, the Net Promoter Score was
particularly high relative to other leading technology household names and
came with improved Customer Satisfaction scores over the year. The Committee
also noted the external accolades received by the abrdn Wrap platform. For the
Personal vector, the Committee reviewed the total customer numbers, noting an
increase in the active and engaged customer segment. There were also positive
customer survey outcomes on satisfaction with relationship managers and the
wider team. The Committee concluded the appropriate outcome for the Customer
category was 11% out of 12%.
Considering all components together, this resulted in an overall assessment of
22% out of a maximum of 25% on non-financial measures.
Remuneration Committee assessment
To assess whether the awards generated by the scorecard were fair in the
broader performance and risk context, the Committee reviewed the individual
components which contributed to the delivery of this performance and the
alignment of scorecard outcomes with the experience of a range of
stakeholders. Details on the Committee's considerations are set out on page
109. The Committee concluded that the outcomes of the scorecard were fair and
balanced and no adjustment to them was needed or made.
The overall outcome recognises the hard work to deliver the critical
milestones that were achieved in 2022 against the backdrop of a challenging
external environment. This was evidenced in our assessment of performance
against non-financial measures including the recognition of progress in
delivering a more diversified, more resilient, organisation that should be
equipped to weather challenging conditions and rebound when cycles turn.
Summarising these results, the Remuneration Committee approved the following
outcomes based on performance against targets:
Executive Director Final outcome 2022 total bonus
(% of max)
(£000s)
Stephen Bird 30.25% 662
Stephanie Bruce 30.25% 244
Long-term incentives (detail on pages 109 to 112)
Vesting of the 2020 LTIP granted to the current executive Directors is based
on performance over the three-year period ending on 31 December 2022. After
reviewing the relevant metrics the Committee concluded that the performance
had not met the stretching targets set and therefore the award will not vest.
As already disclosed in an RNS announcement on 11 August 2022, following an
assessment of performance against its specific performance conditions relating
to efficiency targets, the final tranche of the one-off deferred award made to
Stephanie Bruce was determined to vest at 100% of maximum.
Finally, the 2019 EIP award was granted to Stephanie Bruce and certain former
executive Directors. Performance was measured against the underpin hurdles for
the period ending 31 December 2022. Final vesting was assessed at 25% of the
maximum award. Full details of the vesting outcome can be found on page 111.
Forward looking LTIP awards were made to Stephen Bird and Stephanie Bruce in
April 2021 and 2022, as disclosed in the 2020 and 2021 Annual reports and
accounts. The performance conditions attached to these awards will be measured
over three-year periods finishing on 31 December 2023 and 2024 respectively.
Key features of our new Policy
The Committee is comfortable that the current Policy supports the strategic
direction of the Company, and the Policy therefore remains fit for purpose.
However the Committee proposes to make a limited change in emphasis in the
annual bonus plan, adjusting the minimum weighting of financial components to
65% (from 75%). This ensures that financial elements still maintain an overall
majority but gives scope to increase non-financial metrics to 35% of the
overall award.
The Committee acknowledges the view of some shareholders that non-financial
metrics can prove harder to quantify for performance assessment purposes.
However, there are a wide range of strategic actions in progress which are
crucial to the long-term success of the Group and the Committee strongly
believes that it is in shareholders' interests for management to be held
accountable for delivery of these actions. Accordingly, the Committee intends
that the additional 10% weighting in the non-financial segment should be
targeted against specific strategic Group and vector priorities which have
quantifiable and reportable success metrics.
No change is proposed to the design of the LTIP or the structure of
performance metrics for the 2023 award. Performance metrics for awards under
future LTIP awards will continue to be reviewed on an annual basis and set
within the parameters of the Policy.
Policy implementation in 2023
Following a review no change has been made to salaries for the executive
Directors or fees for the non-executives for 2023.
In line with previous practice, we will continue to set stretch targets for
the annual bonus and the LTIP to ensure that the maximum opportunity will only
be earned for exceptional performance.
The scorecard for the 2023 annual bonus is detailed on page 107 and the
targets, which are commercially sensitive, will be disclosed at the end of
this performance year in the 2023 Annual report and accounts. The scorecard
retains the structure of focusing a majority of the opportunity on the
achievement of financial targets as set out in our Policy (65%) with the
balance measured against non-financial performance including ESG and Customer
objectives and progress on strategic initiatives. The Committee has agreed a
basket of key indicators in each of these areas which will allow a rounded
assessment of performance to be made. Details on these metrics, including how
the Committee assessed performance against them, will be disclosed
retrospectively.
The 2023 LTIP will again consist of two equally weighted targets, Adjusted
Diluted Capital Generation per share CAGR and Relative TSR. The three-year
Adjusted Diluted Capital Generation per share target range has been maintained
at 5%-15% Compound Annual Growth Rate (CAGR), which remains aligned with the
business plan agreed with the Board. The Committee also reviewed the TSR peer
group for the Relative TSR metric. In line with its policy of adjusting the
peer group to match the changing composition of the Group's business, the peer
group will be adjusted for the 2023 grant to exclude M&G, Franklin
Resources, Affiliated Managers, Invesco and SEI Investments. AJ Bell,
IntegraFin Holdings, Rathbones Group and Liontrust Asset Management will be
added to the peer group. Details of the 2023 LTIP grant can be found on page
107.
Wider workforce
The effective date of the salary review was brought forward to October 2022
(compared to April 2023) for around 40% of our global population. To support
the colleagues who are most at risk during the cost of living challenges, this
review focused on those who earned less than £75k (or local country
equivalent). The review resulted in an average increase of 6% for those
individuals. In addition to this, annual reviews have been completed in early
2023 as part of the normal remuneration review cadence.
To help you navigate the report effectively, I would like to draw your
attention to the sections on pages 106 to 107 which summarise both the
outcomes for 2022 and also how the remuneration policy will be implemented in
2023. Further detailed information is then set out in the rear section of the
report for your reference as required. The Policy report, which will be
subject to a binding shareholder vote at the 2023 AGM is set out on pages 120
to 130.
On behalf of the Board, I invite you to read our remuneration report. As
always, the Committee and I are open to hearing your views on this year's
report and our remuneration policy in general.
At a glance - 2022 remuneration outcomes
Outcome of performance measures ending in the financial year
The following charts show performance against the target range for the annual
bonus and commentary on the 2020-2022 Long-Term Incentive Plan (LTIP). Further
detail on the assessment of the performance conditions can be found on pages
108 to 109.
Diagrams removed for the purposes of this announcement. However they can be
viewed in full in the pdf document
2022 annual bonus scorecard outcome
The following table sets out the final outcome for the 2022 annual bonus. A
detailed breakdown of performance can be found on pages 108 to 109.
Bonus Scorecard Outcome Total Bonus Outcome
Financial metrics (maximum 75%) Non-financial metrics (maximum 25%) Board approved outcome Annual salary Maximum opportunity Total award Total award
(% of maximum)
(% of salary)
(% of salary)
(£000s) (£000s)
Stephen Bird 8.25% 22 % 30.25% 875 250% 75.6% 662
Stephanie Bruce 538 150% 45.4% 244
2020-2022 LTIP outcome
The performance period for the 2020-2022 LTIP concluded on 31 December 2022.
Performance was assessed against two measures: Capital Generation per share
(CAGR) and Relative TSR performance. Performance against both measures was
assessed to be below the threshold required and therefore the award will not
vest. Detail of the performance assessment for the 2020-2022 LTIP can be found
on page 109.
Total remuneration outcomes in 2022
The chart below shows the remuneration outcomes for each executive Director in
2022 based on performance compared to the maximum opportunity.
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
At a glance - 2023 remuneration policy implementation
This section sets out how we propose to implement our remuneration policy in
2023. The full remuneration policy can be found on pages 120 to 130.
Element of remuneration Key features of operation 2023 implementation
Salary
Core reward for undertaking the role Normally reviewed annually, taking into account a range of internal and No change to quantum
external factors.
Stephen Bird: £875,000
Stephanie Bruce: £538,125
Pension
Competitive retirement benefit Aligned to the current maximum employer contribution available to the UK wider No change to quantum
workforce (18% of salary).
Stephen Bird: 18% of salary
Stephanie Bruce: 18% of salary
Benefits
Competitive benefits Includes (i) private healthcare; (ii) death in service protection (iii) income No change to quantum
protection (iv) reimbursement of membership fees of professional bodies; and
(v) eligibility for the all employee share plan.
Annual bonus
To reward the delivery of the Company's business plan Annual performance assessed against a range of key financial and non-financial No change to quantum
measures. At least 65% will be based on financial measures. At least 50%
deferred into shares vesting in equal tranches over a three-year period. Stephen Bird: 250% of salary
Awards are subject to malus and clawback terms. Stephanie Bruce: 150% of salary
See below for 2023 performance conditions
Long-term incentive plan
To align with our shareholders and reward the delivery of long-term growth
Awards are subject to a three-year performance period, with a subsequent No change to quantum
two-year holding period. Dividend equivalents accrue over the performance and
holding period. Stephen Bird: 350% of salary
Awards are subject to two equally weighted performance metrics linked to Stephanie Bruce: 200% of salary
long-term strategic priorities and the creation of long-term shareholder
value. 2023 performance metrics are set out below
Awards are subject to malus and clawback terms.
Shareholding requirements Executive Directors are required to build up a substantial interest in Company No change to quantum
shares. The share ownership policy for executive Directors requires shares up
to the value of the shareholding requirement to be held for a period of two Stephen Bird: 350% of salary
years following departure from the Board.
Stephanie Bruce: 300% of salary
Performance conditions for 2023 annual bonus
Financial (65% weighting) Investment performance (15%), Adjusted operating profit (35%), Net flows
excluding liquidity (15%)
Non-financial (35% weighting) Performance against Customer (10%) and ESG objectives (incorporating people
engagement and diversity metrics, and environmental measures) (15%) and
progress on key strategic initiatives (10%)
Due to commercial sensitivity, actual targets and ranges will be disclosed at
the end of the performance period. The Remuneration Committee retains an
appropriate level of flexibility to apply discretion to ensure that
remuneration outcomes reflect a holistic view of overall performance,
including conduct and culture.
Performance conditions for 2023 Long-term incentive plan
Target range(1)
Adjusted Diluted Capital Generation per share (50% weighting) 5% - 15% CAGR
Relative TSR(2) (50% weighting) Equal to median - equal to upper quartile
1. Straight line vesting occurs between threshold and maximum. 25% vesting
for threshold performance.
2. The peer group is made up of the following global asset management peers:
AJ Bell, Alliance Bernstein, Amundi, Ashmore Group, DWS Group, Hargreaves
Lansdown, IntegraFin Holdings, Janus Henderson Group, Jupiter Fund Management,
Liontrust Asset Management, Man Group, Ninety One, Quilter, Rathbones Group,
St James's Place, Schroders.
Directors' remuneration in 2022
This section reports remuneration awarded and paid at the end of 2022 in
further detail, including payments to past Directors.
Single total figure of remuneration - executive Directors (audited)
The following table sets out the single total figure of remuneration for each
of the individuals who served as an executive Director at any time during the
financial year ending 31 December 2022:
Executive Basic salary for year Taxable benefits in year Pension allowance paid in year Bonus paid in cash Bonus deferred £000s(2) LTIP with period ending 2019 EIP Total Total fixed Total variable
£000s
£000s(1)
£000s
£000s
in the year
for the year
Directors
£000s £000s
£000s £000s £000s
Stephen Bird 2022 875 1 158 331 331 - - 1,696 1,034 662
2021 875 1 158 880.5 880.5 - - 2,795 1,034 1,761
Stephanie Bruce(3) 2022 538 1 97 122 122 791 (139) 1,532 636 896
2021 538 1 97 321 321 - - 1,278 636 642
1. This includes the taxable value of all benefits paid in respect of the
relevant year. Included for 2022 are medical premiums at a cost to the group
of £606 for executive Directors.
2. This represents 50% of the total bonus award and is delivered in shares
which will vest in equal tranches over a three-year period.
3. The final outcome of Stephanie Bruce's one off award is included in the
column titled 'LTIP with period ending in the year', for the three tranches
which vested in 2020, 2021 and 2022. This figure includes dividends awarded
over the performance period and is calculated on the basis of the share price
on date of exercise as previously disclosed in RNS announcements. Stephanie
Bruce is the only current Director who participated in the 2019 Executive
Incentive Plan (EIP). The vesting outcome was determined to be 25% (details
can be found on page 111). The final outcome was therefore calculated as £46k
(and so £139k lower than stated in the 2019 Annual report and accounts). This
adjustment is reflected in the table above.
Base Salary (audited)
There was no change to the base salaries of executive Directors in 2022.
Pension (audited)
Under the Directors' Remuneration Policy approved at the 2020 AGM, and
consistent with the proposed policy for 2023, the executive Directors received
a cash allowance in lieu of pension contributions of 18% of base salary.
Annual Bonus Plan
The following section contains details on the targets and the Remuneration
Committee's assessment of outcomes for the period 1 January 2022 to 31
December 2022 against each of the elements of the executive Director bonus
scorecard.
Financial performance metrics - 75% of total scorecard outcome
Weighting Threshold Target Stretch Actual Result
(% of overall scorecard)
(25% of maximum)
(50% of maximum)
(100% of maximum)
(% of overall outcome)
Investment performance - % AUM above benchmark average of three-year and 20% 55% 65% 70% 61.5% 8.25%
five-year for all asset classes
Net flows(1, 2) (£bn) 15% (3.2) 7.2 28 (12) 0%
Adjusted operating profit before tax(2) (£m) 40% 323 336 363 196 0%
1. Excluding LBG tranche exits and cash/liquidity.
2. Excludes ii as financial targets were set prior to acquisition.
Non-financial performance metrics - 25% of total scorecard outcome
Category Highlights from assessment Result
(% of overall outcome)
Environment (5%): The environmental measures we selected focused on the important contribution 5%
our Company has to make as a global institutional investor and a responsible
Improvement on decarbonisation and progress on Operational Net Zero company. The Committee considered more than ten quantitative and qualitative
measures. Our Sustainability and TCFD report, available on our website,
contains detail on our performance in this area. Key factors in the
determination were:
- The range of climate solutions developed across the
asset classes globally, noting the Climate product strategy group which shapes
our climate and net zero offering.
- We are building the tools to track carbon intensity
and we have a clear stance on our climate priorities as investors. There has
been proactive engagement with clients and companies we invest in, including a
stated policy on voting action.
- Reduction in the carbon footprint for 2022,
significantly less than the 2018 baseline. The Committee noted the ongoing
trends that point to abrdn meeting our published target of 50% less than the
2018 baseline by 2025.
Category Highlights from assessment Result
(% of overall outcome)
Social/people (8%): Improvements from baseline on People engagement, sustained abrdn is a people business and we believe that in order to succeed it needs to 6%
progress on gender representation and ethnicity diversity targets embed diversity, equity and inclusion within a strong and shared cultural
framework, enabling us to continue to attract and maintain an engaged and
diverse talent base. The Committee considered 10 quantitative and additional
qualitative measures, including data points relating to gender representation
across the workforce, employee engagement, ethnicity data and new hire
statistics.
- Increased female representation in senior leadership
roles (to 39% from 36% in 2021) and ELT succession plans (up 50% on 2021).
- Our Gender Pay Gap has been reduced for the fifth
consecutive year.
- 35% of early career roles were filled by ethnic
minorities (which is above the 2025 target), helping to improve the diversity
of our talent pipeline.
- Improved CEO and ELT visibility across the
organisation, with clarity on strategy and improved two-way communication via
new channels.
- 30 Culture Champions across the business and over 600
leaders have been engaged with the local roll out of our Commitments, helping
to embed this culture throughout the organisation and the colleague lifecycle.
- Despite the challenges posed by enacting a major
change agenda, engagement levels at the end of 2022 held up at 50% (2021:
51%). Whilst we are not where we need to be, we have clear plans in place to
build engagement through 2023. 76% of employees rated abrdn as an Inclusive
organisation (up from 70% in 2021).
Customer (12%): Our three vector model gives us an extremely diverse customer base, from 11%
institutional to adviser to retail. We therefore measure our success in
Measured across the Adviser, Personal and Investments vectors delivering for our customers with reference to vector specific quantitative
and qualitative metrics that holistically capture the experience of our
different client groups. The Committee considered more than 25 quantitative
and qualitative measures from internal and external sources. Key factors in
the determination were:
- For the Investments vector positive feedback was noted via the
Voice of the Client survey, covering global clients across all asset classes,
rating abrdn favourably on a number of areas across the various client
experience steps. Overall client service and trust where amongst the areas of
noteworthy recognition. There was also a strong RFP hit rate relative to prior
year and no increase in redemptions in spite of the toughest investment year
in half a century.
- Net promoter score (NPS) for the Adviser vector of 57% (which
compared favourably relative to other leading companies) and was significantly
up on the baseline from 2021. Significant improvement in customer satisfaction
scores for the Adviser vector as well as improved survey responses to the
question indicating intent for "more business" and external accolades received
by the abrdn Wrap platform.
- Within the Personal vector, ii reported a 4% increase
from the prior year in their Active and Engaged customer segment as well as
attracting numerous market awards including Which? Recommended SIPP Provider
2022 and a Trust Pilot score of 4.7.
In considering whether the bonus outcomes derived from the scorecards were
fair in the context of the overall results, the Remuneration Committee took
into account the feedback received from the Audit Committee and the Risk and
Capital Committee on material accounting, reporting and disclosure matters and
the management of risk within the business. They also considered factors
including the shareholder experience and pay for the wider workforce. In light
of these, and noting the maintenance of our dividend pay out policy, a final
determination was made that no adjustment should be made to the bonus outcomes
set out above.
2020-2022 Long-term Incentive Plan (LTIP) outcome
The following table details the targets and assessment of outcomes for the
2020-2022 LTIP award. The performance period for this award concluded on 31
December 2022. The Committee concluded that the award had not met the required
threshold performance and the shares will therefore lapse.
Threshold Maximum Actual outcome % vesting
Capital Generation per share (CAGR) 11% 23 % (4%) 0%
Relative TSR Median Upper quartile Below median 0%
Payments to past Directors and payments for loss of office (audited)
Payments made to former executive Directors that have not been previously
reported elsewhere are reported if they are in excess of £20,000. No payments
to past directors or payments for loss of office were made during the year.
Shareholdings and outstanding share awards
This section reports our executive Directors' interests in shares.
Directors' interests in shares (audited)
Our shareholding requirements for executive Directors are detailed on page
107. The Directors' Remuneration Policy requires executive Directors to
accumulate and maintain a material long-term investment in abrdn plc shares.
The Remuneration Committee reviews progress against the requirements annually.
Personal investment strategies (such as hedging arrangements) are not
permitted for the purposes of reducing the economic exposure arising from the
shareholding requirements.
The following table shows the total number of abrdn plc shares held by the
executive Directors and their connected persons:
Unvested shares
Total number of shares owned at 1 January 2022 Shares acquired during the period 1 January 2022 and 31 December 2022 Total shares owned as at 31 December 2022(1) Options exercised during the period 1 January 2022 and 31 December 2022 Vested but unexercised share options Subject to performance conditions(2) Not subject to performance conditions(3) Shares lapsed
Stephen Bird(4) 700,000 82,355 782,355 32,355 - 3,426,584 475,399 -
Stephanie Bruce(5) 360,000 246,633 606,633 139,924 - 1,462,891 194,265 -
3. There were no changes to the number of shares held by executive Directors
between 31 December 2022 and 27 February 2023.
4. Includes: the 2020 LTIP and 2021 LTIP awards and the 2022 LTIP awards
granted in 2022 disclosed below (awards subject to performance targets over
the three-year period ending 31 December 2024), excluding, in each case,
shares to be awarded in lieu of dividend equivalents.
5. This comprises deferred bonus awards. It does not include shares to be
awarded in lieu of dividend equivalents.
6. On 11 April Stephen Bird exercised the first tranche of the deferred
portion of his 2020 annual bonus award. The share price used for exercise was
205.70 pence. This resulted in a gain of £66,554.
7. On 9 August Stephanie Bruce exercised the final tranche of her one-off
award and the first tranche of the deferred portion of her 2020 annual bonus
award. The share price used for exercise was 161.15 pence. This resulted in a
gain of £225,488.
The following table shows the number of qualifying awards included in
assessing achievement towards the shareholding requirement, as at 31 December
2022. The total Qualifying holding includes shares held outright (which derive
from vested and exercised awards plus any purchased shares) as well as
Qualifying unvested awards. Purchased shares are valued at the higher of the
cost of the purchase as disclosed in RNS announcements or the closing market
price on 30 December 2022. Qualifying unvested awards include 50% of the value
(as a proxy for the payment of tax due on the exercise of the awards) of
awards not subject to performance conditions and which have not yet vested.
Qualifying unvested awards
Number of shares under the deferred share plan which are not subject to Number of shares under option under long-term incentive plans which are no Total Qualifying holding (shares held from table above and 50% of Qualifying Value of holding(2) Shareholding requirement Basic Total of the value of shares owned and 50% of the value of qualifying awards Shareholding requirement met?
performance conditions longer subject to performance conditions unvested awards)(1)
(as % salary)
salary at 31 December 2022 as a % of salary
Stephen Bird 475,399 - 1,020,055 £2,216,023 350% £875,000 253% In progress
Stephanie Bruce 194,265 - 703,766 £1,139,485 300% £538,125 259% In progress
1. Of the total number of shares shown, Stephen Bird purchased 750,000
shares at a total cost of £1,705k and Stephanie Bruce purchased 238,571
shares at a total cost of £515k.
2. The closing market price at 30 December 2022 used to determine the value
of non-purchased shares was 189.25 pence.
Executive Directors who have not yet satisfied the shareholding requirement
are expected to accumulate shares until they have fully met their shareholding
requirement. They are required to hold 100% of vested shares (post-tax)
granted under the Company's share plans (including any dividend equivalents)
until they have met their shareholding requirement. All other shares acquired
and held by the executive Director or owned indirectly by a partner or family
trust also count towards the shareholding requirement.
Stephen Bird and Stephanie Bruce, who were appointed during 2020 and 2019
respectively, have not yet met the shareholding requirement, however the
Committee is satisfied with the progress they have made towards their
respective requirements given their tenure.
Vesting of the CFO Deferred Award
The third anniversary of the award was 3 June 2022 and vesting of the final
tranche was determined based on performance up to that date. The award had a
maximum value at grant of £750,000, and tranches one and two of the award
vested at 100% in 2020 and 2021 respectively.
As previously disclosed, the vesting level of the third tranche was considered
based on the final achievement against the efficiency targets. The outcome
would be adjusted by the Remuneration Committee to ensure that the overall
vesting of the award is commensurate with the final achievement against the
efficiency targets.
The Remuneration Committee reviewed the outcome against the £175m (baseline
target) and £230m (maximum target) in June 2022. As at 31 December 2021,
actions had been taken which delivered £400m of annualised synergies,
benefiting 2021 operating expenses by £320m (2020: £287m) (as published on
page 50 of our 2021 ARA). Group Internal Audit reviewed and verified the data
in relation to these efficiency targets for the period of the CFO's tenure,
and the Remuneration Committee concluded that the final outcome was in excess
of the stretch target of £230m required for maximum vesting. Performance was
further assessed by the Committee taking into account the CFO's personal
performance and conduct. Following checks with the Audit Committee and the
Risk and Capital Committee to ensure there were no other matters which the
Committee should take into account when determining this outcome, the
Remuneration Committee approved the vesting level of the final tranche of the
Award at 100% and the award vested on 3 June 2022. Ms Bruce exercised these
shares on 9 August 2022 and they remain subject to Clawback terms for a period
of up to five years from the date of award, as set out in the Remuneration
Policy.
Executive Incentive Plan (EIP) outcome (audited)
Awards granted under the 2019 EIP to Stephanie Bruce and former executive
Directors, set out in full on page 87 of the Annual report and accounts 2019,
and summarised below, completed their performance period on 31 December 2022.
The Remuneration Committee reviewed the outcomes and concluded that three of
the four elements had failed the performance hurdle and therefore lapsed.
Measure Performance underpin hurdle Actual performance Outcome (as % of maximum opportunity)
Investment performance At least 55% AUM by value to be outperforming the benchmark 65% 25%
Flows Gross new business flows underpin of £235bn (1) £175bn 0%
Net new business flows underpin of £30bn (2) (£8bn)
Return on adjusted equity At least 17% 12% 0%
Cost/Income ratio 73% (3) 82% 0%
1. Flows exclude investment in cash & liquidity funds and total Lloyds.
2. Flows exclude investment in cash & liquidity funds and strategic
insurance partners.
3. The Cost/Income ratio was restated from 65% to 73% to remove the impact
of JVs & Associates from the 2022 target and outcome following the change
to how these are accounted for in 2021.
The following amounts had been previously disclosed in respect of each
Director and an adjustment is set out below for each in light of the
performance assessment. Note the figure for Stephanie Bruce is disclosed as
part of the single total figure of remuneration on page 108.
Participant Total EIP value deferred (£000s) EIP value following Original single total Adjusted single total
performance outcome (£000s) figure disclosure for 2019 (£000s) figure disclosure for 2019 (£000s)
Martin Gilbert 374 93.5 1,219 938.5
Keith Skeoch 563 141 1,472 1,050
Rod Paris 462 115.5 1,158 811.5
Bill Rattray 97 24 352 279
Awards granted in 2022 (audited)
The table below shows the key details of the LTIP and deferred awards granted
in 2022:
Participant Type of Basis of award % of Face value Number of shares awarded % payable Details on performance conditions
award
salary
at grant(1)
for threshold performance
Stephen Bird Nil-cost option LTIP 350% £3,062,500 1,447,169 25% Awards are subject to performance against targets measured over three years as
set out on page 104 of the Annual report and accounts 2021
Stephanie Bruce Nil-cost option LTIP 200% £1,076,250 508,576
Stephen Bird Nil-cost option Deferred Bonus Not applicable £880,466 416,060 Not applicable Not applicable
Stephanie Bruce Nil-cost option £320,856 151,619
1. The share price used to calculate the number of shares for the awards was
211.62 pence (the five day average price from 31 March 2022).
Share dilution limits
All share plans operated by the Company which permit awards to be satisfied by
issuing new shares contain dilution limits that comply with the guidelines
produced by The Investment Association (IA). On 31 December 2022, the
Company's standing against these dilution limits was 0.22% where the guideline
is no more than 5% in any 10 years under all discretionary share plans in
which the executive Directors participate and 0.71% where the guideline is no
more than 10% in any 10 years under all share plans.
As is normal practice, there are employee trusts that operate in conjunction
with the Executive LTIP, the abrdn Discretionary Plan, the deferred elements
of the abrdn plc annual bonus plan, the Aberdeen Asset Management deferred
plans and the abrdn all-employee plans. On 31 December 2022 the trusts held
65,858,129 shares acquired to satisfy these awards. Of these shares,
10,716,059 are committed to satisfying vested but unexercised awards. The
percentage of share capital held by the employee trusts is 3.29% of the issued
share capital of the Company - within the 5% best practice limit endorsed by
the IA.
Promoting all-employee share ownership
The Company promotes employee share ownership with a range of initiatives,
including:
- The abrdn plc (Employee) Share Plan which allows UK employees
(our largest jurisdiction) to buy abrdn plc shares directly from earnings.
A similar tax-approved plan is used in Ireland. At 31 December 2022, 1,552
individuals in the UK and Ireland were actively making monthly contributions
averaging £72. At 31 December 2022, 1,694 individuals were abrdn plc
shareholders through participation in the Plan.
- The Sharesave Plan which was offered in 2022 to eligible
employees in the UK. This plan allows UK tax resident employees to save
towards the exercise of options over abrdn plc shares with the option price
set at the beginning of the savings period at a discount of up to 20% of the
market price. At 31 December 2022, 1,861 individuals were saving towards one
or more of the Sharesave offers.
Executive Directors' external appointments
Subject to the Board's approval, executive Directors are able to accept a
limited number of external appointments to the boards of other organisations
and can retain any fees paid for these services. Both Stephen Bird and
Stephanie Bruce held representative directorships on behalf of the Group
during the year for which they received no fees. Significant external
positions held during the year are set out below.
Executive Director Role and Organisation 2022 Fees
Stephen Bird Member of the Financial Services Growth & Development Board(1) £nil
Board member at the Investment Association(2) £nil
1. Appointed on 11 May 2022.
2. Appointed on 27 April 2022.
Executive Directors' remuneration in context
Pay compared to performance
The graph shows the difference in the total shareholder return at
31 December 2022 if, on 1 January 2013, £100 had been invested in abrdn plc and in the FTSE 100 respectively. It is assumed dividends are reinvested in both. The FTSE 100 has been chosen as abrdn plc is a member of this FTSE index.
Total shareholder return of abrdn plc compared to the FTSE 100 index
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
The following table shows the single figure of total remuneration for the
Director in the role of Chief Executive Officer for the same 10 financial
years as shown in the graph above. Also shown are the annual incentive awards
and LTIP awards which vested based on performance in those years.
Year ended Chief Executive Officer Chief Executive Officer single total figure of remuneration (£000s) Bonus outcome/ annual incentive rates against maximum opportunity (%) Long-term incentive plan vesting rates against maximum opportunity (%)
31 December
2022 Stephen Bird 1,696 30 0
2021 Stephen Bird 2,795 80.5 -
2020 Stephen Bird 1,044 48 -
Keith Skeoch 1,075 48 -
2019(1) Keith Skeoch 1,050 9 -
2018(1,2) Keith Skeoch 814 10 -
Martin Gilbert 814 10 -
2017(2) Keith Skeoch 3,028 82 70
Martin Gilbert 1,317 56 -
2016 Keith Skeoch 2,746 81 31.02
2015 Keith Skeoch 1,411 87 40.77
2015 David Nish 2,143 90 40.77
2014 David Nish 6,083 95 100
2013 David Nish 4,206 75 64
1. The outcome has been updated to reflect the EIP vesting.
2. Co-CEOs.
Relative importance of spend on pay
The following table compares what the Company spent on employee remuneration
to what is paid in the form of dividends to the Company's shareholders. Also
shown is the Company's adjusted profit before tax which is provided for
context as it is one of our key performance measures:
2022 % change 2021
Remuneration payable to all Group employees (£m)(1) 549 -9% 604
Dividends paid in respect of financial year (£m) 295 -4% 308
Share buybacks and return of capital (£m) 302 637% 41
Adjusted profit before tax (£m) 253 -22% 323
1. In addition, staff costs and other employee related costs of £88m (2021:
£97m) and £11m (2021: £53m) are included in restructuring and corporate
transaction expenses and in cost of sales respectively. See Note 6 of the
Group financial statements for further information.
Annual percentage change in remuneration of Directors compared to UK based employees
The table below shows the percentage year-on-year change in salary, benefits
and annual bonus in the relevant year for the executive Directors, along with
any percentage change in fees for the non-executive Directors, compared to the
average UK-based Group employee. The Remuneration Committee considers this the
most appropriate comparison given the location of the executive Directors and
that the Group does not operate a harmonised salary and benefits structure
across its global operations. Year on year movement on base salaries or
Director fees is primarily attributable to part-year appointment changes.
% Base salary/fee Annual bonus outcome % Benefits(1)
2022 2021 2020 2022 2021 2020 2022 2021 2020
Executive Directors Stephen Bird(2) - 100% - -62% 234% - - - -
Stephanie Bruce - - 74% -62% 69% 54% - - 100%
Non-executive Directors(3,4) Sir Douglas Flint - - - - - - - - -
Jonathan Asquith - - 202% - - - - - -
Catherine Bradley - - - - - - - - -
John Devine 6% -3% -2% - - - -100% - -100%
Hannah Grove 334% - - - - - - - -
Pam Kaur - - - - - - - - -
Brian McBride -13% 59% - - - - - - -
Michael O'Brien - - - - - - - - -
Martin Pike -60% - -3% - - - - - -100%
Cathleen Raffaeli 10% - - - - - - - -100%
Jutta af Rosenborg -55% - - - - - - - -
Cecilia Reyes -14% - 292% - - - -100% - -
UK-based employees⁵ - - 2.5% -47% 50% -52.5% - - 17%
1. The change in benefits figures for employees (including executive
Directors) are based on the change in medical premium paid by the Group on
their behalf. Benefits do not include pension contributions for these
purposes.
2. Stephen Bird was appointed 1 July 2020.
3. Remuneration for non-executive Directors and the Chairman is disclosed on
page 116.
4. Martin Pike and Jutta af Rosenborg stepped down from the Board with
effect 18 May 2022. Cecilia Reyes stepped down from the Board with effect 30
September. Catherine Bradley, Pam Kaur and Michael O'Brien were all appointed
to the Board in 2022 and therefore no year on year comparison can be made on
their fees.
5. Disclosure is made on the basis of a 1 April 2021 to 1 April 2022
comparison and so does not include the increases made in 2022 with effect from
1 October 2022 (as referred to in the section below).
How pay was set across the wider workforce in 2022
Our principles for setting pay across the wider workforce are consistent with
those for our executive Directors, in that the proportion of the remuneration
package which is linked to performance increases for more senior roles within
the Company as responsibility and accountability increase.
Base salaries are targeted at an appropriate level in the relevant markets in
which the Group competes for talent. The Remuneration Committee considers the
base salary percentage increases for the Group's broader UK and international
employee populations when determining any annual salary increases for the
executive Directors. In 2022, a Group-wide decision was made not to carry out
a salary review and, as disclosed in the Annual report and accounts 2021, the
same approach was applied to executive Directors for 2022 where no increases
were applied.
Over the course of 2022 global inflationary pressures impacted our colleagues
and in response the Company decided to bring forward the 2023 salary review to
have an effective date of 1 October 2022 (rather than 1 April 2023) for
individuals who earned less than £75,000 per annum (or local country
equivalent) on a full time equivalent basis and who had not had a material
increase in the previous 18 months. This captured approximately 40% of our
population. The average increase for those eligible employees was 6%, with the
highest percentage increases typically at the most junior job levels.
The eligibility criteria for participation in variable pay plans is set so
that more senior individuals have a greater proportion of their pay linked to
performance. Some colleagues at more junior levels are not eligible to
participate in the bonus plan, with their package instead consisting of only
fixed pay, including a higher salary and therefore higher salary linked
benefits (such as pension), ensuring certainty of outcome for these
individuals compared to peers who are eligible to participate in the bonus
plan.
For roles where variable remuneration eligibility is retained, our clear
approach is designed to support and reward performance at a company, team and
individual level. Performance related variable remuneration includes deferred
variable compensation at a suitable level for the employee's role, ensuring a
performance link over a longer time horizon than a single year. Variable
remuneration for employees, including executive Directors, is determined as a
total pool which is distributed across the business based on the performance
of each vector and function. Individuals are then considered for a bonus
payment on the basis of their individual performance objectives and goals,
taking into account conduct.
The Group engaged with its employees in 2022 through the annual Viewpoints
full company survey. The survey included an opportunity for employees to
provide feedback to the Board on pay and benefit matters. Additionally, the
Board Employee Engagement (BEE) programme continued with a variety of ways to
connect with and gather feedback from employees globally including listening
sessions, network engagement and 'meet the NEDs' sessions. These provide
opportunities to have direct communication between employees and NEDs on a
wide range of topics, including remuneration. The representative NED is able
to provide updates and insights at each Board meeting ensuring that employee
views are understood and can be taken into account. The representative NED
also shares updates with employees via the BEE programme sessions.
The Group operates a Compensation Committee comprising the Chief People
Officer (Chair), Chief Financial Officer and Chief Risk Officer, the role of
which is to consider the implementation of the remuneration policy across the
Group. The terms of reference of the Compensation Committee are set by the
Remuneration Committee and the Chair of the Compensation Committee formally
reports to the Remuneration Committee on all matters which fall within the
Compensation Committee's remit.
Pay ratio
The table below sets out the ratio of CEO pay to the median, 25(th) and 75(th)
percentile total remuneration of full-time equivalent UK employees. We have
identified the relevant employees for comparison using our gender pay gap data
set (snapshot data from 5 April 2022), referred to as Methodology B in the
legislation. This was chosen by the Remuneration Committee as it utilised a
data set which had already been processed and thoroughly reviewed, and this
enabled timely reporting for disclosure purposes. Some employing entities are
excluded from the gender pay gap calculation in line with the regulations due
to the number of individuals employed by these entities being less than 250.
The Committee considered this would not have a material impact on the outcome
of the pay ratio calculation given the limited number of individuals this
excludes, relative to the total population being captured, and the range of
the remuneration for those excluded individuals, which was spread across
quartiles.
The remuneration paid to each of the individuals identified under methodology
B was reviewed against other individuals within the quartile both above and
below. The individuals identified at the 25(th) percentile and the 50(th)
percentile had since left the business, therefore the next identified
individuals were selected. The individual identified at the 75(th) percentile
had been promoted in the year, therefore the next identified individual was
selected. Benefits figures were based on the medical premium paid by the
Company on behalf of employees.
The ratio has decreased from 2021, which reflects the fact that the CEO has a
greater level of remuneration at risk which is dependent on Company
performance; based on performance in 2022, the bonus for the CEO paid out at
30.25% of maximum, compared to 80.5% of maximum in 2021. Consistent with that,
the trend for bonus payments across all employees has also reduced, but not as
materially as is the case for the CEO. The Committee is comfortable that the
pay ratio reflects the pay and progression policies and Remuneration
Philosophy across the Company as set out above. Further detail on the make up
of workforce pay is set out below.
Year Method 25(th) percentile 50(th) percentile 75(th) percentile
Stephen Bird 2022 Option B 35 25 16
Stephen Bird 2021 Option B 62 45 25
Stephen Bird/Keith Skeoch 2020 Option B 49 30 18
Keith Skeoch 2019 Option B 34 23 13
Keith Skeoch 2018 Option B 30 19 12
Base salary Total pay
(£000s) (£000s)
CEO remuneration 875 1,696
25(th) percentile employee 40 48
50(th) percentile employee 55 69
75(th) percentile employee 82 107
Remuneration for non-executive Directors and the Chairman
Single total figure of remuneration - non-executive Directors (audited)
The following table sets out the single total figure of remuneration for each
of the non-executive Directors who served as a Director at any time during the
financial year ending 31 December 2022. Non-executive Directors do not
participate in bonus or long-term incentive plans and do not receive pension
funding:
Non-executive Directors Fees for year ended Taxable benefits in Total remuneration
31 December
year ended
for the year ended
£000s
31 December
31 December
£000s
£000s
Sir Douglas Flint(1) 2022 475 - 475
2021 475 - 475
Jonathan Asquith 2022 139 - 139
2021 139 - 139
Catherine Bradley(2) 2022 109 - 109
John Devine 2022 131 - 131
2021 124 2 126
Hannah Grove(2) 2022 126 - 126
2021 29 - 29
Pam Kaur(3) 2022 63 - 63
Brian McBride(4) 2022 105 - 105
2021 121 - 121
Michael O'Brien(3) 2022 63 - 63
Martin Pike(5) 2022 50 - 50
2021 124 - 124
Cathleen Raffaeli(6) 2022 164 - 164
2021 149 - 149
Jutta af Rosenborg(5) 2022 42 - 42
2021 94 - 94
Cecilia Reyes(7) 2022 81 - 81
2021 94 9 103
1. Sir Douglas Flint is eligible for life assurance of 4x his annual fee.
This is a non-taxable benefit.
2. Appointed to the Board with effect from 4 January 2022.
3. Appointed to the Board with effect from 1 June 2022.
4. Total fees include subsidiary Board fees of £30,000 p.a. as a member of
the Standard Life Savings Limited and Elevate Portfolio Services Limited
Boards.
5. Stepped down from the Board with effect from 18 May 2022.
6. Total fees include subsidiary Board fees of £55,000 p.a. as Chair of the
Standard Life Savings Limited and Elevate Portfolio Services Limited Boards.
7. Stepped down from the Board with effect from 30 September 2022.
The non-executive Directors, including the Chairman, have letters of
appointment that set out their duties and responsibilities. The key terms are
set out in the remuneration policy, and can be found on page 130. The service
agreements/letters of appointment for Directors are available to shareholders
to view on request from the Company Secretary at the Company's registered
address (details of which can be found on page 296) and at the 2023 AGM.
Details of the date of appointment to the Board and date of election by
shareholders are set out below:
Chairman/ non-executive Director Initial appointment to the Board Initial election by shareholders
Chairman
Sir Douglas Flint 1 November 2018 AGM 2019
Senior Independent Director
Jonathan Asquith 1 September 2019 AGM 2020
Non-executive Directors
Catherine Bradley 4 January 2022 AGM 2022
John Devine 4 July 2016 AGM 2017
Hannah Grove 1 September 2021 AGM 2022
Brian McBride 1 May 2020 AGM 2020
Cathleen Raffaeli 1 August 2018 AGM 2019
Pam Kaur 1 June 2022 AGM 2022
Michael O'Brien 1 June 2022 AGM 2022
Implementation of policy for non-executive Directors in 2023
The following table sets out abrdn non-executive Director fees to be paid in
2023. Fees for 2023 remain at the current level.
Role 2023 fees(1) 2022 fees
Chairman's fees(2) £475,000 £475,000
Non-executive Director fee(3) £73,500 £73,500
Additional fees:
Senior Independent Director £25,000 £25,000
Chairman of the Audit Committee £30,000 £30,000
Chairman of the Risk and Capital Committee £30,000 £30,000
Chairman of the Remuneration Committee £30,000 £30,000
Committee membership (Audit, Risk and Capital and Remuneration Committees) £17,500 £17,500
Committee membership (Nomination Committee) £10,000 £10,000
Employee engagement £15,000 £15,000
1. The core fee of £73,500 paid to each non-executive Director (including
the Chairman) is expected to total £662k for 2023 (2022: £735k). This is
within the maximum £1,500,000 permitted under Article 87 of abrdn's articles
of association. Total fees including additional duties are expected to amount
to £1,408k for 2023 (2022: £1,407k).
2. The Chairman's fees are inclusive of the non-executive Directors' core
fees and no additional fees are paid to the Chairman where he chairs, or is a
member of, other committees/boards. The Chairman is eligible to receive life
assurance, which is a non-taxable benefit.
3. For non-executive Directors, individual fees are constructed by taking
the core fee and adding extra fees for being the Senior Independent Director,
chairman or member of committees and/or subsidiary boards where a greater
responsibility and time commitment is required.
Non-executive Directors' interests in shares (audited)
The following table shows the total number of abrdn plc shares held by each of
the non-executive Directors and their connected persons:
Total number of shares owned Shares acquired during the period Total number of shares owned at
at 1 January 2022 or date of appointment if later
1 January 2022 to
31 December 2022 or date of cessation if earlier(5)
31 December 2022
Sir Douglas Flint 179,617 20,383 200,000
Jonathan Asquith 102,849 50,865 153,714
Catherine Bradley(1) 10,000 2,181 12,181
John Devine 28,399 - 28,399
Hannah Grove 33,000 - 33,000
Pam Kaur(2) - - -
Brian McBride - - -
Michael O'Brien(2) - - -
Martin Pike(3) 69,476 - 69,476
Cathleen Raffaeli 9,315 - 9,315
Jutta af Rosenborg(3) 8,981 - 8,981
Cecilia Reyes(4) - - -
1. Appointed to the Board with effect from 4 January 2022.
2. Appointed to the Board with effect 1 June 2022.
3. Stepped down from the Board with effect 18 May 2022.
4. Stepped down from the Board with effect 30 September 2022.
5. There were no changes to the number of shares held by the reportable
Directors noted above between 31 December 2022 and 27 February 2023.
Sir Douglas Flint, as Chairman, is subject to a shareholding guideline of 100%
of the value of his annual fee in abrdn plc shares to be reached within four
years of appointment. As set out in the above table, during 2022 he purchased
20,383 abrdn plc shares. The total investment cost of Sir Douglas Flint's
shareholding was £495k, equivalent to 104% of his annual fee. Based on the
share price at 31 December 2022 (189.85 pence), his shareholding is valued at
80% of his annual fee.
The Remuneration Committee
Membership
During 2022 the Remuneration Committee was made up of independent
non-executive Directors. For their names, the number of meetings and committee
member attendance during 2022, please see the table on page 84.
The role of the Remuneration Committee
To consider and make recommendations to the Board in respect of the total
remuneration policy across the Company, including:
- Rewards for the executive Directors, senior employees and the
Chairman.
- The design and targets for any employee share plan.
- The design and targets for annual cash bonus plans throughout
the Company.
- Changes to employee benefit structures (including pensions)
throughout the Company.
The Remuneration Committee's work in 2022
Jan - Mar - 2021 Directors' remuneration report.
- Approve performance for the 2021 bonus targets, 2019 LTIP
targets and 2018 EIP underpins.
- Set 2022 annual bonus scorecard targets and 2022 LTIP targets.
- Updates from the Risk and Audit Committees on relevant matters
for the Committee's consideration when determining pay outcomes.
- Review remuneration outcomes for executive Directors and the
Material Risk Taker population.
Apr - Jun - Conduct retender process for external advisors to the
Remuneration Committee.
- Review Remuneration disclosures required by regulations.
- Review Material Risk Taker identification principles with regard
to the relevant regulations.
- Review and approve changes to the Share Plan rules to ensure all
plans meet best practice.
Jul - Sep - Agree outcome of the final tranche of the CFO's one-off award.
- Review and update the Group Remuneration Policy to reflect
regulatory changes.
- Review the Directors Remuneration Policy in light of the
Company's strategy and market best practice.
- Mid-year review of performance against target for annual bonus
for the executive Directors.
- Review gender pay gap data.
- Update the Remuneration Committee and Compensation Committee's
Terms of Reference.
Oct - Dec - Refine the Directors Remuneration Policy, including consultation
with largest shareholders.
- Finalise bonus pool allocation principles.
- Review 2023 remuneration proposals relating to all-employee
remuneration.
At various points throughout the year the Committee also:
- Made remuneration decisions for the executive leadership team
and other senior employees within the Remuneration Committee's remit,
including approving the design of one-off incentive plans linked to specific
projects.
- Received updates relating to regulatory changes and market best
practice.
- Reviewed minutes of subsidiary Committee meetings and their
governance documents.
External advisers
During the year, the Remuneration Committee took advice from Deloitte LLP (a
member of the Remuneration Consultants Group (RCG)) who were appointed by the
Remuneration Committee in 2017. Given the length of their tenure, and to
ensure the Committee is receiving the best quality advice and value for money,
a retender process was conducted at the start of the year. Following this
review, PwC were appointed as external advisers to the Remuneration Committee,
effective June 2022. PwC, who are also a member of the RCG, demonstrated
detailed knowledge of our sector throughout the process and set out a
competitive fee structure which ensures value for money. The Remuneration
Committee is satisfied that the advice given from both advisers during the
year was objective and independent.
A representative from our external adviser attends, by invitation, all
Remuneration Committee meetings to provide information and updates on external
developments affecting remuneration as well as specific matters raised by the
Remuneration Committee. Outside the meetings, the Remuneration Committee's
Chairman seeks advice on remuneration matters on an ongoing basis. As well as
advising the Remuneration Committee, Deloitte LLP also provided tax,
accounting support, risk management and consultancy services to the Company
during the year. Deloitte Total Rewards and Benefits is an investment adviser
to the trustees of the abrdn (SLSPS) Pension Scheme. Fees paid to Deloitte LLP
during 2022 for professional advice to the Remuneration Committee were
£89,850.
As well as advising the Remuneration Committee, PwC also provided tax, risk
management and consultancy services to the Company during the year. Fees paid
to PwC during 2022 for professional advice to the Remuneration Committee were
£100,000.
Where appropriate, the Remuneration Committee receives input from the
Chairman, Chief Executive Officer, Chief Financial Officer, Chief People
Officer, Global Head of Reward and the Chief Risk Officer. This input never
relates to their own remuneration. The Remuneration Committee also receives
input from the Risk and Capital Committee and the Audit Committee.
Remuneration Committee effectiveness
The Committee reviews its remit and effectiveness each year. The effectiveness
review was conducted externally by IBE.
The review included observation of a meeting, access to papers and interviews
with Committee members. A representative of IBE provided feedback on the
performance of the Committee directly to the Chair and the report and
recommendations were discussed by the Committee. Details of the 2022 review
are on page 81 and reflect the themes raised across the Board and its
Committees.
Shareholder voting
We remain committed to ongoing shareholder dialogue and take an active
interest in voting outcomes.
The remuneration policy was last subject to a vote at the 2020 AGM on 12 May
2020 and the following table sets out the outcome.
Policy 2020 AGM For Against Withheld
% of total votes 91.66% 8.34%
No. of votes cast 1,003,905,073 91,323,405 10,346,991
The Directors' remuneration report was subject to a vote at the 2022 AGM on 18
May 2022 and the following table sets out the outcome.
2021 Directors' remuneration report For Against Withheld
% of total votes 96.23% 3.77%
No. of votes cast 1,009,839,204 39,512,722 8,058,523
Future remuneration policy
This section sets out the remuneration policy for executive Directors and
non-executive Directors, which is subject to a binding vote of shareholders
and will, if approved, take effect from the date of the 2023 AGM.
The Remuneration Committee agreed the following core principles designed to
support our strategy, culture and values which guided the design of the
remuneration framework going forward:
- Simple and easy to understand for participants and wider
stakeholders alike.
- Aligns executive remuneration with the overall performance of
the Company.
- Rewards executives for the delivery of both short-term plans and
long-term returns to shareholders.
- Takes into consideration the external landscape relating to
executive reward.
- Is market competitive to ensure that the Company is able to
attract and retain the right talent to deliver the Company's strategic
ambitions.
In determining the new remuneration policy, the Committee followed a robust
process which included detailed discussions on the content of the policy at
multiple Committee meetings. The Committee considered input from management
(although decisions were taken by the Committee alone to avoid conflicts of
interest), shareholders and its independent advisers.
Remuneration policy for executive Directors
Base salary - there is no change in the operation of this element of pay
compared to the previous policy
Purpose and link to strategy Maximum opportunity
To provide a core reward for undertaking the role, commensurate with the
Salaries for executive Directors are set at an appropriate level to attract
individual's role, responsibilities and experience. and retain individuals of the right calibre and with the experience required.
Whilst no maximum is set, when considering annual incremental increases the
Remuneration Committee is guided by the general increase for the broader
employee population.
The Remuneration Committee may determine larger increases in certain
circumstances, such as: development in role; change in responsibility; where a
new or promoted employee's salary has been set lower than the market level for
such a role and larger increases are justified as the individual becomes
established in the role.
Operation Performance metrics
Normally reviewed annually, taking into account a range of factors including: Not applicable.
(i) the individual's skills, performance and experience; (ii) increases for
the broader employee population; (iii) external market data and other relevant
external factors; (iv) the size and responsibility of the role; and (v) the
complexity of the business and geographical scope.
Pension - there is no change in the operation of this element of pay compared
to the previous policy
Purpose and link to strategy Maximum opportunity
To provide a competitive, flexible retirement benefit in a way that does not Maximum employer contribution aligned to the maximum employer contribution
create an unacceptable level of financial risk or cost to the Company. available to the wider workforce in the relevant jurisdiction.
The current maximum employer contribution available to the UK wider workforce
is 18% of salary.
Operation Performance metrics
Employee contributions are made to the Company's defined contribution pension Not applicable.
arrangement, or equivalent cash allowances are paid.
The level of contribution/cash equivalent is reviewed periodically taking into
account the pension opportunity offered to other employees within the Company.
Benefits - there is no change to the operation of this element of pay compared
to our previous policy
Purpose and link to strategy Maximum opportunity
To provide market competitive and cost effective benefits. There is no maximum value of the core benefit package. The costs associated
with benefits provision are monitored and controlled by the Remuneration
Committee.
Maximum contributions under 'all-employee' share plans will be set in line
with other employees and within the limits set by the relevant tax authority.
Operation Performance metrics
In line with other employees, executive Directors are provided with a package Not applicable.
of core benefits, which include (i) private healthcare; (ii) death in service
protection; (iii) income protection (iv) reimbursement of membership fees of
professional bodies; and (v) eligibility for the 'all-employee' share plan.
Executive Directors are also eligible to participate in the Company's flexible
benefits programme.
Executive Directors are provided with a health screening assessment.
Specific benefit provision may be subject to change from time to time.
Additional benefits may be provided on recruitment or to support relocation
with the Remuneration Committee's agreement.
Annual Bonus - financial performance measures account for a minimum of 65% of
the maximum opportunity (previously 75%). The optionality to include personal
performance measures has been removed.
Purpose and link to strategy Maximum opportunity
To reward the delivery of the Company's business plan in a range of financial The maximum award opportunity in respect of any financial year is based on
and non-financial areas and to align executives' interests to those of role and is up to 300% of salary.
shareholders and our customers and clients.
Operation Performance metrics
An annual incentive programme in respect of which the performance measures, Performance is assessed against a range of key financial and non-financial
and their respective weightings and targets, are normally set annually by the measures.
Remuneration Committee.
At least 65% will be based on financial performance measures.
Normally 50% of the award will be paid in cash. No less than 50% will be
deferred into shares vesting in equal tranches over a three-year period. A For threshold performance, the award opportunity is 25%, with 100% of the
retention period may be applied, as required by relevant regulations. award payable for maximum performance. Payouts between threshold and maximum
(100%) are determined on an annual basis. Details of the payout schedule will
Where required for regulatory purposes, deferred awards may be made in a be disclosed in the relevant DRR.
combination of share awards and notional fund awards (which are conditional
rights to receive a cash sum based on the value of a notional investment in a The Remuneration Committee exercises its judgement to determine awards at the
range of abrdn funds). end of the performance period, which in normal circumstances will be one
financial year, and will use its discretion to amend them if material change
Deferred awards may include the right to receive (in cash or shares) the value is required to ensure that the outcome is fair in the context of overall
of the dividends that would have accrued during the vesting period. Company and individual performance and conduct. The Risk and Capital Committee
and the Audit Committee advise the Remuneration Committee as part of this
Awards are subject to malus and clawback. process to ensure that the performance outcomes have not been achieved by
assuming inappropriate levels of risk.
The Remuneration Committee may adjust and amend awards in accordance with the
rules.
Long-Term Incentive Plan - there is no change to the operation of this element
of pay compared to our previous policy
Purpose and link to strategy Maximum opportunity
To align with our shareholders and promote sustainability of our performance The maximum award opportunity in respect of any financial year is based on
by rewarding the delivery of long-term growth in shareholder value. role and is up to 500% of salary.
However, when combined with the annual bonus, the total incentive opportunity
may not exceed 700% of salary. This means that in financial years where the
annual bonus opportunity is set at the maximum (300% of salary), the maximum
LTIP award would be 400% of salary.
Up to 25% of the award vests for threshold performance.
Operation Performance metrics
An annual award of performance shares, normally subject to a three-year Performance metrics are set by the Remuneration Committee and are linked to
performance period, with a subsequent two-year holding period. the achievement of the Company's long-term strategic priorities and the
creation of long-term shareholder value.
Performance targets are normally set annually for each three-year cycle by the
Remuneration Committee. LTIP awards are subject to at least two performance metrics, with at least one
being absolute in nature (e.g. an earnings based metric) and one being a
Awards are subject to review by the Remuneration Committee at the end of the relative metric (e.g. a shareholder return based metric, relative to the
three-year performance period to confirm that vesting of the award is market or competitors).
appropriate in the context of overall performance of the Company and the
individual. The Committee may take advice from the Risk and Capital Committee Subject to these restrictions, the Committee retains the discretion to
and the Audit Committee to determine appropriate vesting. introduce other or additional performance metrics for future awards. Were the
Committee to intend to introduce any such alternative or additional metric(s)
Awards may include the right to receive (in cash or shares) the value of the for future awards, it would expect to consult with the Company's largest
dividends that would have accrued over the performance and holding period. institutional shareholders in advance.
The Remuneration Committee may adjust and amend awards in accordance with the For 2023, the LTIP award will be based on the following metrics:
LTIP rules.
- Growth in Adjusted Diluted Capital Generation per share (50%).
Awards are subject to malus and clawback.
- Relative total shareholder return measured against a bespoke competitor
peer group (50%) (the peer group to be used for the 2023 LTIP is set out on
page 107).
The Remuneration Committee retains the discretion to amend the final vesting
level of awards if material change is required to ensure that they reflect
fairly the performance of individuals or the Company.
Other features
Malus and clawback
Malus and clawback provisions apply to annual bonus and LTIP awards.
Under the malus and clawback provisions, the Remuneration Committee has the
ability to reduce awards that have not yet vested (malus) and can require
repayment of an award (clawback) for a period of up to five years from the
date of award.
The circumstances in which malus or clawback would apply include but are not
limited to:
- A material misstatement of the Group's audited financial
statements prior to the end of the Recovery Period.
- Any failure of risk management, fraud or other material
financial irregularity.
- Material corporate failure.
- An error in the information or assumptions on which the award
was granted, vests or is released, as a result of erroneous or misleading data
or otherwise.
- Serious misconduct by a participant.
- Failure by a participant to meet or maintain appropriate
standards of fitness and propriety.
- Any deliberate or severely negligent act or omission by a
participant which has resulted in significant losses or material reputational
damage to the Company (or any member of the Company's group).
- A material downturn in the financial performance of the Company,
the Company's group, or any member or business unit of the Company for which
the relevant participant works or has responsibility or accountability.
- Misbehaviour or material error by a participant.
Share ownership
Executive Directors are required to build up a substantial interest in Company
shares.
The shareholding requirement for executive Directors remains at 350% of salary
for the CEO and 300% of salary for other executive Directors. The Committee
retains the discretion to reduce this requirement for new joiners to align it
with the higher of their maximum LTIP opportunity or 200% of salary.
The post cessation of employment share ownership policy for executive
Directors requires shares up to the value of the shareholding requirement to
be held for a period of two years following departure from the Board.
Shares received as a result of employment must be accumulated (including
dividend shares) until the shareholding requirements are met.
Vested and unvested shares which are not subject to performance conditions
will count towards the total at 50% (on a notional net of tax basis). Shares
received/exercised will count towards the total of shareholding requirements
at 100%.
Voluntary purchases of shares will count towards the shareholding requirement
and will be only released for sale in exceptional circumstances at the
discretion of the Company Chairman and the Chair of the Remuneration
Committee.
Voluntary purchases of shares will count towards totals at the higher of cost
and market. However, voluntary purchases of shares will not be subject to
post-employment retention rules.
How our proposed remuneration structure supports our long-term strategy and strategic drivers
Our remuneration policy is designed to support our long-term strategy of
delivering shareholder value, by aligning the interests of our executive
Directors with our stakeholders - including our customers, our shareholders
and our people. The performance goals that are set for the short-term element
of variable remuneration reward the delivery of the Company's business plan,
while the long-term element promotes sustainability and alignment by rewarding
the delivery of long-term growth in shareholder value. A significant
proportion of variable remuneration is delivered in the form of shares and
deferred over a period of time, ensuring our Directors are further aligned to
the shareholder experience.
Our overall strategy is to deliver diversified client-led growth. Our
remuneration policy supports this objective by including investment
performance as part of the financial measures, incentivising best in class
impact and growth and incorporating customer and client metrics for
satisfaction as part of the annual bonus non-financial assessment. The four
strategic priorities are specifically supported by the remuneration policy as
follows:
Our priorities How our remuneration structure supports our priorities
Asia - By ensuring our performance metrics are focused on Company
performance and KPIs, individuals are incentivised to deliver strong
A key market for our Investments vector and an area where we are performance across all Company activity globally.
well-positioned to drive growth.
- Investment performance and net flows are measured as part of the
annual bonus assessment, incentivising best in class impact and growth.
- The achievement of strategic milestones will be recognised
within the annual bonus assessment.
Sustainability - ESG factors are included as part of the annual bonus
non-financial assessment, incorporating objectives against Environmental (via
Consideration of ESG factors is essential to more constructive engagement and sustainability and decarbonisation metrics) and Social (via employee
better-informed investment decisions. engagement and diversity metrics).
- Our remuneration structure is weighted to long-term success,
ensuring that executive Directors are incentivised to focus on sustainable
outcomes.
Alternatives - Investment performance and net flows are measured as part of the
annual bonus assessment, incentivising best in class impact and growth.
The growing trends for urbanisation, digitisation and decarbonisation create
significant investment opportunities in real assets. Our Alternatives business - By ensuring our performance metrics are focused on Company
also offers clients access to major areas of European private credit, as well performance and KPIs, individuals are incentivised to deliver strong
as compelling opportunities in the hedge fund sector. performance across all Company activity globally.
- The achievement of strategic milestones will be recognised
within the annual bonus assessment.
- The focus on long-term outcomes via the LTIP incentivises and
rewards future sustainable success and the creation of shareholder value.
UK savings and wealth - By ensuring our performance metrics are focused on Company
performance and KPIs, individuals are incentivised to deliver strong
As financial responsibility continues to move more towards individuals, we performance across all Company activity globally.
have successfully re-positioned our business towards an increasingly
attractive and growing UK savings and wealth market. - The achievement of strategic milestones will be recognised
within the annual bonus assessment.
- The focus on long-term outcomes via the LTIP incentivises and
rewards future sustainable success and the creation of shareholder value.
The remuneration framework appropriately addresses the following principles as
set out in the 2018 Corporate Governance Code.
Code provision abrdn approach
Clarity Incentive arrangements are based on clearly defined financial and
non-financial metrics which are aligned with the Company's strategy for
sustainable long-term growth. The Policy is materially unchanged, providing
further clarity to participants through using a consistent approach.
Simplicity Remuneration arrangements are simple, while still complying with regulatory
requirements. They comprise the following key elements:
- Fixed element: comprises base salary, benefits and pension,
which are aligned to those offered to the majority of the workforce.
- Short-term incentive: annual bonus which incentivises the
delivery of financial and non-financial performance metrics aligned to the
Plan for the year agreed with the Board. Half of the bonus is paid in cash
with the balance deferred over a period of three years.
- Long-term incentive: LTIP which incentivises financial
performance over a three-year period, promoting long-term sustainable value
creation for shareholders tied to established and transparent shareholder
value metrics. Awards are subject to a two-year holding period post vesting.
Risk In line with regulatory requirements, remuneration arrangements across the
Company are designed to ensure that they do not encourage excessive risk
taking. Performance targets for incentive arrangements are set to reward
delivery of the Company's business plan which is set in line with the
Company's risk appetite statement. Variable remuneration of the executive
Directors is delivered predominantly via shares. The executive Directors are
subject to the shareholding requirements, including a post-cessation
requirement (as set out in the shareholding requirement section on page 123),
ensuring they remain exposed to and aligned with the risk profile of the
Company.
The Remuneration Committee retains the flexibility to review and amend
formulaic outcomes to ensure that they are appropriate in the context of
overall performance of the Company, including adherence to risk appetite
limits. The Remuneration Committee takes advice from the Risk and Capital
Committee and Audit Committee as part of this review.
Predictability The Remuneration scenario charts, set out on page 129, provide estimates on
the potential future reward opportunity in a range of scenarios, including
below threshold, target and maximum performance (including share price
appreciation). Conditions around vesting are clear and understandable.
Proportionality Variable remuneration is directly aligned to the Company's strategic
priorities (through the selection of key financial and non-financial
performance metrics), with targets calibrated to ensure that payments are only
made where strong performance is delivered.
As noted above, the Remuneration Committee retains the flexibility to review
formulaic outcomes to ensure that they are appropriate in the context of
overall performance of the Company.
Alignment with culture The remuneration policy at abrdn has been set to be appropriate for the
nature, size and complexity of the Company, recognising variances in markets
and geographies. It has been designed to support the delivery of the Company's
key strategic priorities and is in the best interests of the Company and its
stakeholders, as set out on page 124. A shared culture and values by employees
of the Company is critical to delivery of the Company's strategic priorities.
This is recognised through alignment of the remuneration policy with the wider
workforce whenever possible.
Notes to the policy table
Performance measures and approach to target setting
Performance targets for the Company's incentive arrangements are set on an
annual basis by the Remuneration Committee. The Committee takes into account a
range of factors including business forecasts, prior year performance, degree
of stretch against the performance targets in the business plan, the economic
environment, market conditions and expectations.
The following table sets out details on why the performance measures for the
purpose of the annual incentive plan were chosen. These metrics and the
balance between them may vary over time, but financial metrics will be
weighted no less than 65% of the total.
Financial metrics (overall at least 65% of the maximum opportunity) Non-financial metrics (overall no more than 35% of the maximum opportunity)
Measures to support the delivery of performance in each area are set as part Non-financial metrics chosen to focus management on the delivery of the
of the Company's annual business plan. For reasons of commercial business strategic priorities for the financial year.
confidentiality detailed measures will be disclosed annually in arrears as
part of the remuneration policy implementation report. Metrics may be linked to factors including, but are not limited to:
2023 measures and their weighting are set out below: - ESG (15%) Performance against Environmental objectives
(including sustainability commitments and carbon reduction programmes) and
- Adjusted profit before tax (35%). Social objectives (including gender and ethnicity targets) may be used to
focus management on developing organisational capability and meeting our
- Investment performance (15%). publicly stated commitments.
- Net flows (15%). - Customer (10%) Customer objectives (including customer feedback
and satisfaction scores, NPS rankings and net new business scores) may be used
to measure our success in ensuring that customers remain at the forefront of
our sustainable strategy.
These measures were chosen to ensure a strong alignment with shareholders (via
profitability measure) and a direct link to future financial performance as - Strategic Initiatives (10%) Key strategic objectives will be
set out in the business plan (investment performance and net flows). used to focus executives on specific strategic priorities for the Company
which they can deliver in order to drive improved performance in future years.
The following table sets out details on why the performance measures for the
purpose of the Long-term Incentive Plan (LTIP) were chosen for the 2023
awards.
Growth in Adjusted diluted capital generation per share Relative total shareholder return
Captures a broad measure of the rate of increase in the company's ability to Aligns executive reward with the creation of shareholder value and provides an
generate capital to sustain investment and dividend flows. Adjusted Capital external assessment of Company performance against relevant peers which is
Generation is closely aligned to the measurement of management's performance less influenced by market effects.
in generating sustainable increases in shareholder value from its growth
vectors and strategic relationships, while excluding one-off items and
mark-to-market changes in the fair value of significant listed investments,
which are beyond management's direct control.
Remuneration Committee discretion in relation to existing commitments
The Remuneration Committee reserves the right to make any remuneration
payments and payments for loss of office, notwithstanding that they are not in
line with the policy set out above where the terms of the payment were agreed:
(i) before the policy set out above, or (ii) at a time when a previous policy,
approved by shareholders, was in place provided the payment is in line with
the terms of that policy, or (iii) at a time when the relevant individual was
not a Director of the Company and the payment was not in consideration for the
individual becoming a Director of the Company. For these purposes, payments
include the Remuneration Committee satisfying awards of variable remuneration.
This means making payment in line with the terms that were agreed at the time
the award was granted.
All awards are subject to malus and clawback provisions.
Remuneration Committee discretion in relation to future operation of the
remuneration policy
The Committee will operate variable remuneration plans according to the
respective rules of the plans. The Committee will retain flexibility in a
number of areas regarding the operation and administration of these plans,
including (but not limited to): change of control, changes in regulatory
requirements, variation of share capital, demerger, special dividend, fund
merger, winding up or similar events.
The Committee also retains the discretion within the remuneration policy to
adjust targets and/or set different measures and weightings if events happen
that cause it to determine that the original targets or conditions are no
longer appropriate and that amendment is required so that the targets or
conditions achieve their original purpose. Revised targets/measures will be,
in the opinion of the Committee, no less difficult to satisfy than the
original conditions.
Share awards, under the Company's share plans, may be granted as conditional
share awards, nil cost options or forfeitable shares at the discretion of the
Committee. Awards may at the Committee's discretion be settled in cash (for
example, where required for local legal/regulatory purposes).
The Committee may accelerate the vesting and/or the release of awards if an
executive Director moves jurisdictions following grant and there would be
greater tax or regulatory burdens on the award in the new jurisdiction.
Remuneration policy for new executive Director appointments
Area Policy
Principles In determining remuneration arrangements for new executive appointments to the
Board (including internal promotions), the Committee applies the following
principles:
- The Committee takes into consideration all relevant factors,
including the calibre of the individual, local market practice and existing
arrangements for other executive Directors, adhering to the underlying
principle that any arrangements should reflect the best interests of the
Company and its shareholders.
- Remuneration arrangements for new appointments will typically
align with the remuneration policy.
- In the case of internal promotions, the Committee will honour
existing commitments entered into before promotion.
Components and approach The remuneration package offered to new appointments may include any element
of remuneration included in the remuneration policy set out in this report, or
any other element which the Committee considers is appropriate given the
particular circumstances but not exceeding the maximum level of variable
remuneration set out below.
In considering which elements to include, and in determining the approach for
all relevant elements, the Committee will take into account a number of
different factors, including (but not limited to) typical market practice and
existing arrangements for other executive Directors and internal relativities.
The maximum level of variable remuneration which may be awarded to a new
executive Director, at or shortly following recruitment, shall be limited to
700% of salary. This limit excludes buyout awards which are in line with the
policy as set out below.
Buyouts To facilitate recruitment, the Committee may make an award to buy out
remuneration terms forfeited on leaving a previous employer. In doing so, the
Committee will adhere to regulatory guidance in relation to the practice of
buyout awards to new recruits.
In considering buyout levels and conditions, the Committee will take into
account to the best of their ability the type of award, performance measures
and the likelihood of performance conditions being met in setting the quantum
of the buyout. The buyout award will reflect the foregone award in amount and
terms (including any deferral or retention period) as closely as possible.
Where appropriate, the Committee retains the discretion to utilise Listing
Rule 9.4.2 for the purpose of making an award to buy out remuneration terms
forfeited on leaving a previous employer or to utilise any other incentive
plan operated by the Company.
Service Contracts and loss of office policy for executive Directors
Within executive service contracts, the Committee aims to strike the right
balance between the Company's interests and those of the executive Directors,
whilst ensuring that the contracts comply with best practice, legislation and
the agreed remuneration principles. Contracts are not for a fixed term, but
set out notice periods in line with the executive Director's role.
Area Policy
Notice period Our standard notice policy is:
- Six months by the executive Director to the employer.
- Up to 12 months by the employer to the executive Director.
Executive Directors may be required to work during the notice period or take a
period of 'garden leave' or may be provided with pay in lieu of notice if not
required to work the full notice period.
Termination payments Any payment in lieu of notice will be made up of up to 12 months' salary,
pension contributions and the value of other contractual benefits. The payment
may be made in phased instalments (this will be standard policy for notice
periods of over six months). A duty to mitigate applies.
Non-compete clauses Apply during the contract and for up to 12 months after leaving, at the
Company's choice.
Treatment of incentive awards For the purpose of awards under the annual bonus, long-term incentive plan and
Executive Incentive Plan, approved leavers are defined as those whose office
or employment comes to an end because of death, ill-health, injury or
disability, redundancy, or retirement with the agreement of the employing
company; the sale of the individual's employing company or business out of the
Group or any other reasons at the discretion of the Committee.
Annual bonus plan
Leavers during the award year
For approved leavers, rights to awards under the annual bonus will typically
be pro-rated as a proportion of the performance period, and will be paid at
the normal time in the normal manner (i.e. in cash/ deferred awards as
appropriate and subject to performance), unless the Committee determines that
payments should be accelerated (e.g. on death). For other leavers, rights to
awards under the annual bonus will be forfeit.
Leavers during the deferral period
For approved leavers, outstanding deferred awards under the annual bonus will
typically vest and be released at the scheduled vesting date. The Committee
retains the discretion to apply time pro-rating (over the deferral period) for
approved leavers and to accelerate the vesting and/or release of awards if it
considers it appropriate. For other leavers, rights to deferred awards will be
forfeited.
Awards under the Long-Term Incentive Plan
Leavers during the performance period
For approved leavers, outstanding awards under the LTIP will typically be
pro-rated as a proportion of the performance period and will be released at
the scheduled vesting date subject to performance. Subsequent holding periods
will apply. The Committee retains the discretion to dis-apply time pro-rating
for approved leavers. For other leavers, rights to outstanding awards will be
forfeited.
Leavers during the holding period
Vested awards subject only to a holding period will be retained and released
at the scheduled date.
Legacy awards under the Executive Incentive Plan
Leavers during the deferral period
Outstanding deferred awards under the EIP will typically be paid at the normal
time, subject to performance against the Underpin performance conditions. The
Committee retains the discretion to apply time pro-rating (over the deferral
period) for approved leavers and to accelerate the vesting and/or release of
awards if it considers it appropriate. For other leavers, rights to deferred
awards will be forfeited.
Other payments The Committee reserves the right to make any other payments (including
appropriate legal fees) in connection with an executive Director's cessation
of office or employment where the payments are made in good faith in discharge
of an existing legal obligation (or by way of damages for breach of such an
obligation) or by way of settlement of any claim arising in connection with
the cessation of that executive Director's office or employment.
Change of control Outstanding awards will be treated in line with the terms of the respective
plans.
Scenario charts
The following chart illustrates how much the current executive Directors could
receive under a range of different scenarios along with a comparison to our
current policy:
Diagram removed for the purposes of this announcement. However it can be
viewed in full in the pdf document
Outcomes for the 2023 scenario chart are based on the following:
- Minimum - fixed pay, consisting of salary and pension effective
1 April 2023 (18% of salary), and benefits (the value of taxable benefits are
as shown in the Single Total Figure of Remuneration table for 2022 on page
108).
- Target - fixed pay, 50% of the maximum bonus award, 50% of LTIP
vesting.
- Maximum - fixed pay, 100% of maximum bonus award, 100% of LTIP
vesting plus share price growth.
Maximum + share price growth assumes share price growth of 50% for the LTIP
element (calculated by applying a 50% uplift to the face value at grant of the
LTIP shares).
Remuneration arrangements throughout the Company
When setting the policy for executive Directors' remuneration, the Committee
takes into account the pay and employment conditions elsewhere in the Company,
recognising international variance and jurisdictional differences, where
appropriate. The Committee is informed about the approach to salary increases,
Company-wide benefits offerings including pensions, the structure of incentive
arrangements and distribution of outcomes throughout the wider organisation,
as well as the take-up of all-employee share plans, employee engagement survey
results and employee morale, although it does not directly consult employees
in the Company on the remuneration policy for executive Directors.
The Company applies a consistent remuneration philosophy for employees. In
particular all employees receive a base salary and are eligible to receive
benefits and pensions. The annual bonus cascades throughout the organisation
with quantum and measures set appropriately for each individual's role. The
LTIP, as set out above, is only received by the executive Directors. However
there are different long-term incentives in use throughout the business that
are relevant and in line with regulatory requirements for each business area.
The remuneration philosophy is reviewed at least annually by the Remuneration
Committee and may be updated to ensure that this remains aligned to business
strategy and regulatory requirements as well as being appropriately structured
to attract, retain and incentivise our employees.
Consideration of stakeholder views
The Remuneration Committee values the opportunity to engage in meaningful
dialogue with its investors.
Prior to the 2023 AGM, as detailed in the Committee Chairman's cover letter,
the Committee consulted with key institutional shareholders on the proposed
policy and the changes that were being made. The proposed policy reflects the
discussions with shareholders during the consultation process.
The Company does not explicitly consult with employees when making decisions
pertaining to executive remuneration given the complex nature of these roles
and the global nature of the business. However, via the Board Employee
Engagement programme, employees have the opportunity for direct communication
with the NEDs on a wide range of topics, including remuneration. The
representative NED is able to provide updates and insights at each Board
meeting ensuring that employee views are understood and can be taken into
account.
Remuneration policy for non-executive Directors
No changes are being proposed to the remuneration policy for the Chairman and
non-executive Directors. The policy remains as follows:
Area Policy
Approach to fees - Fees for the Chairman and non-executive Directors are set at an
appropriate level to reflect the time commitment, responsibility and duties of
the position and the contribution that is expected from non-executive
Directors.
- Board membership fees are subject to a maximum cap which is
stated in the Company's articles of association. Any changes to the cap would
be subject to shareholder approval.
Operation - The remuneration policy for non-executive Directors is to pay:
(i) Board membership fees; and (ii) further fees for additional Board duties
such as chairmanship or membership of a committee, the Senior Independent
Director, and service on subsidiary boards, in each case to take into account
the additional responsibilities and time commitments of the roles. Additional
fees may be paid in the exceptional event that non-executive Directors are
required to commit substantial additional time above that normally expected
for the role.
- The Chairman receives an aggregate fee, which includes the
chairmanship of any appropriate Board committee(s).
- The Board annually sets the fees for the non-executive
Directors, other than the fee for the Chairman of the Company which is set by
the Committee.
- Fees are set at a market rate with reference to the level of
fees paid to other non-executive Directors of FTSE100/FTSE250 financial
services companies.
- The Board retains discretion to remunerate the non-executive
Directors in shares rather than cash where appropriate.
Other items - The Chairman and non-executive Directors are not eligible to
participate in any incentive arrangements.
- Additional fees or benefits may be provided at the discretion of
the Committee in the case of the Chairman, and the Board in the case of the
other non-executive Directors, to reflect, for example, life assurance,
housing, office, transport and other business-related expenses incurred in
carrying out their role.
Non-executive Directors, including the Chairman, have letters of appointment
that set out their responsibilities. The key terms are:
- Period of appointment: a three-year term, which can be extended
by mutual consent and is subject to re-election by shareholders in line with
the Company's articles of association and the UK Corporate Governance Code.
- Notice periods: six months for the Chairman. No notice period
for other non-executive Directors.
- Termination payment: there is no provision for compensation
payments for loss of office for non-executive Directors.
If a new Chairman or non-executive Director is appointed, the remuneration
arrangements will normally be in line with those detailed in the remuneration
policy for non-executive Directors above.
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