Remuneration report

Introduction from the DLC remuneration committee chairman

I am pleased to present the Committee’s report on directors’ remuneration.

In accordance with the new UK regulations governing the disclosure and approval of directors’ remuneration, our remuneration report has been split into two parts. The directors’ remuneration policy is being put to a binding shareholder resolution at the forthcoming AGMs and the annual report on remuneration will be put to an advisory shareholder resolution.

Our remuneration policy for executive directors continues to be based on the principle of pay for performance and alignment with shareholders. Annual bonuses are dependent on a scorecard of financial and non-financial elements with robust metrics, and 50% of any bonus is deferred into Mondi shares for three years. The long-term incentive plan rewards sustained financial performance, measured through our percentage Return on Capital Employed (ROCE), and our relative Total Shareholder Return (TSR) compared to other international companies in our sector. Executive directors are also required to build a personal shareholding in Mondi.

Two changes were made in 2013:

  • For LTIP awards in 2013, the ROCE performance requirement was increased to 16% (from 14% previously) at the top end of the performance scale.
  • Following shareholder approval at the 2013 AGMs, dividend equivalent accrual, up to the point of LTIP vesting, will apply to LTIP awards from 2013 onwards, to the extent that awards meet performance conditions. This provides further alignment with the interests of shareholders.

As described in the strategic report Mondi achieved record financial performance in 2013. ROCE performance of 15.3% and EBITDA of €1,068 million, which was 15% higher than in the previous year, are reflected in the remuneration received by directors during the year under review:

  • Annual bonuses of approximately 73% of the maximum have been awarded in respect of performance in 2013. This recognises the Group’s good financial performance as well as strong performance against personal operational and strategic objectives that were set at the start of the year. As a result of the tragic and unacceptable fatalities of contractors engaged in Mondi operations no payment was made under the safety element of the bonus.
  • The performance period for the 2011 LTIP ended on 31 December 2013. Half of the award was based on ROCE performance and the other half on relative TSR performance. ROCE for the three year performance period was 14.6%, above the applicable performance range of 10% to 14%. The Group’s TSR over the performance period was in excess of 100% (120% for Mondi plc shares and 126% for Mondi Limited shares) which placed it in the top 25% of the comparator group. As a result of this performance both the ROCE and TSR elements, and therefore the overall 2011 LTIP award, vested in their entirety.

Base salary increases of 2.6% were implemented with effect from 1 January 2014, once again below the average percentage increase for the wider Mondi population.

The Committee believes that the remuneration policy will continue to motivate our senior team to achieve the Group’s objectives and deliver sustained returns for our shareholders. We also believe that the remuneration of executives during 2013 reflects our successes to date in the delivery of our strategy.

I trust that you will feel able to support the remuneration resolutions at this year’s annual general meetings.

Anne C Quinn
Chairman of the DLC remuneration committee