Remuneration outcomes during the year ended 31 March 2009

Sections 1, 2, 3, 4 and 6 comprise the ‘auditable’ part of the Directors’ Remuneration Report, being the information required by Part 3 of Schedule 7A to the Companies Act 1985.

1. Directors’ emoluments

The following tables set out the pre-tax emoluments for the years ended 31 March 2009 and 2008, including bonuses but excluding pensions, for individual Directors who held office in National Grid during the year ended 31 March 2009.

Table 1A Year ended 31 March 2009   Year ended
31 March
2008
  Salary(i)
£000s
Annual
Performance
Plan
(bonus)
£000s
Benefits
in kind(ii)
(cash)
£000s
Benefits
in kind(ii)
(non-cash)
£000s
Other
emoluments
£000s
Total
£000s
  Total
£000s
Executive Directors
Steve Holliday 917 1,265 12 12 2,206   2,062
Steve Lucas (iii) 516 709 6 28 1,259   1,183
Nick Winser 459 620 17 1,096   963
Mark Fairbairn (iii) 458 598 8 25 1,089   1,010
Tom King (iv) 677 704 5 10 1,396   1,149
Edward Astle (v) 37 1 440 478   1,070
Bob Catell (iv) (vi) 825 1,090 6 28 1,949   818
Total 3,889 4,986 38 120 440 9,473   8,255
(i)
The Executive Directors decided voluntarily to forego salary increases in 2009. It is anticipated their salaries will next be reviewed in 2010.
(ii)
Benefits in kind comprise benefits such as private medical insurance, life assurance, either a fully expensed car or cash in lieu of a car, use of a driver when required; and for this year a fuel card buyout.
(iii)
These Executive Directors participate in the UK flexible benefits plan which operates by way of salary sacrifice, therefore, their salaries are reduced by the benefits they have purchased. The value of these benefits is included in the Benefits in kind (non-cash) figure. The values are: Steve Lucas £5,522 and Mark Fairbairn £786.
(iv)
For US-based Executive Directors, the exchange rate averaged over the year 1 April 2008 to 31 March 2009 to convert US dollars to UK pounds sterling is US$1.539:£1.
(v)
Edward Astle left National Grid on 30 April 2008. He received a contractual entitlement of one year’s additional salary, part of which was payable in 6 monthly instalments and was subject to mitigation had he taken employment during the period.
(vi)
Bob Catell ceased being an Executive Director on 31 March 2009. His employment agreement was terminated and replaced with a Non-executive Director contract for services and he will retire from the Board at the conclusion of the Company’s AGM on 27 July 2009. He did not, nor will he, receive any termination payments.
Table 1B Year ended 31 March 2009   Year ended
31 March
2008
  Fees
£000s
Other
emoluments
£000s
Total
£000s
  Total
£000s
Non-executive Directors
Sir John Parker (i) 542 62 604   559
Ken Harvey 83 83   79
Linda Adamany 75 75   77
Philip Aiken (ii) 59 59   n/a
John Allan 76 76   71
Stephen Pettit 84 84   79
Maria Richter 92 92   92
George Rose 84 84   82
Total 1,095 62 1,157   1,039
(i)
Sir John Parker’s other emoluments comprise a fully expensed car, private medical insurance and life assurance.
(ii)
Philip Aiken joined the Board on 15 May 2008.

2. Directors’ pensions

The table below gives details of the Executive Directors’ pension benefits in accordance with both Schedule 7A of the Companies Act 1985 and the UK Listing Authority’s Listing Rules.

Table 2 Personal
contributions
made to the
scheme
during the year
£000s
Additional
benefit earned
during year
ended
31 March 2009
pension
£000s
Accrued
entitlement as at
31 March 2009
pension
£000s
 



Transfer value of accrued
benefits as at 31 March (i)
Increase in
transfer
value less
Director’s
contributions (ii)
£000s
Additional
benefit earned in
the year ended
31 March 2009
(excluding inflation)
pension
£000s
Transfer value
of increase in
accrued benefit
in the year ended
31 March 2009
(excluding
inflation
& Director’s
contributions)
£000s
  2009
£000s
2008
£000s
Steve Holliday (iii) 18 49 280   4,740 4,730 (8) 37 591
Steve Lucas 31 25 250   4,877 3,680 1,165 17 293
Nick Winser (iv) 28 16 186   2,802 3,237 (463) 7 76
Mark Fairbairn (v) 28 26 186   3,084 3,340 (284) 18 249
Tom King (vi) 49 126   442 207 235 49 174
Edward Astle (vii) 19 16 112   2,939 1,997 924 15 385
Bob Catell (vi) (viii) 256 1,754   20,431 12,774 7,657 256 2,812
(i)
The transfer values shown at 31 March 2008 and 2009 respectively represent the value of each Executive Director’s accrued benefits based on total service compared to the relevant date. The transfer values for the UK Executive Directors at 31 March 2008 have been calculated in accordance with guidance note ‘GN11’; transfer values for the UK Executive Directors at 31 March 2009 have been calculated in line with new transfer value bases agreed with the UK Pension Scheme Trustees. The transfer values for the US Executive Directors have been calculated using discount rates based on high quality US corporate bonds and associated yields at the relevant dates.
(ii)
Figures for the increase in transfer value less Director’s contributions include the impact of changes during the year to the UK transfer value bases for UK Directors and exchange rate movements for US Directors. The figures excluding these impacts were Steve Holliday £625,000, Steve Lucas £464,000, Nick Winser £62,000, Mark Fairbairn £233,000, Tom King £114,000, Edward Astle £1,166,000 and Bob Catell £2,052,000.
(iii)
In addition to the pension above, there is an accrued lump sum entitlement of £107,000 as at 31 March 2009. The increase to the accumulated lump sum including inflation was £7,000 and excluding inflation was £3,000 in the year to 31 March 2009. The transfer value information above includes the value of the lump sum.
(iv)
In addition to the pension above, there is an accrued lump sum entitlement of £258,000 as at 31 March 2009. The increase to the accumulated lump sum including inflation was £8,000 and excluding inflation was nil in the year to 31 March 2009. The transfer value information above includes the value of the lump sum.
(v)
In addition to the pension above, there is an accrued lump sum entitlement of £278,000 as at 31 March 2009. The increase to the accumulated lump sum including inflation was £23,000 and excluding inflation was £11,000 in the year to 31 March 2009. The transfer value information above includes the value of the lump sum.
(vi)
The exchange rate as at 31 March 2009 was US$1.4368:£1 and as at 31 March 2008 was US$1.98:£1.
(vii)
It was agreed that £344,754, representing the value of 49,032 shares which Edward Astle would otherwise have received in respect of his PSP awards (see Table 4), instead be transferred into his pension fund. This is equivalent to one additional year of pension credit and is included above. Edward received an immediate unreduced pension on cessation of employment under the standard redundancy terms of the Trust Deed and Rules of the Pension Scheme.
(viii)
Bob Catell retired as an Executive Director on 31 March 2009 and was eligible to draw immediate pension benefits. In addition to the pension quoted above, through participation in the Thrift Plan in the US, the Company made contributions worth £4,948 to a defined contribution arrangement.

3. Directors’ interests in share options

The table below gives details of the Executive Directors’ holdings of share options awarded under the Executive Share Option Plan (ESOP), the Share Matching Plan (Share Match) and Sharesave schemes.

Table 3
 
 
Options held at
1 April 2008

Options
exercised or
lapsed during
the year

 
Market price
at exercise
(pence)

Options
granted
during
the year
Options held
at 31 March
2009 or,
if earlier, on
retirement †

 
Exercise price
per share
(pence)

 
 
Normal exercise
period
Steve Holliday
ESOP 67,497 67,497 481.5 June 2005 to June 2012
Share Match 10,350 10,350 100 in total June 2005 to June 2012
  14,083 14,083 100 in total June 2006 to June 2013
  18,713 18,713 nil May 2007 to May 2014
  9,983(i) 9,983 663 nil June 2008 to June 2015
Sharesave 4,692 4,692 660.5 350 Mar 2008 to Aug 2008
  2,564 2,564 655 Apr 2013 to Sep 2013
  3,432 3,432 488 Apr 2014 to Sep 2014
Total 127,882 17,239   3,432 114,075    

Steve Lucas
ESOP 54,404 54,404 434.25 Dec 2005 to Dec 2012
Share Match 14,778(ii) 14,778 663 nil June 2008 to June 2015
Sharesave 1,693 1,693 558 Apr 2010 to Sep 2010
Total 70,875 14,778   56,097    

Nick Winser
ESOP 19,755 19,755 531.5 June 2003 to June 2010
Share Match 11,581(iii) 11,581 663 nil June 2008 to June 2015
Total 31,336 11,581   19,755    

Mark Fairbairn
ESOP 2,180 2,180 435.75 July 2002 to July 2009
  33,489 33,489 531.5 June 2003 to June 2010
  31,152 31,152 481.5 June 2005 to June 2012
Share Match 2,134(iv) 2,134 663 nil June 2008 to June 2015
Sharesave 862 862 383 Apr 2010 to Sep 2010
  1,760 1,760 558 Apr 2012 to Sep 2012
  512 512 655 Apr 2013 to Sep 2013
Total 72,089 2,134   69,955    

Edward Astle
ESOP (v) 67,497 67,497† 481.5 May 2008 to Apr 2009
Share Match (v) 6,553 6,553† 100 in total May 2008 to Oct 2008
  13,812 13,812† 100 in total May 2008 to Oct 2008
  15,716 15,716† nil May 2008 to Oct 2008
  14,637 14,637† nil May 2008 to Oct 2008
Total 118,215   118,215†    
(i)
Steve Holliday exercised a Share Match award over 9,983 shares. The market price at the date of exercise was 663p. He received £9,739 in respect of a cash payment in lieu of dividends. He also exercised, on its five year maturity, a Sharesave option over 4,692 shares with an option price of 350p. In addition, he cancelled an existing Sharesave contract over 2,564 shares with an option price of 655p in order to commence a Sharesave contract over 3,432 shares with an option price of 488p.
(ii)
Steve Lucas exercised a Share Match award over 14,778 shares. The market price at the date of exercise was 663p. He also received £17,761 in respect of a cash payment in lieu of dividends.
(iii)
Nick Winser exercised a Share Match award over 11,581 shares. The market price at the date of exercise was 663p. He also received £14,078 in respect of a cash payment in lieu of dividends.
(iv)
Mark Fairbairn exercised a Share Match award over 2,134 shares. The market price at the date of exercise was 663p. He also received £3,050 in respect of a cash payment in lieu of dividends.
(v)
On leaving, Edward Astle was permitted 12 months from his termination date in which to exercise his ESOP awards and 6 months for his Share Match awards. This aligns with normal practice for such leavers under the plan rules.
Executive Share Option Plan (ESOP)

No further awards will be made under this plan but there are outstanding options granted in previous years. Such options will normally be exercisable between the third and tenth anniversary of the date of grant, subject to a performance condition. The performance condition attached to the outstanding ESOP options is set out below. If the performance condition is not satisfied after the first three years, it will be re-tested as indicated.

Options worth up to 100% of an optionholder’s base salary will become exercisable in full if TSR, measured over the period of three years beginning with the financial year in which the option is granted, is at least median compared with a comparator group of companies.

Grants in excess of 100% of salary vest on a sliding scale, becoming fully exercisable if the Company’s TSR is in the top quartile.

Grants made in 2000

The performance condition attached to options granted in June 2000 is tested annually throughout the lifetime of the option. These options remain unvested. The final re-test will be in March 2010 and if the performance criterion is not reached at that time the options will lapse in full.

The comparator group for the 2000 award is unaudited and this information follows below. The Remuneration Committee at that time believed the group to be an appropriate mix of energy distribution sector companies, including UK and international utilities.

Allegheny Energy, Inc.
BG Group plc
British Energy plc
Central & South West
   Corporation
Consolidated Edison, Inc.
Duke Energy Corporation
Energy East Corporation
FPL Group, Inc.
GPU, Inc.
Innogy Holdings plc
International Power plc
Niagara Mohawk Holdings, Inc.
NSTAR
Powergen plc
Progress Energy, Inc.
Public Service Enterprise
Group, Inc.
Scottish & Southern Energy plc
Scottish Power plc
The Southern Company, Inc.
TXU, Corp
United Utilities plc
Xcel Energy, Inc.

4. Directors’ interests in the PSP, DSP and SRA

Table 4 gives details of the Executive Directors’ holdings of conditional shares awarded under the PSP whereby Executive Directors receive a conditional award of shares, up to a current maximum of 200% of salary, which is subject to performance criteria over a three year performance period. Awards vest based on the Company’s TSR performance when compared to the FTSE 100 at the date of grant (50% of the award) and the annualised growth of the Company’s EPS (50% of the award), see Executive Directors' remuneration for further information. Shares are then released on the fourth anniversary of the date of grant, following a retention period. The table includes conditional share awards under the DSP, where Executive Directors receive an award of shares representing one half of any Annual Performance Plan award earned in the year. The deferred shares are held in trust for three years before release. As part of a contractual commitment made at the time of Tom King’s recruitment, Tom received a SRA. The one-off award of National Grid ADSs vests in equal tranches, over three years, on the anniversary of the award (November 2008 through to November 2010) subject to continued employment. There are no performance conditions attached to the award.


 
 
 
Table 4

 
 
Type of
award
PSP, DSP
and SRA
conditional
awards at
1 April 2008

 
Awards
lapsed
during year

 
Awards
vested
in year

 
 
Awards granted
during year

 
Market price
at award
(pence except#)

 
 
 
Date of award
Conditional
awards at
31 March 2009
or, if earlier, on
retirement†

 
 
 
Release date
Steve Holliday PSP 100,801(i) 100,801 527.03 June 2005 100,801 June 2009
  PSP 126,788 591.5382 June 2006 126,788 June 2010
  PSP 139,217 740.75 June 2007 139,217 June 2011
  PSP 77,247 800.9919 Nov 2007 77,247 Nov 2011
  PSP 276,947 667.9967 June 2008 276,947 June 2012
  DSP 36,389 583.96 June 2006 36,389 June 2009
  DSP 42,435 726.87 June 2007 42,435 June 2010
  DSP 85,307 697.48 June 2008 85,307 June 2011
Total   522,877 100,801 362,254     885,131  

Steve Lucas
PSP 99,615(i) 99,615 527.03 June 2005 99,615 June 2009
  PSP 101,430 591.5382 June 2006 101,430 June 2010
  PSP 84,930 740.75 June 2007 84,930 June 2011
  PSP 47,125 800.9919 Nov 2007 47,125 Nov 2011
  PSP 157,186 667.9967 June 2008 157,186 June 2012
  DSP 34,882 583.96 June 2006 34,882 June 2009
  DSP 29,276 726.87 June 2007 29,276 June 2010
  DSP 47,263 697.48 June 2008 47,263 June 2011
Total   397,258 99,615 204,449     601,707  

Nick Winser
PSP 91,314(i) 91,314 527.03 June 2005 91,314 June 2009
  PSP 88,751 591.5382 June 2006 88,751 June 2010
  PSP 75,008 740.75 June 2007 75,008 June 2011
  PSP 41,620 800.9919 Nov 2007 41,620 Nov 2011
  PSP 138,413 667.9967 June 2008 138,413 June 2012
  DSP 31,316 583.96 June 2006 31,316 June 2009
  DSP 25,596 726.87 June 2007 25,596 June 2010
  DSP 36,008 697.48 June 2008 36,008 June 2011
Total   353,605 91,314 174,421     528,026  

Mark Fairbairn
PSP 40,225(i) 40,225 527.03 June 2005 40,225 June 2009
  PSP 40,572 591.5382 June 2006 40,572 June 2010
  PSP 67,499 740.75 June 2007 67,499 June 2011
  PSP 37,453 800.9919 Nov 2007 37,453 Nov 2011
  PSP 138,324 667.9967 June 2008 138,324 June 2012
  DSP 10,800 583.96 June 2006 10,800 June 2009
  DSP 13,867 726.87 June 2007 13,867 June 2010
  DSP 40,646 697.48 June 2008 40,646 June 2011
Total   210,416 40,225 178,970     389,386  

Tom King
PSP ADSs 24,006 $83.3121# Nov 2007 ADSs 24,006 Nov 2011
  PSP ADSs 32,099(ii) $65.4211# June 2008 ADSs 32,099 June 2012

 
SRA ADSs 35,487 ADSs 11,829(iii) $84.5360# Nov 2007 ADSs 23,658 Nov 2008
to Nov 2010
  DSP ADSs 4,843(ii) $68.1174# June 2008 ADSs 4,843 June 2011
Total ADSs   ADSs 59,493 ADSs 11,829 ADSs 36,942     ADSs 84,606  

Edward Astle
PSP 94,872(iv) 527.03 June 2005 94,872† April 2008
  PSP 88,751(iv) 591.5382 June 2006 88,751† April 2008
  PSP 74,249(iv) 740.75 June 2007 74,249† April 2008
  PSP 41,198(iv) 800.9919 Nov 2007 41,198† April 2008
  DSP 28,769 583.96 June 2006 28,769† April 2008
  DSP 27,927 726.87 June 2007 27,927† April 2008
Total   355,766     355,766†  

Bob Catell
PSP ADSs 17,084(v) $83.3121# Nov 2007 ADSs 17,084 Nov 2011
  PSP –(v) ADSs 39,146(ii) $65.4211# June 2008 ADSs 39,146 June 2012
  DSP –(v) ADSs 7,225(ii) $68.1174# June 2008 ADSs 7,225 June 2011
Total   ADSs 17,084 ADSs 46,371     ADSs 63,455  
(i)
The 2005 PSP award vested in full in June 2008 but the shares under this award are subject to a retention period in order that shares may only be transferred to participants on or after the fourth anniversary of the date of grant. The Remuneration Committee determined cash equivalent dividend payments would be made to participants whilst the shares were in the retention period, therefore, Steve Holliday received £23,856 in August 2008 and £14,157 in February 2009; Steve Lucas £23,576 and £13,990; Nick Winser £21,611 and £12,825 and Mark Fairbairn £9,520 and £5,649 respectively.
(ii)
Awards were made over ADSs and each ADS represents five ordinary shares.
(iii)
Tom King received a Special Retention Award as part of a contractual commitment made at the time of his recruitment. The award vests in three equal parts over three years, the first vesting for which was November 2008 for 11,829 ADSs. The ADS price on vesting for the first tranche was US$47.4920.
(iv)
Shortly after leaving, Edward Astle received 207,905 PSP shares that vested as a result of the performance criteria having been met and taking into account his contribution and in particular the sale of National Grid Wireless being significantly in excess of market expectations. As outlined in Table 2, it was also agreed that instead of Edward receiving a further 49,032 PSP shares an equivalent monetary value (using a share price of 705p) would be transferred into his pension fund. All remaining PSP shares shown in Table 4 lapsed.
(v)
As Bob Catell ceased being an Executive Director on 31 March 2009, his PSP award will be transferred to him from this date subject to performance criteria and following time pro ration. His DSP award will also be transferred to him. This treatment aligns with normal practice for such leavers under the plan rules.

5. Directors’ beneficial interests

The Directors’ beneficial interests (which include those of their families) in National Grid ordinary shares of 111743 pence each are shown below.

Table 5 Ordinary shares at 
31 March 2009 
or, if earlier, on 
retirement †(i)
Ordinary shares at 
1 April 2008 
or, if later, on 
appointment*
Options/awards over 
ordinary shares at 
31 March 2009 
or, if earlier, on 
retirement †
Options/awards over 
ordinary shares at 
1 April 2008 
or, if later, on 
appointment*
Sir John Parker 81,337 77,115
Steve Holliday (ii) (iii) 39,285 28,488 999,206 650,759
Steve Lucas (ii) (iv) 88,192 79,438 657,804 468,133
Nick Winser (ii) 83,518 69,937 547,781 384,941
Mark Fairbairn (ii) (iii) 48,305 28,584 459,341 282,505
Tom King 59,145 423,030 297,465
Edward Astle 28,428† 28,428 473,981† 473,981
Bob Catell 40,000 15,000 317,275 85,420
Ken Harvey 3,740 3,740
Linda Adamany 2,000 2,000
Philip Aiken 2,000 –* –*
John Allan 2,000 2,000
Stephen Pettit 2,632 2,632
Maria Richter 5,255 3,255
George Rose 4,852 4,852
(i)
There has been no other change in the beneficial interests of the Directors in ordinary shares between 1 April 2009 and 13 May 2009, except in respect of routine monthly purchases under the SIP (see note (iii) below).
(ii)
Each of the Executive Directors, with the exception of Bob Catell and Tom King, was for Companies Act purposes deemed to be a potential beneficiary under the National Grid plc 1996 Employee Benefit Trust and the National Grid Employee Share Trust; Steve Holliday, Steve Lucas, Nick Winser and Mark Fairbairn thereby have an interest in 264,878 and 160,696 ordinary shares in the aforementioned trusts respectively, as at 31 March 2009 (with the latter holding 6,294 ADSs in addition).
(iii)
Beneficial interest includes shares purchased under the monthly operation of the SIP in the year to 31 March 2009. In April and May 2009 a further 45 shares were purchased on behalf of Steve Holliday and a further 91 shares were purchased on behalf of Mark Fairbairn thereby increasing their beneficial interests.
(iv)
Steve Lucas was for Companies Act purposes deemed to be a potential beneficiary in 4,057 ordinary shares held by Lattice Group Trustees Limited as trustee of the Lattice Group Employee Share Ownership Trust as at 31 March 2009.

6. National Grid share price range

The closing price of a National Grid ordinary share on 31 March 2009 was 535.5p. The range during the year was 749.5p (high) and 515p (low). The Register of Directors’ Interests contains full details of shareholdings and options/awards held by Directors as at 31 March 2009.

On behalf of the Board

Helen Mahy
Company Secretary & General Counsel
13 May 2009

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