George Rose
Chair of the Remuneration Committee
Protecting our people
Protecting our employees has always been high on our list of key strategic priorities. As the vast majority of our workforce continues to work from home, and as hybrid and remote working become embedded business practices, our focus in FY22 was to build on the policies and practices first introduced to support employees in the immediate onset of the pandemic.
Over the last two years we have been impressed by the resilience, commitment and productivity of our employees as they overcame the challenges of the pandemic. The strong performance delivered this year reflects the strong collaborative and innovative culture at Experian which, importantly, has proven to be very effective even outside of the traditional office environment.
In FY22, we undertook a comprehensive Future of Work project, to understand the views, preferences and concerns of employees on their desired way of working following the pandemic. Based on their feedback, we have fully embraced a hybrid working environment, where employees have enhanced flexibility over when and where they work. We strongly believe, as evidenced by the business results over the last two years, that supporting enhanced flexibility leads to a more engaged and motivated workforce. Again, based upon employee feedback, this is also enabling us to attract and retain talent which is critical to delivering our future growth aspirations.
Outlined below are some of the policies introduced to ensure we continue to adapt to changes in our external environment and maintain our focus on our employees as we continue the transition into new ways of working:
- Enhanced flexible working policies to support employees in balancing their personal and professional demands, including global adoption of a hybrid working approach and providing training to support employees with their preferred way of working, as well as enhanced family-friendly policies including improved maternity and neo-natal leave.
- Further development of our mental health and wellness programmes to support employees working from home, particularly during ongoing lockdowns. We introduced a number of region-specific programmes in FY22, which received very positive feedback from employees. They felt that the actions taken were a major factor in their levels of both empowerment and engagement. It was pleasing to see our employee engagement scores continued to be high (78%) in FY22, even though most employees had been working remotely for two years. As we return to a more normal operating environment, we are confident that we can continue to build on the momentum already created.
- While flexible working is supported, maintaining access to Experian offices will also continue to be important, as many employees enjoy the traditional working environment to support them with their work and personal life balance. Over the last two years we have taken the opportunity to refurbish many of our main office hubs, to provide collaborative and flexible working environments for those who choose to work partly or completely from an Experian office. Where appropriate, we have also realigned our office footprint to reflect employees' preference for hybrid working.
- As a thank you for all their hard work and dedication over the pandemic, in August 2021 we granted 'Thank You' shares worth US$800 to around 16,000 employees below senior management worldwide. In doing so we increased the number of employee shareholders. Under the plan all eligible employees received 19 Experian shares, and those who do not sell their shares for three years will receive a further matching award of 38 Experian shares in 2024. We were very pleased with the take-up of the Thank You Share Plan.
Stakeholder experience in FY22
FY22 Performance
I am pleased to report that FY22 was a very strong year for Experian. Despite the continued challenges presented by COVID-19, the Group delivered outstanding growth in our key financial metrics, in all our major regions. Continuing to achieve growth in such economic circumstances reflects the robustness of our business strategy and, importantly, the ability to execute that strategy.
It is pleasing to see the strategic decisions made following the emergence of COVID-19, including protecting our employees and key strategic investments, enabled our business – even during the challenges of the pandemic – to stay on course with our strategic growth ambitions to deliver sustainable high single-digit growth. In FY22, the Group outperformed this ambition, delivering Benchmark EBIT growth of 19%, revenue performance growth of 17% and Benchmark EPS growth of 21%, all at constant exchange rates. These double-digit performance levels were also reflected in our share price, which increased by 18% in the three months to 31 March 2022 compared to the same period last year.
While the delivery of financial results is undoubtedly very important, the Committee actively undertakes a holistic approach to the assessment of the Company’s performance by reviewing a broad range of metrics. These include, but not exclusively, employee engagement, diversity and inclusion, impact on the environment and consumer satisfaction. In this way we ensure that the financial outturns are a fair and true reflection of the Group’s holistic performance over the period.
Our preference for simplicity means that we do not include these and other non-financial metrics in our incentive plans. However, that in no way dilutes their importance to the Group and hence they remain key considerations for the Committee’s review of short- and longer-term performance.
How is our performance reflected in executive pay?
Salary: during the year the Committee approved salary increases of 2.3% – 2.6% for the executive directors. As in previous years, and aligned with our policy, these increases were in line with the increases awarded to the general employee population across the Group.
Annual Bonus: the Committee always seeks to set stretching but attainable annual bonus performance targets that reflect our strong pay-for-performance philosophy. For FY22, the Committee set targets that reflected our unchanged ambition to return to the very strong levels of growth achieved before the pandemic. The Committee recognised a potential one-off bounce-back from the pandemic by incorporating that impact into a performance target range which as a result required double-digit growth to achieve target and maximum outturns. Despite the anticipated bounce-back being tempered by the return of national lockdowns in some of our major markets, the execution of our strategic business priorities enabled us to return to double-digit growth in all of our major markets.
In FY22, both North America and Latin America once again delivered outstanding, double-digit Benchmark EBIT and organic revenue growth. It was arguably even more pleasing to see a return to growth in our UK and Ireland (UK&I) business, which contributed double-digit EBIT and organic revenue growth. The strong performance from all our major regions pushed the Group to double-digit growth for both annual bonus performance metrics. FY22 revenue performance growth, for annual bonus purposes, was 17% and this high level of revenue performance, combined with returns on strategic investments and prudent financial management of expenses, flowed through to deliver Benchmark EBIT growth of 19% for FY22.
As a result of the combined revenue growth and Benchmark EBIT growth performance, the overall bonus for FY22 will be paid out at 100% of maximum for each of the executive directors.
Following a review of the Group’s financial performance and consideration of all business priorities, including those that are non-financial in nature, the Committee was satisfied that the level of bonus payout aligned fairly and accurately to the year’s achievements. While the FY22 annual bonus is a reflection of the FY22 performance, the Committee also considered the performance delivered across both FY21 and FY22 and was satisfied that the cumulative 22% growth delivered for both revenue and Benchmark EBIT across this two-year pandemic period reflected a very strong financial performance. Therefore, no discretion (upwards or downwards) was deemed necessary. Full details of the annual bonus outcomes are set out in the Annual report on directors’ remuneration.
Long-term Incentives (LTI): The Performance Share Plan (PSP) and Co-investment Plan (CIP) awards granted in 2019 will vest on 13 June 2022. The 2019 LTI targets were set in May 2019, when our growth ambitions were to achieve sustainable annual high single-digit growth. The strong financial performance delivered in FY22 follows a resilient FY21 and a very solid FY20 performance. We believe that a healthy, well-run business will deliver wealth to its shareholders and over the last three years Experian has achieved:
- 11% average increase per annum in adjusted Benchmark EPS
- US$4.7bn three-year cumulative Benchmark operating cash flow
- 16.6% adjusted Return on capital employed
- 52% share price growth over three years
- £9.0bn of value creation through market capitalisation growth and dividends.
These high growth figures underpin the overall vesting levels of the PSP and of the CIP, both of which vested at 100%. While the impact of the pandemic in the second year of the performance period undoubtedly affected the potential performance outcomes that may have otherwise been achieved, no adjustments were made in assessing the performance outturns for the 2019 LTI plans.
As with the annual bonus plan, the Committee considered the LTI vesting levels in the context of both the current economic environment and the Group’s holistic performance over the three-year period. It was decided that the formulaic vesting levels appropriately reflect the strong business growth achieved over the three-year performance period, despite the unanticipated headwinds created by the COVID-19 pandemic.
In line with our remuneration principles, a substantial portion of the CEO’s single figure value is determined by long-term performance. For FY22 68% of the CEO’s single figure value is driven by the vesting levels of the LTI plans. Importantly, 16% of the total FY22 single figure value for the executive directors is directly attributable to share price growth and dividends. All shareholders, including employee shareholders, will have benefitted from the same share price growth and dividend return over the same three-year period.
Pay in the wider workforce
Employee engagement
We have always felt well informed about the pay and related policy arrangements for the broader employee population at Experian. As the Committee had existing processes in place to gain an extensive understanding of employee pay, prior to the introduction of the 2018 UK Corporate Governance Code (the Code) requirements, no single approach recommended in the Code was considered appropriate for our business. We have therefore adopted a combination of the suggested methods to comply with the Code’s requirements.
Each year, as part of the Committee’s standing agenda, we are provided with an extensive paper setting out details of all-employee pay and workforce policies across Experian. The discussions on this topic have enabled us to proactively incorporate wider employee pay as important context for framing executive pay considerations. This year we were also provided with greater insights into the remuneration and benefit arrangements, including gender pay positioning in our major regions, which facilitated informative and insightful discussions regarding diversity, equity and inclusion (DEI) practices in our major markets.
I had the opportunity to further supplement the Committee’s understanding of the pay and related policies for the broader workforce by attending our UK and Ireland Experian People Forum, in person. I was once again very impressed with the level of engagement from employees and I found the two-way nature of the discussions provided valuable insights.
In the course of my discussions with the Forum it was very apparent that employees appreciated the open and honest approach to communication that our senior leaders demonstrated over the year. The feedback included many references to the value of our mental health and wellness initiatives. It was equally clear that employees continue to value our current reward offering, and that the additional benefits introduced in FY22 on the back of the UK Total Rewards Optimisation Project were very well received. Those additional benefits included the introduction of critical illness cover, increasing bonus opportunities and the extension of private medical coverage deeper into the organisation, in addition to the granting of 'Thank You' shares to employees globally.
Another core theme was employee appreciation for the enhanced flexibility provided in working from home and the developing practice of hybrid and remote working going forward. We had taken the opportunity of the UK national lockdowns to refurbish our main Nottingham office, and to make it a more attractive place for employees whose preference is to work from an office environment. Our enhanced flexible working environment, combined with our broader reward offering, are important factors in enabling us to attract and retain key talent and it was very encouraging to hear that employees felt they could thrive even more with the new ways of working.
People and culture
More than ever, creating and maintaining an agile, innovative, high-performance culture is a key priority for Experian as we look to maintain and develop an environment that enables our employees to perform and be successful.
The Experian Way, our unique and consistent way of working globally, informs how our people act and behave, thus shaping our culture. Experian's culture is a key enabler of our success, and this was clear to see over the last two years, as evidenced by the strong financial performance delivered, while 83% of the global workforce continue to work remotely.
The collegiate nature of the Experian Way, generated via our connected global network, has undoubtedly supported the delivery of our very strong financial results. However, as I mentioned previously, the challenge will be maintaining this strong culture in the new working world, where remote working becomes standard practice.
In 2021 we participated in the Great Place To Work global survey, and the results demonstrated that the initiatives introduced over the last two years, including the refurbishment of some of our office hubs and other initiatives to make our workplaces attractive for employees to collaborate, have positioned us well as a modern employer.
We appreciate that measuring culture is difficult. To inform our own assessment of culture, the Committee considers a range of quantitative culture-related data, which may also provide useful information for our investors and other stakeholders. Further insights on these important metrics can be found in the Sustainable Business Performance Data, including specific disclosures on Experian employee attrition and employee composition. Details on DEI can be found on page 56.
Experian’s executive remuneration policy
In recent years, we have benefitted from open and constructive shareholder engagement, which led to a number of changes to our Remuneration Policy at the 2020 AGM. Following these changes, we have been consistently applying the Remuneration Policy, and also incorporated some governance-led best practice elements as appropriate. I was very pleased to see the strong level of shareholder support we received for our Remuneration Report at the 2021 AGM.
The Committee proactively considers the incentive arrangements each year, to ensure they continue to be fit for purpose and aligned with the Group’s long-term strategy. It is also important for the Policy to reflect the rapidly changing environment in which we operate. The Committee is confident our current Remuneration Policy remains the most appropriate for our business and its application is a critical enabler of our long-term strategic objectives, as it is designed to:
- deliver strong financial performance
- reward long-term sustainable growth
- ensure effective shareholder alignment
- facilitate the attraction of critical talent.
The unprecedented events of the last two years came with a number of challenges but remaining consistent with the Policy has enabled Experian to continue our growth agenda. Our Remuneration Policy, and in particular its incentive plans, continued to challenge and motivate our leadership teams to successfully deliver exceptional growth. Importantly we were able to retain critical talent and also we:
- did not need to make any changes to our in-flight LTI plans, including the performance targets.
- did not need to make any change to the performance metrics or evaluation methodology.
- did not need to grant any supplementary one-off or ad-hoc incentive awards to retain key talent, including below Board level.
While the Committee is confident our current Remuneration Policy remains the most appropriate for our business, we look forward to taking the opportunity of the 2023 Remuneration Policy review to once again engage openly and proactively with our shareholders and ensure any views and opinions are considered and reflected in our approach going forward.
In March 2022, we issued a letter to our major shareholders and the proxy advisory bodies, to provide an update on our approach to executive pay in FY23 and to invite any comments and feedback. For full transparency we have included some details on the questions raised and our responses in order to provide some additional context.
Q: On the back of COVID-19 many companies have signalled their intention to make changes to their Remuneration Policy. Is Experian considering making any changes to the Remuneration Policy when it is renewed at the 2023 AGM?
A: In recent years, we have consulted quite extensively and benefitted from open and constructive shareholder engagement, which led to a number of changes to our Remuneration Policy at the 2020 AGM. The Committee proactively considers the Remuneration Policy each year, to ensure it continues to be fit for purpose, remains aligned with the Group’s long-term strategy, and also reflects the rapidly changing environment in which we operate.
The Committee believes that our current Remuneration Policy is the most appropriate for our business and that its application is a critical enabler of our long-term strategic objectives. This was perhaps most evident over the last two years, as our Policy provided us with the necessary flexibility to respond to the challenges of the pandemic – by retaining our incentive metrics but reflecting the economic circumstances in the targets – without necessitating any exceptional awards or adjustments to the in-flight plans to address any of the concerns brought about by COVID-19.
We do not propose to make any changes to our Remuneration Policy at this time. However, we value our investors' insights and look forward to undertaking meaningful, open and honest engagement with our investors following the 2022 AGM.
Q: Does Experian anticipate incorporating Environmental, Social and Governance (ESG) metrics into the executive incentive plans?
A: We appreciate that ESG is an important indicator for some investors of a company’s commitment to long-term sustainable performance. While already actively undertaking a holistic assessment of performance by reviewing a broad range of metrics, over the last year the Committee has begun to consider the appropriateness of incorporating a specific ESG metric into our executive pay arrangements. We believe any metric to be included would need to resonate strongly with our purpose.
Our purpose is intertwined with the strategic objective of creating long-term value for all our stakeholders. Creating a better tomorrow by improving financial health supports the long-term success of our business by strengthening our reputation and stakeholder relationships, driving innovation, generating new revenue streams, and creating potential new customers for us and our clients by increasing financial inclusion.
As has been our previous practice, before making any changes to our performance metrics, we consider it is important to engage with our major shareholders. We therefore propose to reach out again, following the 2022 AGM, to begin more detailed discussions on the appropriateness of any changes that may be proposed to our performance metrics ahead of our Remuneration Policy renewal in 2023. We look forward to undertaking meaningful engagement with our shareholders later in 2022.
Q: Many FTSE 100 companies are experiencing challenges attracting and retaining talent, particularly technical talent, following the global pandemic. What steps, if any, has Experian taken to mitigate the impact of ‘The Great Resignation’?
A: As a growth company, attracting and retaining talent – particularly technical talent – is pivotal to our future growth strategy. At senior levels, our remuneration framework is a critical enabler of our ability to compete for key leadership talent. At an employee level, we have taken a number of steps in recent years to ensure we continue to be an attractive place for employees to work including:
- 'Thank You' share award: as a technology company, equity is a critical tool to enabling us to compete for talent. In August 2021, we granted shares worth US$800 to all employees below senior management, with the promise of a further 2-for-1 matching share award in August 2024 if employees chose to retain their original share award. The purpose of the Award was to thank employees for their dedication and resilience over the pandemic, and by delivering the award in shares together with the future matching award, we can ensure all employees can benefit from our future share price growth ambitions. The plan was very well received by employees with over 80% of employees still holding their original shares.
- Expanded LTI eligibility: as the ‘war for technology talent’ intensifies we also expanded eligibility to receive restricted stock LTI awards to employees further down the organisation in some of our key markets. As with the 'Thank You' share award, this step was critical to enabling us not only to compete for and retain talent but, by expanding eligibility to the LTI, we are enabling more employees to share in Experian’s further growth.
- Acting on feedback: I mentioned in last year's Report that our UK&I business undertook a Total Reward Optimisation project immediately prior to the pandemic. We implemented some immediate changes in FY21, such as critical illness cover. In FY22 we made a number of planned enhancements to our employee reward framework directly on the back of the feedback received from employees, including increased bonus opportunities for UK employees and enhanced medical coverage.
Q: In January 2022 the Group announced the appointment of Craig Boundy as Chief Operating Officer (COO) effective from 1 April 2022 and that Kerry Williams will remain with the Group until the end of FY23. Can you provide clarity on the remuneration arrangements for both individuals?
A: Following Kerry’s announcement of his intention to retire we are pleased to have been in a position to make not one but two planned internal appointments – Craig Boundy’s appointment to COO and Jennifer Schulz’s appointment to CEO, North America. For the Committee, it is pleasing to have the strength and depth of talent internally to appoint two such critical roles for our business. Both appointments were part of our planned internal succession strategies and we are pleased to now be in a position to manage the smooth transition of both roles and our approach for FY23 reflects this.
Following his appointment on 1 April 2022, Craig assumed many of the global responsibilities of Chief Operating Officer. As part of his appointment, we announced that Craig will be appointed to the Board as an executive director following the AGM in July 2022. As part of this planned succession, Kerry will remain with Experian until 31 March 2023, to facilitate a smooth transition.
From a remuneration perspective, our prevailing Remuneration Policy and the standard level of awards will apply to Craig as they have applied to Kerry. His annual bonus opportunity will be 100% of base salary at target and 200% of base salary at maximum. His level of PSP award will also be aligned to 200% of salary as is the case for our executive directors. Craig’s base salary for FY23 is US$1,000,000, which is slightly lower than Kerry (US$1,075,000). Kerry will earn his normal remuneration package during FY23 and the normal exit arrangements for a retiree in the USA will apply at the end of FY23.
Looking forward
As we continue to emerge from the COVID-19 pandemic, we do so with a lot of momentum. I am confident that the decisions we have taken, and strategic investments made, combined with the exceptional performance delivered in FY22 across all our key markets, provides a springboard for the Company to continue to deliver strong financial performance and growth.
I will be stepping down from the Experian Board at the conclusion of the 2022 AGM, and while my association with the Company will change to being one of many interested shareholders, my keen interest in and aspirations for the Company continues.
I have been proud to be part of the Experian Board for the last nine years. It has been a pleasure to work with my fellow Board members, both past and present, to shape the strategic direction of such an innovative company, and to see how the strategic decisions undertaken over the years have come to fruition to enable Experian to grow into a successful FTSE 30 company.
When I took over as Chair, I was fortunate to inherit the position with very strong shareholder engagement and support for our executive remuneration arrangements. I am pleased to say that position has continued and I was encouraged by the strong shareholder support received at the 2021 AGM.
The Committee will continue to listen to and act on feedback from our shareholders. As mentioned previously, we look forward to engaging with and seeking open and honest feedback from our shareholders and the proxy advisory bodies later in the year. Those interactions will be key as we consider any potential changes to our remuneration approach in advance of the 2023 Remuneration Policy vote.
I hope that I have provided some helpful insight and broader context on Experian's FY22 performance, that enables shareholders to support our Annual report on directors’ remuneration at the 2022 AGM.