This is my first letter to you since taking over from Simon Emeny as Remuneration Committee Chair of Dunelm after the AGM in November 2017. I would like to thank Simon for his sound stewardship of the Committee over the past three years, and for overseeing the adoption of the 2017 Remuneration Policy at the AGM, with a vote of 99% in favour.
At the moment, I have four objectives as Chair of the Remuneration Committee. Firstly, I want the Committee to help the Board ensure a strong Policy framework for securing the best talent for Dunelm. Secondly, we should ensure that remuneration for senior appointments follows the principles set out in our Policy or, where we need to consider exceptions, that there is appropriate challenge and rationale. Thirdly, I want to help the Board keep abreast of our shareholders' and wider stakeholders' views. Finally, I want us to follow best practices, taking professional advice if necessary, but in a Dunelm way that fits our strong and positive culture.
Since I became Chair, we have made two Executive Director appointments: CEO Nick Wilkinson in February 2018, and Laura Carr who starts in November.
The remuneration packages for both Nick and Laura are in line with our 2017 Policy, and with that of their predecessors. We have however taken the opportunity to reduce pension entitlement for both to 10% of salary, to align this more closely to that of our senior management. We believe that it is important for our Executive Directors to live close to our Syston Support Centre, and so both have been offered relocation assistance, and for Nick Wilkinson a travel allowance and temporary accommodation assistance.
In order to ensure that Laura does not incur a significant penalty by joining Dunelm, we also had to agree to compensate her partially. We are never happy about having to make payments of this nature, but having considered the matter carefully and taken expert advice, the Committee decided that, together with a requirement to invest in Dunelm shares upon appointment, the arrangements are acceptable and in the best interests of the Company. More details are set out in the report.
John Browett and Keith Down both stepped down from the Board in the year. John was paid salary and benefits to date of termination and for his six month notice period, plus bonus entitlement in respect of the 2017 financial year during which he was employed. Keith worked part of his notice period and was paid salary and benefits to the date of termination only. No other amounts were paid, and all other bonus and share option entitlements have lapsed.
Our 2017 Remuneration Policy requires Executive Directors to make an investment in Dunelm shares on joining, and then to invest two-thirds of performance pay earned (after payment of tax and national insurance) in Dunelm shares. Executives also have to build a personal shareholding equivalent to 1× salary after three years and 2× salary after five years. Nick Wilkinson invested £250,000 in Dunelm shares shortly after his arrival, and a further £250,000 in July 2018. Laura Carr has agreed to invest a significant sum in Dunelm shares on joining the Group. Nick has qualified for bonus during FY18 and his purchase of shares in July includes an investment of two thirds of this after tax.
We have published our Gender Pay report during the year. We are committed to paying men and women equally for roles of the same size and scale. We are proud that 67% of our colleagues are female. However, in common with many other retailers, 80% of our colleagues are employed in our retail operations, and these roles tend to be lower paid. As a result, we have a significant gap in the pay between genders (our mean gap is 17.4% and our median gap is 4.8%), very much in line with our peers in the UK retail sector. We have made progress over the twelve months to improve, and we have more activity planned, including the launch of an Empowering Female Leaders programme, widening our internal mentoring programme, and looking at how we can reduce friction for women returning to work after maternity leave. We are leading by example; 33% of our senior leadership roles are held by women, and following Laura Carr's appointment to the Board, at least before Rachel Osborne had to step down for competitive reasons, four of our nine Board members, and half of our Executive Board were female.
Finally, we have reviewed proposed governance changes, including the new Corporate Governance Code and supporting guidance. We support these changes and have already taken steps to implement them as follows:
- We have strengthened the ability of the Committee to recover bonus and LTIP awards through malus and clawback to cover a wider range of events of corporate or individual failure
- We have changed the Committee's terms of reference to give the Committee formal approval of remuneration of the Executive Board and the Company Secretary
- We are taking steps to ensure that Board and the Committee engage more directly with our colleagues on executive pay and other matters, and to reinforce the Board oversight of all matters relating to our People, including diversity and the gender pay gap
I look forward to meeting shareholders at the AGM.
Chair of the Remuneration Committee
12 September 2018