Role of the committee

The role of the committee is to:

  • Determine and agree with the Board the broad policy and framework for the remuneration of Executive Directors, the Chairman and certain senior managers
  • Review the continued appropriateness and relevance of the Remuneration Policy
  • Ensure that incentives are appropriate to encourage enhanced performance and provide alignment with long-term shareholder value. Approve the design of, and determine the targets for, performance related pay schemes
  • Review the design of all share incentive plans before approval by the Board and shareholders. Monitor the application of the rules of such schemes and the overall aggregate amount of the awards
  • Determine the remuneration of all Executive Directors, the Chairman and certain senior managers within the agreed policy, taking into account remuneration trends across the Company and remuneration practices in other peer companies
  • Maintain contact with principal stakeholders, as required, on matters relating to remuneration

The full Remuneration Committee Terms of Reference are available for download. 


The Committee met eight times during the year. The Committee reviewed the Group’s financial performance and the achievements of the Executive Directors, and conducted a review of the remuneration arrangements for Executive Directors. The review concluded that our existing remuneration framework remains fit for purpose, although we will be proposing a number of changes which reflect latest best practice to the Remuneration Policy which will be submitted to shareholders in May 2017.

Key observations and outcomes

The Committee considers that the business is well-positioned for 2017 and was pleased with the leadership provided by the Executive Directors:

  • Our financial performance in 2016 continued to be impacted by two difficult legacy projects, but we have now completed and handed over the Laggan-Tormore project
  • 2016 saw the delivery of record revenues, which are up 15% on 2015
  • We were pleased to achieve net profit of US$320 million along with strong performance on cash collection and a reduction in net debt of 10%
  • Our existing backlog of US$14.3 billion continues to provide excellent revenue visibility for 2017 and beyond
  • HSSEIA performance against Lost Time Injury and Recordable Injury Frequency metrics improved

Key outcomes

  • The Committee reviewed the Group’s financial performance during 2016, as well as the achievements of the Executive Directors against the targets under their balanced scorecards
  • 2016 was an important year in restoring Petrofac to good corporate health and good progress was made against both the financial targets and the targets of the balanced scorecard. Accordingly, both the Group Chief Executive Officer and the Chief Operating Officer received bonuses of 47.5% of maximum
  • Our Chief Financial Officer was appointed during the year and received a pro-rated bonus to reflect his period of employment 
  • The performance period for the 2014 Performance Share Plan (PSP) cycle ended on 31 December 2016. Based on performance against the three-year relative TSR and EPS targets, the awards lapsed in full, resulting in zero payout

Key highlights for 2017

  • For 2017, there will be no increase in salary for Executive Directors. This is the third consecutive year where no salary increases were proposed for our UK-based Executive Directors. There will also be no increase in their cash allowances
  • We will be operating the same bonus framework for 2017. This means the maximum opportunity will remain at 200% of base salary, with performance measured against financial targets (60%) and a balanced scorecard of key health and safety, operational, strategic and individual objectives (40%)
  • PSP awards will be made, following shareholder approval. The award level will remain unchanged at 200% of salary

The full 2016 Directors’ Remuneration Report is available to download.

The Directors’ Remuneration Policy is available to download. The Directors’ Remuneration Policy was subject to shareholder approval in May 2017. 

Faced with continued industry pressures, 2016 proved to be another challenging year for Petrofac. In response, we continued to focus on our core strengths, and, following the refocusing of the business, the Committee considers that we are well positioned for 2017.

Thomas Thune Andersen, Chairman of the Remuneration Committee

Thomas Thune Andersen