Role of the committee

The role of the committee is to:

  • Determine and review annually, on behalf of the Board, the framework and policy for the remuneration of the Company Chairman, the Executive Directors and other members of executive management.
  • Review the ongoing appropriateness and relevance of the Remuneration Policy
  • Ensure that the objectives of the remuneration policies and practices support the Company’s strategy and promote long-term sustainable success
  • Approve the design of, and determine targets for, any performance related pay schemes and review the total annual payments made under such schemes
  • Review wider workforce remuneration and related policies and the alignment of incentives and rewards with culture, taking these into account when setting the policy for Executive Director remuneration
  • Review the design of all share incentive plans for approval by the Board and shareholders
  • Ensure that remuneration schemes and policies enable the use of Committee discretion and independent judgement to override formulaic outcomes, taking into account Company and individual performance
  • Maintain contact with principal stakeholders, as required, on matters relating to executive remuneration

Terms of reference

The Committee reviewed and amended its terms of reference during the year to incorporate changes included within the new UK Governance Code published in July 2018.

Download the Remuneration Committee Terms of Reference 


The Committee met four times in 2018. 

How the Remuneration Committee spent its time during the year (%): 

In response to the new UK Corporate Governance Code, and in light of stakeholder feedback, we have made a number of changes to the way that we operate, and will continue to work towards identifying areas where our processes could be improved:

  • While the Committee has always had oversight, it now formally approves remuneration for the Company’s leadership team, in addition to the Executive Directors
  • We have implemented new post-employment shareholding requirements for Executive Directors, effective from 1 January 2019 - a year ahead of the regulatory deadline
  • We have reviewed award documentation to ensure that the Committee has full discretion available to adjust pay outcomes where it is considered that they do not align with wider Company performance and circumstances
  • In considering pay outcomes for the leadership team, the Committee has access to a broader and more detailed suite of information regarding remuneration-related policies within the wider workforce
  • We have decided to publish the pay ratio of the Group Chief Executive to UK employees – a year ahead of the regulatory deadline
  • We have agreed a policy whereby future Executive Directors will have any cash allowance in lieu of pension contributions limited to the typical contribution available to the wider workforce in their home country (in the case of the UK, this would currently be 7%)

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 Remuneration Policy was approved at the 2017 AGM with 99.6% support, and no changes have been made to the policy this year.

In accordance with the expected timetable, we intend to submit our remuneration policy for shareholder consideration at the AGM to be held in 2020 In advance of this, the intention is that the Committee will perform a review of the remuneration framework during 2019 with a view to ensuring that it remains appropriate to support and drive delivery of Petrofac’s strategy over the coming years.

Key outcomes

  • The Committee reviewed the Group’s financial performance during 2018, as well as the achievements of the Executive Directors against the targets under their balanced scorecards
  • During 2018, the business delivered very strongly against both cashflow and net income targets, continuing our emphasis on cash conversion, cost control and project profitability. Performance on new order intake reflected the tough and very competitive market conditions. While a healthy business opportunity pipeline and strong win rate was maintained, delivery fell short against the stretching target set by the Committee at the start of the year.
  • When coupled with consideration of the Executive Directors’ performance against the targets of their individual performance scorecards, annual bonus outturns for the CEO was 79.9% of maximum and for the CFO was 84.9% of maximum
  • However, in setting the bonus level, the Committee considered the two work-related incidents experienced in Mexico and Kuwait resulting in the fatality of three colleagues during the year. The Committee decided to use its discretion to reduce bonus outturns for both Executive Directors, as well as for the senior leadership team and others directly in the management line for those locations.
  • The performance period for the 2016 PSP cycle ended on 31 December 2018. Based on performance against the three-year relative Total Shareholder Return (TSR) and Earnings per share (EPS) targets, the awards will lapse in full.

The full 2018 Directors' Remuneration Report is available to download and contains the Remuneration Policy summary. The full Remuneration Policy is available to download in the 2016 Annual Report and Accounts.

Matthias Bichsel, Chairman of the Remuneration Committee