Remuneration Report

Introduction

The Group’s remuneration policies and amounts for all employees including Executive Directors and Non-executive Directors are set out in this report. Information on pages 43 to 44 comprise the audited parts of the Remuneration Report and form an integral part of the Group’s financial statements. The Group employed a total of 336 shore-based staff (2017: 335) at 31 December 2018 and approximately 3,800 seafarers (2017: 3,400) during the year.

Group’s Remuneration Policy

The Board, through the Remuneration Committee, seeks to attract and retain personnel with the skills, experience and qualifications needed to manage and grow the business successfully. We achieve this by providing remuneration packages, including bonuses, which are competitive, consistent with market practice, and reward performance and align employees and shareholders’ interests.

The Board has taken into consideration a number of relevant factors when considering remuneration adjustments and annual bonuses, such as making reference to the prevailing market conditions, local market practice, salaries paid by comparable companies, the levels of emolument of existing staff of the Company, job responsibilities, duties and scope, performance of individuals and the market demand for their skills. The business of shipping is highly cyclical. It is inappropriate to impose straight financial measures for both salary adjustments and bonus determination as to do so would likely generate meaningless results and potentially damaging consequences. The Board seeks to obtain a balance of all the above mentioned factors.

Discretionary equity awards by way of restricted share awards are provided through the Company’s Share Award Scheme which is designed to provide Executive Directors and other employees with long-term financial benefits that are aligned to and consistent with the creation of shareholder value as an incentive and recognition for their contribution to the Group. The number of share awards granted each year is based on the performance, role and responsibilities of the individual eligible participant and approved by the Remuneration Committee.

The Group’s principal retirement benefit scheme is the Mandatory Provident Fund Scheme, a defined contribution scheme provided under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those staff employed under the jurisdiction of the Hong Kong Employment Ordinance. Other locations provide pension contributions in line with the local regulations. Key components of remuneration are set out below.

Key Remuneration
Components
Executive Directors and All EmployeesNon-executive
Directors
Fixed Based Salary:Salaries are reviewed annually taking into account prevailing market
conditions and local market practice, as well as the individual's role,
duties, experience, responsibilities and performance
No

Annual discretionary
cash Bonus

Discretionary cash bonuses are determined based on the overall
performance of the individual and the Group. Bonuses for Executive
Directors are assessed by the Remuneration Committee and those of
all other staff are assessed by the Chief Executive Officer. Bonuses to
Executive Directors and other employees are expected to be no more
than 12 months' salary equivalent
No
Long-term equity awardDiscretionary awards are determined based on the performance,
role and responsibilities of eligible participants. Awards typically vest
annually over a three year period. New Awards for existing awardees are
considered each year by the Remuneration Committee to maintain the
incentive period, in which case they vest at the end of the third year
No
Retirement benefitIn line with local legislation and market practiceNo
Fixed annual director's feeNoIn line with market
practice

Remuneration for the Years Ended 2018 and 2017

31 December 2018Directors
fee
US$'000
Salaries
US$'000
Bonuses
US$'000
Pension
US$'000
Total
payable
US$'000
Share-based
compensation
US$'000
Total
payable
and charged
US$'000
Executive Directors
David M. Turnbull-375952472251723
Mats H. Berglund-1,04452021,5665782,144
Peter Schulz1-49525027474761,223
-1,91486562,7851,3054,090
Independent Non-executive Directors
Patrick B. Paul102---102-102
Robert C. Nicholson 96---96-96
Alasdair G. Morrison 89---89-89
Daniel R. Bradshaw 89---89-89
Irene Waage Basili 95---95-95
Stanley H. Ryan 100---100-100
571---571-571
Total Directors' remuneration5711,91486563,3561,3054,661
Other Employees-127,72026,9322,945137,5973,960141,557
Total remuneration571129,6347,7972,951140,9535,265146,218
31 December 2017Directors
fee
US$'000
Salaries
US$'000
Salaries
US$'000
Pension
US$'000
Total
payable
US$'000
Share-based
compensation
US$'000
Total
payable and
charged
US$'000
Executive Directors
David M. Turnbull-377472426243669
Mats H. Berglund-1,08221621,3005471,847
Andrew T. Broomhead3-524-1525(167)358
Chanakya Kocherla4-157-1158(371)(213)
-2,14026362,4092522,661
Independent Non-executive Directors
Patrick B. Paul97---97-97
Robert C. Nicholson90---90-90
Alasdair G. Morrison84---84-84
Daniel R. Bradshaw84---84-84
Irene Waage Basili94---94-94
Stanley H. Ryan94---94-94
543---543-543
Total Directors' remuneration5432,14026362,9522523,204
Senior Management
Peter Schulz1-208401249178427
Other Employees-120,11224,1752,344126,6313,871130,502
Total remuneration543122,4604,4782,351129,8324,301134,133

For the year 2018, the five individuals whose emoluments were the highest in the Group were the three Executive Directors and two employees (2017: two Executive Directors and three employees). The emoluments of the highest paid individuals who are not Executive Directors are set out below and fell within the following bands.

2018
US$'000
2017
US$'000
Salaries693906
Bonuses374255
Pension174130
Total Payable1,2411,291
Share-based compensation445518
Total payable and charged1,6861,809
Emolument bands20182017
HK$3,500,001 to HK$4,000,000-1
HK$5,000,001 to HK$5,500,000-2
HK$6,000,001 to HK$6,500,0001-
HK$6,500,001 to HK$7,000,0001-

During the year, the Group did not pay the Directors any inducement to join or upon joining the Group. No Directors waived or agreed to waive any emoluments during the year.

Accounting Policies on Employee Benefits

Bonuses

The Group recognises a liability and expense for bonuses when there is a contractual or constructive obligation or where there is a past practice that created a constructive obligation.

Retirement Benefit Obligations

Mandatory Provident Fund Scheme

The Group operates the Mandatory Provident Fund Scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for those employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution scheme, the assets of which are held in separate trustee administered funds.

Under the MPF scheme, the employer and its employees are each required to make regular mandatory contributions to the scheme at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$25,000. The Group also makes voluntary contribution in addition. The Group’s contributions to the scheme are expensed as incurred. When employees leave the scheme prior to the full vesting of the employer’s voluntary contributions, the amount of forfeited contributions is used to reduce the contributions payable by the Group.

Other Defined Contribution Schemes

The Group also operates a number of defined contribution retirement schemes outside Hong Kong in accordance with local statutory requirements. The assets of these schemes are generally held in separate administered funds and are generally funded by payments from employees and by the relevant group companies. The Group’s contributions to the defined contribution retirement schemes are expensed as incurred and are reduced by contributions forfeited by those employees who leave the schemes prior to contributions being fully vested.

Share-based Compensation

The Group operates an equity-settled, share-based compensation scheme. Restricted share awards are recognised as an expense in the income statement with a corresponding credit to reserves, based on the fair value of the shares.

The total amount to be expensed is calculated by reference to the fair value of the equity instruments on the grant date, excluding the impact of any non-market vesting conditions (for example, requirement of an employee to remain in employment for a specified time period). The number of equity instruments that are expected to vest takes into account non-market assumptions, including expectations of an employee remaining in the Group during the vesting period. The total amount expensed is charged through the vesting period. The Company reviews its estimates of the number of equity instruments that are expected to vest based on the non-market vesting conditions if necessary. It recognises the impact of the revision of the original estimates, if any, in the consolidated income statement with a corresponding adjustment to equity.

The grant of share-based compensation by the Company to the employees of subsidiary undertakings in the Group is treated as a capital contribution by the Company to the subsidiaries. The fair value of employee services received, measured by reference to fair value of the shares on the grant date is recognised over the vesting period as an increase in investment in the subsidiary undertakings, with a corresponding credit to equity in the Company’s account. In the accounts of the subsidiaries, such fair value is recognised as an expense in the income statement with corresponding credit to reserve.

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