Annual report and accounts 2008

Report on directors’ remunerationSub‐section report on directors’ remuneration

Dilution and use of equity

We can use existing shares bought in the market, treasury shares or newly-issued shares to satisfy awards under the company’s various stock plans.

For restricted stock awards under the long-term incentive plan and matching share awards under the annual bonus share matching plan, we would normally expect to use existing shares.

There are limits on the amount of new-issue equity we can use. In any rolling ten-year period, no more than 10% of Pearson equity will be issued, or be capable of being issued, under all Pearson’s share plans, and no more than 5% of Pearson equity will be issued, or be capable of being issued, under executive or discretionary plans.

At 31 December 2008, stock awards to be satisfied by new-issue equity granted in the last ten years under all employee share plans amounted to 3.8% of the company’s issued share capital and under executive or discretionary plans amounted to 2.2%.

In addition, for existing shares no more than 5% of Pearson equity may be held in trust at any time. Against this limit, shares held in trust at 31 December 2008 amounted to 1.7% of the company’s issued share capital.

The headroom available for all employee plans, executive or discretionary plans and shares held in trust is as follows:

	2008	2007	2006
Headroom for all employee plans	6.2%	6.0%	6.6%
Headroom for executive or discretionary plans	2.8%	2.3%	2.7%
Headroom for shares held in trust	3.3%	3.4%	3.5%