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

Main elements of remuneration

Total remuneration is made up of fixed and performance-linked elements, with each element supporting different objectives.

Element Objective Performance period Performance conditions
Base salary Reflects competitive market level, role and individual contribution Not applicable Normally reviewed annually taking into account the remuneration of directors and executives in similar positions in comparable companies, individual performance and the approach to pay across the company as a whole
Annual incentives Motivates achievement of annual strategic goals One year Subject to achievement of targets for sales,
earnings per share or profit, working capital
and cash
Bonus share matching Encourages executive directors and other senior executives to acquire and hold Pearson shares.Aligns executives’ and shareholders’ interests Three years Subject to achievement of target for earnings per
share growth
Long-term incentives Drives long-term earnings and share price growth and value creation.Aligns executives’ and shareholders’ interests Three years Subject to achievement of targets for relative total shareholder return, return on invested capital and earnings per share growth

Consistent with its policy, the committee places considerable emphasis on the performance-linked elements i.e. annual incentives, bonus share matching and long-term incentives. The relative importance of fixed and performance-related remuneration for each of the directors is as follows:

Proportion of total compensation

The committee will continue to review the mix of fixed and performance-linked remuneration on an annual basis, consistent with its overall philosophy.