Governance
Chairman and non executive director remuneration
Remuneration policy
Remuneration for non executive directors is structured with a fixed fee component, details of which are set out in the table below and in the 'Table showing remuneration mix' in Remuneration components. The board as a whole determines non executive directors' fees, although non executive directors do not vote on any changes to their own fees. Fees reflect the responsibilities and time spent by the directors on the affairs of Rio Tinto. Current fee levels are set out in the table on the page opposite.
It is Rio Tinto's policy that the chairman should be remunerated on a competitive basis and at a level which reflects his contribution to the Group, as assessed by the board. The chairman is not present at any discussion regarding his own remuneration and he does not participate in the Group's incentive plans or pension arrangements.
Letters of appointment
Non executive directors have formal letters of appointment setting out their duties and responsibilities. These letters are available for inspection at Rio Tinto plc's registered office, prior to the annual general meeting and at the meeting itself. Each non executive director is appointed subject to subsequent election and periodic re-election by shareholders as detailed in the Board area of the Corporate governance report. There are no provisions for compensation payable on termination of any non executive director's appointment.
The chairman's letter of appointment summarises his duties as chairman of the Group and was agreed by the committee. It stipulates that he is expected to dedicate three days per week on average to carry out his duties, including attending all board and committee meetings. The chairman receives a base fee and no additional committee or attendance fees. He is provided with private medical insurance and participates in the Rio Tinto accident policy which are disclosed in Table 1.
The board announced on 14 January 2009 that Paul Skinner had expressed a preference to retire on 20 April 2009. Following the resignation of the chairman designate, Jim Leng, on 9 February 2009, he agreed to remain as chairman until mid 2009, by which time it is anticipated that a successor will be appointed. The terms of his existing letter of appointment will remain in place over that period.
Shareholding policy
In 2006, the board recommended that non executive directors be encouraged to build up a shareholding equal in value to one year of the director base fee within three years of their appointment. To help facilitate this, the Group put in place a non executive directors' share purchase plan through which non executive directors could elect to invest a proportion of their fees net of tax on a regular basis to acquire shares on the open market. During the year no directors purchased shares using these arrangements as purchases were suspended following the unsolicited pre-conditional offer from BHP Billiton. This suspension was lifted following the announcement of the 2008 annual results and the strategic partnership with Chinalco.
Remuneration components
The following table sets out the annual fees payable to the chairman and the non executive directors in £/A$, as appropriate. These are unchanged from 31 December 2007.
Rio Tinto does not pay retirement benefits or allowances to the chairman or non executive directors, nor do any of them participate in any of the Group's incentive plans. Where the payment of statutory minimum superannuation contributions for Australian non executive directors is required by the Australian superannuation guarantee legislation, these contributions are deducted from the directors' overall fee entitlements.
Remuneration paid during 2008
Details of each element of remuneration paid to the chairman and non executive directors during 2008 is set out in Table 1. No post employment, long term or termination payments were paid and no share based payments made.
| As at 31 Dec 2008 |
|
|---|---|
| Base fees: | |
| Chairman | £693,000 |
| Other directors | £70,000/A$160,000 |
| Additional fees: | |
| Senior independent director | £35,000 |
| Audit committee chairman | £30,000 |
| Audit committee member | £15,000/A$37,500 |
| Remuneration committee chairman | £20,000 |
| Remuneration committee member | £10,000/A$25,000 |
| Nominations committee member1 | £7,500 |
| Committee on social and environmental accountability chairman | £20,000 |
| Committee on social and environmental accountability member | £7,500/A$18,750 |
| Overseas meeting allowances: | |
| Long distance (flights over 10 hours per journey) | £4,000/A$10,000 |
| Medium distance (flights of 5-10 hours per journey) | £2,000/A$5,000 |
| Notes | Expand |
|
|
Auditable information
Under Part 3 of Schedule 7A to the UK Companies Act 1985, the information included in respect of the non executive directors and the directors' short term employee benefits and termination benefits in Table 1, and the information included in respect of the directors accrued benefits, transfer values and defined contribution pension in Table 2, Table 4 and Table 5 are all auditable.
The Australian Securities Investment Commission issued an order dated 27 January 2006 (and amended on 22 December 2006) under which the information included in the Remuneration report to comply with paragraph 25 of Australian Accounting Standard AASB 124 "Related Party Disclosures" (relating to "key management personnel" compensation) is also auditable. This information comprises Tables 1, 3, 4 and 5 and the disclosures provided under the headings Executive remuneration and chairman and non executive director remuneration.
Annual general meetings
Shareholders will be asked to vote on this Remuneration report at the Companies' 2009 annual general meetings.
By order of the Board
Ben Mathews
Secretary
Remuneration committee
6 March 2009
