Non-executive Directors’ fees
A Committee of the Board comprising the Chairman and Executive Directors sets the remuneration of non-executive Directors. The fees paid are set at a level to attract individuals with the necessary experience and ability to make a significant contribution to the Company’s activities, while also reflecting the time commitment and responsibility of the role. Each non-executive Director currently receives an annual fee of £53,000. Steven McTiernan currently receives an additional annual fee of £10,000 to reflect his additional responsibilities as Senior Independent Director and Clare Spottiswoode and David Williams each receives an additional annual fee of £10,000 to reflect their additional responsibilities as Chairman of the Remuneration and Audit Committees respectively. Each non-executive Director is also entitled to reimbursement of necessary travel and other expenses.
Non-executive Directors do not participate in any share scheme or annual bonus scheme and are not eligible to join the Company’s Pension Scheme.
The Remuneration Committee, with the Chairman absenting himself from discussions, sets the remuneration of the Chairman, whose annual fee is currently £170,000.
Performance graph
The graph below shows Tullow’s TSR against both the FTSE 100 and FTSE 250 (excluding Investment Trusts) over the five-year period from 1 January 2003 to 31 December 2007, over which period Tullow outperformed the FTSE 100 by 506% and the FTSE 250 (excluding Investment Trusts) by 415%. The relevant indices are set to 100 at the beginning of the period. These indices have both been shown because for the majority of the financial year, Tullow was a member of the FTSE 250, but moved into the FTSE 100 from September onwards.
This graph shows the value, by the end of 2007, of £100 invested in Tullow Oil on 31 December 2002 compared with the value of £100 invested in the FTSE 100 and FTSE 250 Indices (excluding Investment Trusts). The other points plotted are the values at intervening financial year-ends.
Source: Datastream.
Service contracts and letters of appointment
Each Executive Director has entered into a service agreement with Tullow Group Services Limited (dated 2 September 2002 in the case of Aidan Heavey, Matthew O’Donoghue, Graham Martin and Tom Hickey; dated 29 March 2006 in the case of Paul McDade and dated 18 April 2006 in the case of Angus McCoss). Aidan Heavey and Matthew O’Donoghue also each entered into a service agreement with Tullow Oil International Limited on 16 September 2002 on similar terms.
The terms of each of these service contracts is not fixed, although each Executive Director is required under his service agreement to retire from service upon attaining the age of 65. Each agreement is terminable by the Director on six months’ notice and by the Company on 12 months’ notice. There are no specific provisions under which any Executive Director is entitled to receive compensation upon the early termination of his service agreement other than in accordance with these notice periods.
Each service agreement sets out restrictions on the ability of the Director to participate in businesses competing with those of the Group or to entice or solicit away from the Group any senior employees of the Group in the six-month period after the cessation of his employment.
The above reflects the Committee’s policy that service contracts should be structured to reflect the interests of the Company and the individuals concerned, while also taking due account of market and best practice. Furthermore, it is the Committee’s policy that, in the event of early termination of a Director’s service contract, the Committee will take account of the departing Director’s duty to mitigate his loss when determining the amount of any compensation that is paid.
Each of the non-executive Directors is engaged by the Company under the terms of a letter of appointment [dated 8 December 2005 in the case of Pat Plunkett; dated 29 June 2007 in the case of David Bamford, dated 1 March 2008 in the case of Clare Spottiswoode and Steven McTiernan and dated 31 May 2006 in the case of David Williams]. Rohan Courtney, who retired from the Board on 31 December 2007, was engaged under a letter of appointment dated 8 December 2005. Subject to retirement, for example under the Articles of Association, the appointments are for the period to 31 December 2008 in respect of Pat Plunkett, to 30 June 2010 in the case of David Bamford, to 28 February 2011 in the case of Clare Spottiswoode and Steven McTiernan and to 31 May 2009 in the case of David Williams. In each case, the appointment is renewable thereafter if agreed by the Director and the Board. The appointments for each of the non-executive Directors may be terminated by either party on three months’ notice. There are no arrangements under which any non-executive Director is entitled to receive compensation upon the early termination of his or her appointment.
Material contracts
There have been no other contracts or arrangements during the financial year in which a Director of the Company was materially interested and/or which were significant in relation to the Group’s business.
External appointments
The Board has not introduced a formal policy in relation to the number of external directorships that an Executive Director may hold. Currently, the only Executive Directors who hold external directorships are Tom Hickey and Aidan Heavey. Aidan is a director of Traidlinks, a charity promoting enterprise in the developed world, especially Africa. He receives no fee for this position. Tom has been nominated by Tullow as its representative on the board of Ikon Science Limited, a company in which Tullow has a small equity stake. Any fees payable for his services have been waived by Tullow. In addition, Tom is a non-executive director of PetroNeft Resources plc for which he receives an annual fee of €20,000.
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