The Remuneration Committee
Remuneration paid to executive directors is considered and determined by the Remuneration Committee. The Committee comprises the Chairman and all non-executive directors. The Chief Executive attends some meetings of the Committee in an advisory capacity but is not a Committee member and is not present for discussions which directly concern him.

Remuneration policy
Remuneration policy centres on ensuring that remuneration packages are sufficiently competitive to attract, retain and motivate the right calibre of executive director for each individual function. Incentive payments are conditional upon demanding performance criteria so as to align incentive awards paid to directors directly with the interests of shareholders. The Committee uses the services of external consultants to help it agree appropriate packages reflecting the remuneration policy. The constituent parts of those packages are set out in the following paragraphs.

Salaries, fees and benefits
Salaries for executive directors are reviewed annually and determined by the Committee, taking into account individual performance over the previous twelve months and pay and employment conditions elsewhere in the Group. The Committee also uses information provided by external consultants relating to rates of pay for similar positions in comparable companies. Any increases in basic salary are effective from 1 July each year.

Benefits relate to the provision of cars, life assurance and medical cover.

Fees for non-executive directors are determined by the Board. Individuals cannot vote on their own remuneration.

Short-term incentive arrangements
The 2001 annual bonus scheme for executive directors was based on a shareholder value measure which takes into account not just after tax earnings but also an estimated cost of equity capital. Under this scheme, directors could earn a bonus of up to 60 per cent of their basic annual salaries based on a pre-determined scale. For 2001, executive directors are not entitled to a bonus under this scheme. Additional incentive arrangements were put in place which would have crystallised if an offer for the Company’s share capital had become unconditional by the end of 2001. No such incentives became payable. A bonus was paid to Lyndon Cole and George Fairweather on the basis that the bonus could be applied by them towards settling fees incurred in obtaining professional advice in relation to their possible participation with any potential purchaser of the Company.

Long-term incentive plan
The executive directors, together with certain key business managers, participate in a long-term incentive plan known as the Performance Share Plan (“the Plan”). This is similar to schemes operated by a number of other listed companies and uses total shareholder return (TSR) as the performance measure.

Under the Plan, participants are, on payment of a nominal option price of 1 penny per share, able to exercise options over shares in the Company in respect of an individual grant if the performance criteria over a three year performance period are met. Details of options granted to executive directors under the Plan are shown in the table of directors’ share options at the end of this report; this includes details of options granted in 1999 which have now lapsed.

At the date of this report, grants made in 2000 and 2001 remain outstanding. The maximum value of shares over which options were granted in each of these two years was equivalent to 80 per cent of annual basic salary as determined at 1 January in each year.

Comparator companies for purposes of grants are FTSE 250 companies, excluding investment trusts.

The TSR for each FTSE 250 company is measured over a three year period commencing 1 January in the year of the relevant grant, with each company then placed in descending order according to their TSR returns with the company with the highest return shown first. If the Company’s TSR over the same period is more than the company in the 30th percentile position, all options will become exercisable; options to the value of 60 per cent of salary will be exercisable if in the top 40; 40 per cent if in the top 50 and 20 per cent if in the top 60. No options will be exercisable if the Company’s performance is below the 60th percentile position.

In order to emphasise the long-term nature of the Plan, participants may only sell enough shares to cover their liability for income tax arising on the exercise of an option within the two year period following the date of the exercise of that option.

An Employee Share Ownership Plan trust (ESOP) was established in 1995 and has purchased some of the shares in the Company which would be required if participants were entitled to exercise the maximum number of options outstanding under the Plan. At 31 December 2001, the ESOP held 687,229 shares with a market value of £0.3 million. The ESOP has been included in the financial statements in accordance with UITF Abstract 13. There were no amounts outstanding on the balance sheets at 31 December 2001 and 31 December 2000 and there has been no charge to the profit and loss account in the year (2000: nil). The right to dividends on ordinary shares owned by the ESOP have been waived.

Directors' remuneration table

		Salaries/ fees		Bonuses		Benefits		Compensation for loss of office		Total emoluments excluding pensions
		2001 £’000		2001 £’000		2001 £’000		2001 £’000		2001 £’000		2000 £’000
Executive
Geoff Gaywood 1		84		-		-		-		84		-
George Fairweather		269		50		19		-		338		371
Philip Brown		148		-		10		-		158		96
Lyndon Cole 2		211		50		1		525		787		520
Mike Parker3		-		-		-		-		-		596
Non-executive
Jonathan Fry (Chairman)		150		-		-		-		150		150
Michael Hartnall		23		-		-		-		23		23
Rick McNeel		20		-		-		-		20		7
Edward Wilson		20		-		-		-		20		20
Robert Easton 4		-		-		-		-		-		7
		925		100		30		525		1,580		1,790

Emoluments for Lyndon Cole and George Fairweather exclude salary supplements related to funded unapproved retirement benefit arrangements. These are shown in the Directors’ retirement benefits table.

Benefits relate to the provision of cars, life assurance and medical cover.

Service contracts
Geoff Gaywood and George Fairweather have service agreements with Elementis plc which are terminable by either party on giving not less than 12 months’ notice to the other party.

Philip Brown has a service agreement with Elementis plc which is terminable by the Company on giving not less than 24 months’ notice (where such notice is given on or before 27 July 2003) and not less than 12 months’ notice (where such notice is given after 27 July 2003) and terminable by Philip Brown giving not less than 12 months’ notice to the Company. Up until his appointment as a Director of the Company in July 2000, he had an employment contract with Elementis Holdings Limited which was terminable by Elementis Holdings Limited giving not less than 12 months’ notice. In addition, the contract provided that he would be paid the equivalent of 24 months’ salary in the specific event of redundancy. This contract was replaced by a service agreement with Elementis plc on Philip Brown’s appointment as a director in July 2000. The service agreement was amended on 20 December 2001 to reduce the notice period to be given by the Company after 27 July 2003 to 12 months.