The financial statements of Rolls-Royce plc (aero engine manufacturer) for the year ended 31 December 1999 disclose the following matters in relation to the directors:

(a) Remuneration committee
The remuneration committee, which operates within agreed terms of reference, has responsibility for making recommendations to the board on the Group’s general policy towards executive remuneration. The committee also determines, on the board’s behalf, the specific remuneration packages of the executive directors and a number of senior executives.
The membership of the committee consists exclusively of independent non-executive directors (the financial statements disclose the names of these directors). The committee meets regularly and has access to professional advice from inside and outside the Company. The Chairman of the Company (a par t-time executive director) and the Chief Executive (an executive director) generally attend meetings but are not present during any discussion of their own emoluments.

(b) Base salary
The committee believes that in order to attract and retain executive directors of the right caliber and to provide them with adequate incentives to deliver the Group’s objectives, the Group should pursue a policy of offering median-level base salaries for its executive directors, and through the performance-related schemes, the opportunity of upper quartile earnings for upper quartile performance.

(c) Annual performance award scheme
The scheme enables a maximum performance award of up to 60% of salary to be paid to executive directors for exceptional performance against pre-determined targets based upon return on capital employed with a tapered and reducing scale of maximum percentages for senior employees. The targets are set by the committee based upon the Group’s annual operating plans. Such payments do not form part of pensionable earnings. One-third of total awards made are paid in Rolls-Royce shares which are held in trust for two years, with release normally being conditional on the individual remaining in the Group’s employment until the end of the period. The required shares are purchased on the open market. This arrangement provides a strong link between performance and remuneration and provides a culture of share ownership amongst the Group’s senior management.

Required:
Comment on the notes to the financial statements included above.