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Terms of Reference – Remuneration Committee

Composition of the Committee

The Remuneration Committee is a sub‐committee of Hinckley and Rugby Building Society Board of Directors. A summary of each meeting will be made available at the next Board meeting following the Remuneration Committee meeting.

The Remuneration Committee Terms of Reference shall be reviewed at least annually.

Membership & Quorum

2.1 Members of the Committee shall be appointed by the Board.

2.2 The Committee shall comprise of three non‐executive directors (this may include the Chair of the Board if they were considered independent on appointment as Chairman, however they will not be present at any discussion by the committee relating to the Chair of the Board’s fees).

2.3 The Committee is chaired by one of the Board’s independent non-executive directors, with a minimum of one year’s prior service on the Society’s Remuneration Committee. The Chair of the Remuneration Committee shall preside at every meeting of the Committee. In the absence of the Committee Chair the remaining members present shall elect one of themselves to chair the meeting who would qualify under these terms of reference to be appointed to that position by the Board. The Chairman of the Board shall not be Chairman of the Committee.

2.4 Any other non‐member non‐executive directors may attend the Committee.

2.5 Other individuals such as the Chief Executive Officer (CEO), the Head of HR, and external advisers can by invitation be in attendance at the Committee meetings to enable the Committee to consult on their proposals relating to other executive directors, other non-Board members of the Executive Committee and the Society’s employees, with the agreement of the Committee Chair.

2.6 Other members of the Executive team may also attend meetings, at the request of the Committee. Any other employee of the Society may be asked to attend, as required.

2.7 The Executive Assistant to the CEO shall act as the Secretary of the Committee. Minutes of each meeting will be taken and circulated promptly to all members of the Committee.

2.8 The quorum necessary for the transaction of business shall be two members.

2.9 If the Chair is not present within fifteen minutes after the time appointed for the meeting, the Members present at that meeting shall elect one of their number to be the Chair, for the purposes of that meeting.

2.10 A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.

Meetings

3.1 The Committee will normally meet at least once a year and otherwise as required. The Chair of the Committee may convene meetings of the Committee at any time to consider any matters falling within these terms of reference.

3.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed and supporting papers, shall be forwarded to each member of the Committee and any other person required to attend, not less than five working days before the date of the meeting.

3.3 Meetings are held at least annually to determine appropriate levels of remuneration for all members of the Executive Committee (including Executive Directors) for the twelve months following the start of the Society’s financial year.

3.4 Meetings are also held at any time it is felt necessary to review the remuneration package of an executive director or a member of the Executive Committee or for determining the appropriate remuneration package for a new executive director or a new member of the Executive Committee.

Responsibilities of the Committee

4.1 The Committee is responsible, together with the Society’s Board, for ensuring that the Society’s Remuneration Policy complies with the FCA’s Remuneration Code and the Remuneration Part of the PRA Rulebook together with any other relevant guidance.

4.2 The Committee is responsible for the design and oversight of the implementation of the Society’s Remuneration Policy and considers the views of members.

4.3 The Remuneration Committee is responsible for oversight of the remuneration of the Society’s Code staff and MRTs.

4.4 The Committee determines the remuneration of the Executive Directors.

4.5 The Committee authorises the remuneration of the Chair of the Board and makes recommendations to and seeks approval from the Board for any changes to such fees.

4.6 The Committee determines the level and structure of remuneration for non-Board members of the Executive Committee (including the Society’s Chief Risk Officer (CRO)) and reviews the general level of remuneration for all other employees.

4.7 The Committee approves the design of, and determine targets for, any performance related pay schemes operated by the Society and approves the total annual payments made under such schemes.

4.8 The Committee determines the policy for, and scope of, pension arrangements for each executive director and non-Board members of the Executive Committee and other MRTs (including the Society’s CRO).

4.9 The Committee ensures that contractual terms on termination, and any payments made, are fair to the individual, and the Society, that failure is not rewarded, and that account is taken of any duty to mitigate loss.

4.10 The Committee determines any major changes in employee benefits structures throughout the Society.

4.11 The Committee determines contractual notice periods for each executive director and non-Board members of the Executive Committee (including the CRO).

4.12 The Committee receives a report, at least annually, from the CRO, on the implications on remuneration from an assessment of risk and risk management in the context of the Society’s performance and strategy.

4.13 The Committee agrees the policy for authorising claims for expenses from the Directors.

4.14 The remuneration of the Non-Executive Directors other than the Chairman is determined annually by the Executive Directors and the Chairman of the Board in accordance with the Society’s Rules. Rule 19 (1) states that “the annual remuneration of the Directors as members of the Board (exclusive of any remuneration paid in respect of executive duties) shall be paid at a rate to be determined by the Board from time to time but not exceeding five pence per one hundred pounds of total assets of the Society as at the first day of the Financial Year in which payment is made. This remuneration shall be divisible among them by a majority decision and, in default of agreement, in equal shares.”

4.15 No person shall participate in decision making by the Committee (or during a relevant part) at which any part of their remuneration is being directly discussed or participate in any recommendation or decision specifically concerning their remuneration.

Records

4.16 The Committee’s Terms of Reference will be made available to Members on the Society’s website.

4.17 The Committee will produce a report of the Society’s remuneration policy and practices to be included in the Society’s Annual Report and Accounts and ensure each year that it is put to members for approval at the Annual General Meeting (AGM).

General

4.18 The Committee will monitor the remuneration packages of executives within the building society industry specifically and within the financial services sector and broader marketplace generally.

4.19 The Committee will be responsible for considering all elements of the Executive Committee’s remuneration such that the Society attracts and retains Executive Directors, Executives, Senior Managers and MRTs of sufficient calibre for its continued long-term sustainable success.

4.20 The Committee will ensure that members of the Executive Committee (including executive directors) are fairly rewarded for their individual contributions to the Society’s overall performance and in accordance with the principles stated under the Society’s Treating Customers Fairly / Conduct Risk policy.

4.21 The Committee will ensure that any remuneration and benefits for MRTs do not incentivise undue risk taking.

4.22 The Committee will ensure that the UK Corporate Governance Code is given due regard and will give due regard to the relevant guidance issued by the Building Societies Association (BSA).

4.23 The Committee will consider, as appropriate, all other regulatory guidance.

4.24 The Committee will consider as appropriate the Financial Reporting Council’s “Guidance on Board Effectiveness”.

4.25 The Committee will ensure that if the Society’s remuneration policy leads to tensions between the ability of the Society to meet the requirements and standards under the regulatory system and the personal advantage of those who act for it, these tensions, if they exist, should be appropriately managed.

4.26 The Committee will ensure that it has access to sufficient resources in order to carry out its duties, including access to the company secretariat for advice and assistance as required and is authorised by the Board to obtain, at the Society’s expense, outside legal or other professional advice on any matters within its terms of reference.

4.27 The Committee shall be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members

4.28 The Committee Chair will attend the AGM to answer any member questions on the Committee’s activities. In addition, the Committee Chair should seek engagement with members on significant matters related to the Committee’s areas of responsibility.

Reviews of strategic documents

The following documents will be reviewed and approved at least annually and will be recommended to the Board for ratification, where appropriate.

· Remuneration Policy to include scope and adequacy and recommend any changes it considers necessary to the Board for approval

Committee Effectiveness

The Committee shall at least annually carry out a review of its own effectiveness and make recommendations to the Board of any necessary changes.

June 2021