Report on directors' remuneration

Notes contents

Main elements of remuneration

Total remuneration is made up of fixed and performance-linked elements, with each element supporting different objectives.

Element	Objective	Performance period	Performance conditions
Base salary	Reflects competitive market level, role and individual contribution	Not applicable	Normally reviewed annually taking into account the remuneration of directors and executives in similar positions in comparable companies, individual performance and the approach to pay across the company as a whole
Annual incentives	Motivates achievement of annual strategic goals	One year	Subject to achievement of targets for sales, earnings per share or profit, working capital and cash
Bonus share matching	Encourages executive directors and other senior executives to acquire and hold Pearson shares. Aligns executives’ and shareholders’ interests	Three years	Subject to achievement of target for earnings per share growth
Long-term incentives	Drives long-term earnings and share price growth and value creation. Aligns executives’ and shareholders’ interests	Three years	Subject to achievement of targets for relative total shareholder return, return on invested capital and earnings per share growth

Consistent with its policy, the committee places considerable emphasis on the performance-linked elements i.e. annual incentives, bonus share matching and long-term incentives. Our assessment of the relative importance of fixed and performance-related remuneration for each of the directors based on our policy and the data set out in this report is as follows:

Note The method for valuing thedifferent elements of remuneration is summarised in the table in Benchmarking.

We will continue to review the mix of fixed and performance-linked remuneration on an annual basis, consistent with our overall philosophy.