Pearson

The remuneration committee

David Arculus chaired the remuneration committee for the year 2010; the other members were Patrick Cescau, Ken Hydon and Glen Moreno. David Arculus, Patrick Cescau and Ken Hydon are independent non-executive directors. Terry Burns stepped down from his membership of the committee and his role as a non-executive director on 30 April 2010. Glen Moreno, chairman of the board, is a member of the committee as permitted under the UK Corporate Governance Code.

Marjorie Scardino, chief executive, Robin Baliszewski, director for people, Robert Head, compensation and benefits director, and Stephen Jones, head of company secretarial, provided material assistance to the committee during the year. They attended meetings of the committee, although no director was involved in any decisions relating to his or her own remuneration.

To ensure that it receives independent advice, the committee has appointed Towers Watson to supply survey data and to advise on market trends, long-term incentives and other general remuneration matters. Towers Watson also advised the company on health and welfare benefits in the US and provided consulting advice directly to certain Pearson operating companies.

The committee’s principal duty is to determine and regularly review, having regard to the UK Corporate Governance Code and on the advice of the chief executive, the remuneration policy and the remuneration and benefits packages of the executive directors, the chief executives of the principal operating companies and other members of the Pearson Management Committee who report directly to the chief executive. This includes base salary, annual and
long-term incentive entitlements and awards, and pension arrangements.

The committee’s terms of reference are available on the company’s website.

The committee met four times during 2010. The matters discussed and actions taken were as follows:

19 and 26 February 2010

Reviewed and approved 2009 annual incentive plan payouts Reviewed and approved 2007 long-term incentive plan payouts and release of shares Approved vesting of 2005 and 2007 annual bonus share matching awards and release of shares Reviewed and approved 2010 base salary increases for the Pearson Management Committee Reviewed and approved 2010 Pearson and operating company annual incentive plan targets Reviewed and approved 2010 individual annual incentive opportunities for the Pearson Management Committee Reviewed and approved 2010 long-term incentive awards and associated performance conditions for the Pearson Management Committee Discussed policy on service agreements for executive directors Reviewed and approved 2009 report on directors’ remuneration Noted company’s use of equity for employee share plans Reviewed and approved the remuneration package for the chief executive

23 July 2010
Approved 2010 long-term incentive awards for executives and managers Considered the strategy and timetable for the 2011 renewal of the long-term incentive plan Reviewed committee’s charter and terms of reference Approved changes to the remuneration packages for two members of the Pearson Management Committee

8 December 2010
Considered Towers Watson’s report on remuneration for the Pearson Management Committee for 2011 Reviewed status of outstanding long-term incentive awards Discussed 2011 renewal of long-term incentive plan Considered the approach to 2011 long-term incentive plan awards for the Pearson Management Committee Reviewed 2011 annual incentive plan metrics Reviewed the chairman’s remuneration