Directors' Report: Governance54Glanbia plc Annual Report 2011Committee reportswww.glanbia.comThis framework is applied, as far as possible, to all senior executives, in addition to Executive Directors, to create a consistent global approach to driving sustainable performance and to provide a competitive benefits package. The principles and policy are also applied, as far as possible, across the Group below senior executive level, taking account of seniority and local market practice. It is our aim to ensure that our remuneration arrangements are fully aligned with our approach to risk management. Remuneration policy and design 2012 - 2014Executive remuneration policy and design is reviewed by the Remuneration Committee on a three year basis and accordingly was reviewed in 2011, with the advice of Towers Watson Remuneration Consultants. Element DescriptionPurposePolicy and design for 2011Base Salary (fixed)Annual fixed pay.Recognise market value of role and reflect individual skills and experience.Set by reference to the relevant local market median based on an external independent evaluation of the role.Annual Incentive (variable)Annual payment only earned if agreed target performance is achieved.Incentivise Executive Directors to achieve specific short term business and personal performance objectives during a one year period.Incentivise Executive Directors to achieve specific performance goals which are linked to the Group's business plans.Range of incentive potential of 0% to 100% of Base Salary based on growth in annual adjusted Earnings Per Share ('EPS') and achievement of personal objectives.Long Term Incentives (variable)Award shares in the Company if target performance is achieved over a three year period.Focus on long-term performance.Promote stability and retention.Balance longer term risk/reward.Aligns Executive Directors' interests with those of shareholders and incentivises them to pursue superior results over a three year period within the limits of the Group's risk appetite.Incentivise Executive Directors to deliver superior earnings growth and total shareholder returns.Align the interests of Executive Directors to shareholders interests.Maximum individual annual award level of 115% of Base Salary, other than in exceptional circumstances. Vesting level determined by reference to relative Total Shareholder Return ('TSR') and annual adjusted EPS performance - each representing 50% of maximum vesting level. Key elements of remuneration for Executive Directors for 2011Summary of aspects of the remuneration policy that the 2011 review sought to address and outcomesRemuneration policy aspectOutcomeGreater linkage of Executive Directors' remuneration to performance.Potential levels of Annual and Long Term Incentives increased.Superior performance required to receive material increases in variable pay element.Linkage to long term sustainability and alignment to Group risk management policy.Achieved by:> deferral of portion of Annual Incentive which is converted into shares;> requirement to hold shares received pursuant to the Long Term Incentive; and> proposed shareholding requirement levels.Stronger Long Term Incentives and introduction of an additional performance measure in the amended 2008 LTIP.Achieved with the addition of an appropriate Group investment measure, as determined by the Remuneration Committtee, and less relative TSR and EPS dependence.Flexibility and discretion in plans.Remuneration Committee flexibility for change and review of performance criteria where deemed appropriate.Alignment with shareholders/ share value growth.Significant proportion of Annual Incentive linked to share awards and share ownership requirements.Reflect latest governance.Achieved by:> Share ownership guidelines; and> Claw back potential on Annual Incentive deferral to reflect best practice.

Glanbia plc Annual Report 201155Directors' Report: GovernanceCommittee reportswww.glanbia.comDescription Policy changesDesign changesBase Salary (fixed)No proposed policy changes.No proposed design changes.Variable elements of pay > Annual Incentive (variable)> Long Term Incentives (variable)Definition of 'market' to be determined by reference to a mixture of Irish companies of a similar size/complexity and UK companies in the food industry. Total direct compensation (Base Salary plus Annual Incentive and Long Term Incentive) positioned above the median of the 'market' to encourage stretching performance and value creation.Range of Annual Incentive potential of 0% to 150% of Base Salary (previous maximum 100%) based on growth in annual adjusted EPS and an appropriate cash management measure as determined by the Remuneration Committee annually.Greater proportion of overall total direct compensation based on long term sustainable results and greater linkage to more key performance indicators through the addition of appropriate cash and investment return measures.Long Term Incentive individual annual award level of a maximum of 150% of Base Salary (previous maximum 115%) determined by reference to relative TSR, EPS and an appropriate Group investment measure, with each of these performance conditions representing one-third of maximum vesting level, unless otherwise determined by the Remuneration Committee. The appropriate Group investment measure for 2012 is Return on Capital Employed as set out on page 57.Deferral of a proportion of Annual Incentive. Deferral of the proportion of the Annual Incentive earned in excess of 75% of Base Salary which is then converted into shares and delivered to the Executive Directors two years following deferral.Share ownershipMinimum share ownership requirements to ensure a greater alignment of shareholders' interests through own shareholdingRecommended minimum Executive Director shareholding levels.Requirement to hold shares received pursuant to the vesting of LTIP awards for a minimum period of one year post-vesting (previously no requirement to hold).Share ownership guidelines introduced to encourage ownership of shares to be built up over a maximum period of five years. Recommended levels: Group Managing Director - 200% of Base Salary. Other Executive Directors - 100% of Base Salary.Key review findings and agreed policy and design changes for Executive Directors for 2012-2014DescriptionPolicy changesDesign changesTotal direct compensationThe above framework will apply to all senior executives in addition to the Executive Directors, to create a consistent global approach to reward and to provide a competitive benefits package. The exceptions set out opposite should be noted.Annual IncentiveFor business unit CEOs, the Annual Incentive potential will also be based on appropriate and specific business unit measures, as determined by the Remuneration Committee.Long Term Incentives In exceptional cases and in relation to specific local needs (USA) the maximum share award under the 2008 LTIP scheme may be up to 200% of Base Salary.For business unit CEOs, the Long Term Incentive level will be determined by reference to relative TSR, EPS and an appropriate business unit measure, with each of these performance conditions representing one-third of maximum vesting level, unless otherwise determined by the Remuneration Committee.Deferral and share ownershipFor business unit CEOs, deferral of the proportion of the Annual Incentive earned in excess of 50% of Base Salary which is then converted into shares and delivered to the executive two years following deferral.For business unit CEOs, the share ownership recommended level is 75% of Base Salary to be built up over a maximum period of five years.Key review findings and agreed policy and design changes for other senior executives for 2012-2014