Service contracts

The committee’s policy is that executive directors appointed to the Board are offered notice periods of 12 months. The committee recognises that in the case of appointments to the Board from outside the Group, it may be necessary to offer a longer initial notice period, which would subsequently reduce to 12 months after that initial period.

The committee has a defined policy on compensation and mitigation to be applied in the event of a UK director’s contract being prematurely terminated. In these circumstances, steps are taken to ensure that poor performance is not rewarded. When calculating termination payments, the committee takes into account a range of factors including the director’s obligation to mitigate his or her own loss.

The following table summarises the terms of the executive director's service contracts:

	Date of contract	Unexpired term	Notice period Company	Notice period individual
James Guyette	29 September 1997	Indefinite	30 days1	30 days
Sir John Rose	4 December 1992	12 months	12 months2	6 months
Andrew Shilston	5 November 2002	12 months	12 months	6 months
Colin Smith	1 July 2005	12 months	12 months	6 months
Mike Terrett	1 September 2007	12 months	12 months	6 months

¹ James Guyette has a contract with Rolls-Royce North America Inc, drawn up under the laws of the State of Virginia, US. It provides that, on termination without cause, he is entitled to 12 months severance pay without mitigation and, in addition, appropriate relocation costs.

²In the event of the service contract being terminated by the Company, other than in Accordance with the contract’s terms, Sir John Rose is entitled to receive a liquidated sum of 12 months salary and benefits. Performance related payments are not covered under this arrangement, although an annual bonus may be paid if he is in post at the end of the performance year.