Research Report on Executive Incentivisation

HARVEY NASH GROUP PLC

("Harvey Nash" or "the Group")

Longer term, CEOs are more likely to be rewarded on share price performance, whilst over the short term, share price is ignored - Harvey Nash /London Business School MBA Consulting Team

London(September 19, 2011) - FTSE 100 CEOs who served continuously in the lead up to, and through, the downturn, are more likely to be penalised for poor share performance, and rewarded when it improves. This is according to research carried out by the Harvey Nash Board Practice, and the London Business School MBA Consulting Team.

The research found that during the period Jan 2, 2006 and Dec 31, 2010 changes in share price explained about 30% of the variation in direct pay of the CEOs, suggesting that it takes longer to judge the contribution CEOs make to the performance of the company, a critical factor to be considered by Non Executive Directors when setting the compensation of the CEO.

The research also revealed that Consumer and Retail organisations had a much higher correlation between CEO pay and share performance than other sectors. About 20% of the change in direct pay for FTSE 100 CEOs can be explained by share price performance.

Although numerous reports have seemingly failed to show a correlation between CEO pay and share price performance, many of these studies fail to differentiate between the mainly global FTSE 100 companies and small to medium sized enterprises which have their trading activities mainly here in Britain.

London Business School's MBA team's research reveals that correlations do exist, but in very specific circumstances. Factors such as the size and scale of a company, its sector alignment and even the length of service of its CEO are all important in attempting to draw firm conclusions.

When looking at the data on a short-term, year by year basis, the correlation was significantly less, with less than one per cent of changes in CEO pay being explained by share price performance.

Albert Ellis, CEO of Harvey Nash comments,

"It's perhaps time for the Business Secretary to calm the rhetoric on FTSE 100 executive pay and direct the Coalition's resources on getting the real economy moving.

The results show very clearly that there are significant factors other than share price performance which come into play when Non Executive Directors set CEO compensation and incentives.

The most important finding is that successful FTSE 100 CEO pay in the longer term appears aligned with the success and performance of the company as reflected in the share price over time. In the short term however, executive churn at the top has increased as a result of the financial crisis and therefore there is little or no correlation between pay and share price performance in these organisations.

Size also matters as the distinction between FTSE 100 and small to medium sized British business is also clear. SMEs are more likely to align their CEO pay with performance even whilst battling extremely challenging market conditions in their home market. Findings taken from the Manifest/MM&K Director Remuneration Survey 2011 show that total remuneration in smaller companies has not grown as fast as in the largest companies."

Notes to editor

About the Research

The research was conducted by London Business School's MBA Consulting team during July and August 2011. The team reviewed the published accounts of current FTSE 100 and FTSE SmallCap companies for periods 2006 - 2010 inclusive. For CEO pay, both direct (basic plus bonus) and indirect (deferred benefits such as shares or share options) were taken into account. The share price of each company was analysed to remove the effect of 'general' price rises within the broader market and their industry, to help isolate what affect the CEO had on share price. The relationship between share price performance and CEO pay was analysed in a number of ways:

·; How CEO pay influences share price performance the following year

·; How share price performance influences the CEO pay for the year

·; How share price performance influences CEO pay the following year

·; Whether there is a relation between share price change from 2006 to 2010 and CEO pay change for the same period for FTSE 100 and FTSE SmallCap.

About Harvey Nash

Harvey Nash is a global executive and professional recruitment consultancy and trusted advisor to many of the world's leading businesses, governments and public institutions operating from 39 offices covering the USA, Europe and Asia.

The Harvey Nash Board Practice works with Chairmen, Non-Executive Directors, Chief Executives and Board Directors providing a range of services including board recruitment, evaluation and assessment services and remuneration advice.

Find out more:www.harveynash.comwww.harveynash.com/board

About London Business School

London Business School's purpose is to deliver insights and leaders that have impact. The School is ranked number one in the world for the full-time MBA programme*. In research, the School is ranked top ten and holds the highest average research score of any UK academic institution**.

The School's faculty, from over 30 countries, is grouped into seven subject areas - Accounting; Economics; Finance; Management Science and Operations; Marketing; Organisational Behaviour; and Strategy and Entrepreneurship.

Every summer, London Business School selects six to eight of its top MBA students to form a consulting team, which provides high-quality research and consulting solutions to a wide range of clients.

www.london.edu

* Financial Times MBA 2009, 2010 and 2011 Rankings** Research Assessment Exercise (RAE) 2008

Media Relations contacts: Rob GrimseyDirector, Harvey NashDirect: +44(0) 20 7333 1543Email: [email protected]www.harveynash.com