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■ The Company’s international focus and operation; 

■ The general external environment and context for executive pay; and 

■ The pay and employment practices of Dialog employees generally. 

The Committee has determined that the pay policy for the CEO should set fixed pay at the median level when compared to a range of peers with total remuneration within the upper quartile when superior performance is achieved. 

Benchmarking the CEO remuneration is not straightforward. The Company is not UK listed, and operates in a multinational sector, with few UK comparators. This year, the Committee reviewed the CEO’s remuneration against two peer groups: 

■ UK FTSE 250 companies of similar market capitalisation to the Company (taking 20 above and 20 below based on the sterling equivalent of the Company’s market capitalisation); and 

■ An industry peer group, covering Europe, North America and Asia. This group is diverse both in terms of headquarters and financial scale but reflects the reality of the Company’s talent acquisition challenges. 

In reviewing these benchmarks, the Committee was particularly sensitive to Shareholders’ expectations of executive pay restraint, increases awarded to the Company’s employees generally and the level of support for the 2011 Directors’ remuneration report. 

This year’s review highlighted that at £316,000, the CEO’s 2011 base salary was the lowest in the UK benchmark group. However, despite the continuing strong performance of the Company, the Committee determined that any increase would need to be restrained for the reasons set out above. The CEO was awarded a 5% base pay increase to an annual salary of £331,800 with effect from July 2012. This increase is in the median of the pay increases awarded to all employees. 

On total remuneration, the CEO would not achieve upper quartile positioning against the benchmark group even for superior performance. 

Against the international sector benchmark group, base pay was in the lower quartile, but the Committee recognises that international comparisons are difficult. The Committee believes that international comparisons of remuneration competitiveness are important from a talent recruitment and retention 

perspective, but recognises that as a UK incorporated company, UK comparisons are considered important by Shareholders. 

## Changes currently anticipated for 2013 

As noted above, the Committee believes it has an approach to remuneration that remains appropriate, and appropriately competitive, other than in one regard. The Committee believes that the CEO’s base salary is too far below appropriate market levels to be sustainable. Mindful that any increase in base salary can have a ratchet effect on other elements of pay, notably pension and annual bonus (but not any basic award under the long-term incentive plan, which is set without reference to salary), it believes that above median inflation increases will be necessary over the next two to three years in order to bring the CEO closer to market. 

In assessing the appropriate level, the Committee will take into account individual and Company performance and other relevant factors. 

At this point in time, it does not envisage making any other changes to the CEO’s remuneration arrangements during 2013. 

<img src='content_image/219341.jpg'>

## Elements of remuneration 

## Pay mix and performance 

The following graphs represent the pay mix between the elements of remuneration, assuming target and maximum performance. 

<img src='content_image/219338.jpg'>

As required, the chart below sets out Dialog’s five-year TSR. 

