Directors’ report – remuneration report
Executive summary
This Executive Summary outlines the Company’s remuneration principles, the key remuneration initiatives undertaken by the Company during the year, and
discloses the actual value of remuneration earned by the Company’s Senior Executives in the 2009/2010 financial year (FY 2009/10).
It should be read together with the full remuneration report on pages 50 to 69, which provides disclosure of the remuneration structure of the Company in
accordance with statutory obligations and accounting standards.
The Company’s
remuneration
objectives
The Company’s objective around its executives is to attract, retain and motivate executives to focus on the business objectives of
short and long-term success of the Company. This objective is achieved by aligning remuneration with annual operating
performance and longer term shareholder returns.
Consequently, we have structured our executive remuneration so that there is a significant proportion of remuneration, which is
only earned if Board established targets for annual operating performance, and longer term shareholder return are achieved.
Integrity of the
remuneration
structure
Overall, the Company’s remuneration structure operates as intended, in that incentive remuneration outcomes directly reflect
Company performance. As illustrated below, the Company’s historical and current short-term incentives (STI) and long-term
incentives (LTI) outcomes are tied directly to the results delivered by the Company, thus assuring proper alignment of the
interests of shareholders and executives.
Remuneration
initiatives
The integrity of the Company’s remuneration structure means wholesale changes have not been required but we have introduced
remuneration initiatives to ‘fine tune’ certain aspects of the Company’s remuneration structure in the changing market. During FY
2009/10, the Company:
1. Introduced the mandatory deferral of a portion of Senior Executive’s STI outcome into performance rights in the Company
that only deliver actual value to the individual if the Company maintains or improves its earnings performance over the next
one to two-year period.
This initiative aims to encourage executives to focus on medium-term impact of their short-term decisions and by comparison to
market practice on STI deferral, is more demanding in requiring meeting performance hurdles in addition to service period.
2. Diversified its LTI hurdles by introducing a third hurdle aimed at rewarding returns from pursuing profitable projects and
managing new and existing customers efficiently and effectively for long-term sustainability.
3. Lifted the remuneration freeze that was implemented during FY 2008/09 with a mid-year (1 January 2010) modest average
increase of approximately two per cent since the last review on 1 July 2008.
4. Introduced a policy under which Senior Executives are encouraged to acquire and hold shares in the Company in addition to
any at-risk shares to further align with shareholders.
The Board also monitors ongoing market trends in all operating markets including regulatory and legislative developments in
executive remuneration, including the recent inquiry into executive remuneration by the Productivity Commission, and changes to
termination and share-based pay in Australia. One of the outcomes of this is that the Company suspended and subsequently
ceased its fee-sacrifice Non-Executive Director share acquisition plan with effect from 19 May 2009 as a result of tax changes.
In its place, the Company has adopted a policy under which all Non-Executive Directors are expected to acquire and hold shares
in the Company with a value equal to one year’s Directors’ base fees over a five year period in order to align their interests with
shareholders generally.
The initiatives above are discussed in more detail in the full remuneration report.
Changes in
Senior
Executives
During FY 2009/10, the Managing Director and Chief Executive Officer (MD/CEO) re-shaped the Senior Executive ranks to
establish a team well positioned to support the MD/CEO in driving the strategic direction of the Company, including new
appointments to the roles of Chief Executive, Americas, Chief Executive, Middle East and Asia, Chief Financial Officer and Chief
Executive, Marketing and Business Development.
Remuneration
outcomes
Table 14 on page 64 of the remuneration report provides a breakdown of the Company’s Senior Executive remuneration in
accordance with statutory obligations and accounting standards (this information sets out the cost to the Company).
200
180
160
140
120
100
80
60
40
20
0
EBITA A$mil
Key management personnel short term incentive outcomes % of
Target relative to EBITA*
STI % of Target Paid
% of Target TSE EBITA (normalised)
2006 2007 2008 2009 2010
Year
100
90
80
70
60
50
40
30
20
10
-
12
10
8
6
4
2
0
-2
-4
Share price as at 30 June.
Long-term incentive vesting outcomes relative to Earnings Per Share
and Share Price
120
100
80
60
40
20
0
-20
-40
% of LTI Awards Vested and EPS
EPS % of LTI Awards Vested Share price as at 30 June
2006 2007 2008 2010
-15.34
17.66
27.64
58.16
33.9