Aer Lingus 2010 Annual Report Download - page 41

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Remuneration Committee Report Aer Lingus Group Plc – Annual Report 2010
Conditional Share Award in respect of Mr. Mueller
and Share Option Grant
On 7th September 2009, Mr Christoph Mueller was granted a conditional
award in respect of 500,000 shares with effect from 8th September.
The conditional share award will vest on 1st September 2011 subject
to Mr. Mueller remaining in the employment of the group on that date.
Benefi ts under the conditional share award will not be pensionable.
As announced on 9th September 2009, Mr Christoph Mueller was
granted share options in respect of 1,500,000 shares in the Company
with effect from 8th September. The share options will vest and become
exercisable provided the closing price of the Company’s shares remain
above certain fi xed prices (detailed below) for at least 25 of the 40 days
prior to certain specifi c dates and further details relating to the options
are set out in Table 2.3 below. The Remuneration Committee selected
performance criteria which it believes are suffi ciently stretching to
reasonably incentivise Mr Mueller to deliver value for Aer Lingus
shareholders.
Both the conditional share award and the share option grant were
disclosed in the Remuneration Report contained in last year’s annual
report, which Remuneration Report was approved by shareholders at
last year’s annual general meeting.
Service Contracts
The Company has a service contract or letter of appointment with all
Board members.
Executive Directors
All service contracts with executive Directors are on similar terms and
have notice periods of 12 months or less and comply with the
recommendations in regard to payments on termination in paragraph
B.1.6 of the 2008 FRC Combined Code and paragraph 3.5 of the EU
Commission 2009 Guidance on Remuneration.
Non-executive Directors
The terms upon which each of the non-executive Directors have been
appointed are set out in letters of appointment which refl ect the form
recommended by the 2008 FRC Combined Code. It is the Company’s
policy that each non-executive Director will be appointed for a fi xed
period not exceeding three years (with the potential for a second three
year term), subject to satisfactory performance and re-election at any
Annual General Meeting where this is required. None of the non-
executive Directors is a party to any service contract with the Company
that provides for benefi ts upon termination.
Employee Share Participation
Since April 2003, the Group has operated a Revenue approved share
ownership plan consisting of a Revenue approved employee share
ownership trust and a Revenue approved profi t sharing scheme.
On 21 December 2010 a lump-sum payment was made to the Employee
Share Ownership Trust (“ESOT”) in order to extinguish an obligation to
pay the ESOT a share of annual profi ts. At the time, the ESOT held 12.5%
of the Group’s share capital, in trust for some 4,700 current and former
employees.
The obligation to pay profi t share from profi t before taxation and
exceptional items was established at the time of the Group’s IPO in
2006 and would have remained in place until the ESOT had received
suffi cient cash from the company to pay off approximately €25 million
of debt that it had borrowed in 2006. It made economic sense to
pre-pay the profi t share and extinguish the debt because of the very
substantial interest burden incurred by the ESOT. This interest was
effectively at the company’s expense, funded through the profi t share
mechanism. On 21 December 2010 the Group made a payment to the
ESOT suffi cient to discharge its debt and, as a consequence, the
obligation to pay profi t share was extinguished. By making this payment
to the ESOT, a liability which was not within the Group’s control has
been capped and at the same time the free fl oat of the Company has
signifi cantly increased.
See Note 28 to the fi nancial statements for more details.
Directors’ remuneration
Disclosures regarding Directors’ remuneration have been drawn up on an
individual Director basis in accordance with the requirements of both
the 2008 FRC Combined Code and the Irish Stock Exchange. In addition
to complying with the existing disclosure requirements, in future
Remuneration Reports, the Remuneration Committee intends to include
a more forward looking perspective in relation to its remuneration
policy.
Directors pension benefi ts
Information regarding the pension benefi ts of the Directors are outlined
in Table 2.1. The Company is required to make a contribution at a rate
of 25% of basic salary to pension arrangements as are agreed with each
of Mr Christoph Mueller and Mr Andrew Macfarlane.
Directors shareholdings
The interests of the Directors in offi ce at 31 December 2010 in the
shares of the Group are outlined in Table 2.2.
Report of the Remuneration Committee on Directors’ Remuneration (continued)