Air New Zealand 2015 Annual Report Download - page 60

Download and view the complete annual report

Please find page 60 of the 2015 Air New Zealand annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 68

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68

AIR NEW ZEALAND GROUP
58
Employee Remuneration (continued)
Remuneration฀philosophy
In order to attract and retain talented individuals, Air New Zealand’s performance and reward strategy is aligned with both the recruitment
philosophy – to source talented people; and our capability development agenda – to develop future leaders and provide succession pipelines into
key roles. The key objectives of the strategy are attracting high performing individuals, providing rich developmental opportunities and recognising
achievement through targeted performance and reward initiatives.
Air New Zealand’s remuneration strategy is underpinned by a pay for performance philosophy and accordingly positions base pay for competent
performance below the market median for all Individual Employee Agreements including the Chief Executive Officer (CEO), and uses annual
performance incentives to create opportunities for everyone to achieve market competitive remuneration levels and in the case of superior
performance, total remuneration in excess of market.
The overall remuneration strategy is designed to provide remuneration based on performance against agreed stretch targets, align actions with
shareholder interests and balance competitiveness with affordability. The CEO and executive remuneration packages are made up of three components:
•฀ Fixed฀ base฀ salary;
•฀ Annual฀performance฀incentive;฀and
•฀ Long฀ term฀ incentive.
Air New Zealand’s People Remuneration and Diversity Committee is kept appraised of relevant market information and best practice, obtaining
advice from external advisors when necessary. Remuneration levels are reviewed annually for market competitiveness and alignment with
strategic and performance priorities.
The People Remuneration and Diversity Committee approved PricewaterhouseCoopers to provide remuneration benchmark data for the CEO
and other executive committee roles during the 2015 financial year. PricewaterhouseCoopers benchmarked a selection of the executive positions
against a New Zealand/Australian peer group compiled from PricewaterhouseCoopers’ database. The peer group consisted of twelve New Zealand
and twelve Australian organisations. As a result of this analysis no adjustments were made to Air New Zealand’s executive remuneration bands.
Fixed฀base฀salary
Air New Zealand’s philosophy is to set fixed base salaries at 90 percent of the market median for executives who are fully competent in their role.
Annual฀performance฀incentive
The annual performance incentive component is delivered through the Air New Zealand Short Term Incentive Scheme (STI). The measures used
in determining the quantum of the STI are set annually. Targets relate to both Company financial performance and individual targets. For the
CEO the STI weighting is based 60% on Company financial performance and 40% on individual performance against specific targets. For all
other employees the weighting is 50% Company financial performance and 50% individual performance. Participation in the plan is by annual
invitation at the discretion of the Company.
Company฀ Component
At the beginning of each financial year the Board confirms a financial target for the Company for incentive payments which is set 10% above
the average Normalised Earnings before Taxation achieved by the Company over the previous five year period.
The Company must achieve greater than 50% of the financial target before any company component is paid out. The maximum company
component is 200%, achieved when the Company reaches and exceeds 150% of the financial target.
Significant one off adjustments to profit as agreed by the Board are removed from the calculation to guard against windfall payments.
Individual฀ Component
The main factors for the assessment of individual performance for the 2015 financial year were:
•฀ Financial฀performance฀ falling฀within฀an฀ executive’s฀ specic฀ responsibilities;
•฀ Business฀performance;
•฀ Strategy฀development฀and฀ delivery;฀and
•฀ People,฀ culture฀ and฀ leadership฀ performance.
Payments for the individual component are made according to an overall performance rating taking into account the employee’s performance
across the range of individual measures and demonstration of Air New Zealand’s leadership behaviours.
Performance฀Rating Individual฀STI฀Percentage
Unsatisfactory 0%
Developing 60%
Achieving 100%
High 130%
Outstanding 200%
Long฀term฀incentive
Air New Zealand’s long term incentive plan arrangements are designed to align the interests of the CEO and executives with those of our
shareholders and to incentivise participants in the plan to enhance long term shareholder value. In the 2015 financial year the plan available to
executives was the Air New Zealand Long Term Incentive Performance Rights Plan (LTIP). This scheme replaced the scheme available in 2014,
which was the Air New Zealand Long Term Incentive Options Plan. Participation in any year is by annual invitation at the discretion of the Company.