EasyJet 2008 Annual Report Download - page 38

Basic salary
The basic salaries of Executive Directors are reviewed annually and are
set taking account of a number of factors including (i) practice adopted
in companies of a broadly similar size, (ii) a formal appraisal of their
contribution to the business and (iii) the competitive environment, as
senior easyJet executives are potential targets for other low cost start-ups
and other companies in the airline sector.
At the beginning of the financial year Andrew Harrison’s salary was increased
from £540,000 to £590,000 to provide a salary that was competitive
compared to companies of a comparable size. Jeff Carr’s salary increased
from £300,000 to £360,000 which reflected the final step in a series of
phased increases designed to deliver a market competitive base salary level.
It is proposed that basic salary will not be increased for Executive Directors
in the 2009 financial year.
Annual bonus scheme
All Executive Directors participate in an annual bonus scheme. The maximum
annual bonus opportunity of the Chief Executive during the year was 200%
of salary, with a 100% of salary maximum for the Group Finance Director.
Bonus targets are aligned with easyJet’s vision and values. The performance
targets that will apply to Executive Directors’ annual bonus opportunities
in 2009 are currently under review. It is anticipated that they will be broadly
similar to those in 2008. Full details will be included in next year’s report.
In line with the Association of British Insurers’ Guidelines on Responsible
Investment Disclosure, the Remuneration Committee will ensure that the
incentive structure for Executive Directors and senior management will not
raise environmental, social or governance (“ESG”) risks by inadvertently
motivating irresponsible behaviour. More generally, with regard to the overall
remuneration structure, there is no restriction on the Remuneration
Committee which prevents it from taking into account corporate
governance on ESG matters and takes due account of issues of general
operational risk when structuring incentives.
Achievement of bonus for 2008
Andrew Harrison will be paid a bonus of £265,500 (45% of salary paid)
in the year ending 30 September 2009 to reflect performance in the year
ended 30 September 2008 (2007: 184.6% of salary). Jeff Carr will be paid a
bonus of £81,000 (22.5% of salary) in the year ending 30 September 2009
to reflect performance in the year ended 30 September 2008 (2007: 92.3%
of salary).
These bonuses were determined by the Remuneration Committee in
light of the Company’s performance against a range of key financial and
operational metrics (normalised as appropriate to take account of the
extremely challenging economic environment, in particular the increase
in fuel prices, which accounts for some £283 million of additional cost
versus 2007). These metrics included:
Measure % maximum bonus opportunity
Profit 70%
Customer targets
People
Operating costs
On time performance
Long term incentive plans
The easyJet Long Term Incentive Plan provides for annual awards of
performance shares and matching shares. The plan was approved by
shareholders at the AGM in 2005 and amended at last year’s AGM.
The annual award limit for performance shares was increased from 100%
to 200% of basic salary at the 2008 AGM.
Matching shares awards are linked to the investment of up to 50% of annual
bonus into easyJet shares, which are then matched on a 1:1 gross basis.
Performance and Matching Shares awards vest three years after grant, subject
to continued employment and the Company achieving target returns on
equity. These are defined as post tax profit divided by average shareholders’
funds. This measure was chosen as it is a fundamental measure of financial
performance and is linked to the generation of shareholder returns.
easyJet plc
Annual report and accounts 2008
Report on Directors’
remuneration
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