EasyJet 2009 Annual Report Download - page 48

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46 easyJet plc Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
In response to the difficult trading conditions experienced in the airline industry during the financial year ended 30 September 2008, the Company
completed an extensive shareholder consultation prior to the 2009 Annual General Meeting to amend LTIP performance targets applying to future awards.
This enabled the LTIP to take into account the unique short-term challenges that required effective management at the same time as retaining a long-term
focus on return on equity (“ROE”) which remains a key long-term performance indicator at easyJet.
For the current financial year, the LTIP has again been amended with ROE once more becoming the sole measure of long-term performance as has been
the case prior to the financial year under review. Full details of the targets set for the year under review and those that will apply for awards made to the
senior executive team in the current financial year are set out below.
In line with the Association of British Insurers’ Guidelines on Responsible Investment Disclosure, the Committee will ensure that the incentive structure for
Executive Directors and senior executives 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 Committee which prevents it from taking into
account corporate governance on ESG matters and the Committee takes due account of issues of general operational risk when structuring incentives.
The Committee takes account of risk by regular liaison with the Audit Committee to ensure that the remuneration policies adopted do not encourage
inappropriate risk-taking.
When setting remuneration policy for the Executive Directors and senior executives for the current financial year, the Committee considered pay and
employment conditions elsewhere within easyJet. The Committee was informed of the proposed salary budget for easyJet as a whole and the changes to
pay practices and staffing levels that took place during the year. These factors were significant contributory factors when determining Executive Directors’ pay
packages for the current year. The Committee did not consider it appropriate, for example, to award any salary increases for Executive Directors when very
limited salary increases were given to other staff.
easyJet’s normal remuneration policies are summarised below:
Element Purpose Policy Delivery
Basic salary • Reflect the value of the individual and
their role
•
• Reviewed annually, effective
1 October
• Agreed when previous results are
finalised
• Benchmarked against similar sized
companies and industry comparators
• Targeted at or around median
• Considers individual contribution
• Cash
• Paid monthly
• Pensionable
Annual bonus • Incentivise year on year delivery of
short-term performance goals
• Major measure is profit before tax
aligned to long-term targets
• Other measures based on:
– Revenue
– Cost
– Operational excellence
• Paid as cash
• Not pensionable
• May defer up to half of bonus into
LTIP
Long Term Incentive Plan • Aligned to business plan
• Incentivise long-term growth in
easyJet’s ROE
• Subject to stretching ROE targets
• Subject to 175% of salary
shareholding requirement
• Annual grant of performance shares
• Opportunity to defer bonus and
obtain future matching share awards
Pension • Provide minimum retirement benefits
• Opportunity for Executive to
contribute to their retirement
• Defined contribution
• HMRC approved salary sacrifice
arrangement
• Monthly employer contribution of
7% of basic salary
• Non contributory
• Salary sacrifice for employee
contributions
The Board as a whole determines the remuneration of the Company’s Non Executive Directors, with Non Executive Directors exempting themselves from
discussions and voting as appropriate. When determining the remuneration of Non Executive Directors, account is taken of practice adopted in other similar
organisations, committees chaired and anticipated time commitment.
Reflect skills and experience