EasyJet 2014 Annual Report Download - page 75

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Governance
The Committee also considers developments in institutional
investors’ best practice expectations and the views
expressed by shareholders during any dialogue.
How do we take into account the views of shareholders
when we determine the remuneration policy?
easyJet remains committed to shareholder dialogue and
takes an active interest in voting outcomes. We consult
extensively with our major shareholders when setting our
remuneration policy. If any of these shareholders were to
be opposed to our policy, we would endeavour to meet
with them, as appropriate, to understand and respond to
any issues they may have.
What changes are we proposing to make to the
remuneration policy approved by shareholders at
the 2014 AGM and why?
As a result of the upcoming expiry of the Company’s LTIP
in September 2015, the Committee undertook a review
of the existing remuneration policy against the Company’s
principles and in light of developments in the executive
pay environment. Since the Company’s overall policy is
considered to be aligned with easyJet’s principles, and is
considered to be serving the Company well, the primary
change proposed relates to simplifying the LTIP structure
in light of general encouragement in this regard from
institutional shareholders and the leading shareholder
advisory bodies. In summary, the proposed changes to
policy include:
• simplification of the current long-term incentive
arrangements, with a lower maximum total annual
award potential for the Chief Executive, when compared
against the current long-term incentive structure, to
apply from the financial year commencing on 1 October
2015. Subject to shareholder approval at the February
2015 AGM, for the simplified LTIP, only Performance Share
Awards will be granted in respect of the 2016 financial
year onwards, as opposed to Performance Share Awards
in tandem with Matching Share Awards, as per the policy
shareholders approved at the 2014 AGM;
• the 2015 financial year will see the final operation of the
current LTIP (i.e. with Performance Share Awards and
Matching Share Awards granted at the same time) since
this was the policy communicated to both shareholders
and executives at the start of the financial year, and so
bonuses earned in respect of the 2014 financial year will
be eligible for a Matching Share Award for the final time,
in line with our existing policy;
• from the 2016 financial year, the maximum normal annual
award limit of Performance Shares will be restricted to
250% of salary, which is lower than the combined award
potential for the Chief Executive under the current plan
of 300% of salary (200% of salary in Performance
Shares plus 100% of salary in Matching Shares);
• for completeness, subject to the new LTIP being
approved by shareholders at the 2015 AGM, the intention
is to set ongoing annual award policy at 250% of salary
for the Chief Executive and 200% of salary for the Chief
Financial Officer. The revised award level for the Chief
Executive has been set so as to retain a similar expected
value to the current remuneration policy, with the
Matching Share Award included at 50% of the 100%
of salary maximum level (i.e. assuming that, on average,
half the maximum Matching Share Award would be
granted each year). The revised award level for the
Chief Financial Officer incorporates the maximum
Matching Share Award, at 50% of salary, in order to
position his remuneration closer to comparable roles
in companies of a similar size and complexity. Awards
under the new LTIP will be granted for the first time,
subject to shareholder approval of the new plan and
revised remuneration policy at the 2015 AGM, following
the results announcement for the year ending 30
September 2015 (i.e. in the 2016 financial year); and
• in addition, the Committee will be introducing a
holding period for shares vesting under the new LTIP,
during which Executive Directors will be required to retain
the after-tax value of shares for 24 months from the
vesting date.
To address the below market total remuneration
positioning of the Chief Financial Officer, his annual bonus
opportunity is to increase to 175% of salary from 150%.
The change to the Chief Financial Officer’s bonus
opportunity takes effect from 1 October 2014 (subject
to the policy that follows being approved by shareholders
at the 2015 AGM), and takes account of the fact that
the Chief Financial Officer has fallen well behind
appropriate comparative benchmarks from a total
remuneration perspective.
This approach ensures that his revised remuneration
structure remains aligned with easyJet’s remuneration
philosophy of operating a relatively lean approach to
fixed pay levels versus comparative market benchmarks,
with the opportunity to earn above-market levels of total
remuneration subject to successful execution of the
Board’s strategy.
In setting the 2015 financial year annual bonus targets,
the higher quantum for the Chief Financial Officer was
considered by the Committee. A higher year-on-year profit
growth target has been set for the 2015 financial year
and is considered appropriately challenging for the new
bonus arrangement.
A higher share ownership guideline will be introduced
for the Chief Executive at 200% of salary (from 175%
of salary). A 175% of salary share ownership guideline
will continue to operate for the Chief Financial Officer.