EasyJet 2014 Annual Report Download - page 77

www.easyJet.com 75
Governance
Element, purpose and link
to strategy Operation (including maximum levels where applicable)
Framework used to assess performance
and provisions for the recovery of sums paid
Annual bonus
To incentivise and
recognise execution
of the business strategy
on an annual basis.
Rewards the achievement
of annual financial and
operational goals.
Compulsory and
voluntary deferral
provides alignment
with shareholders.
Maximum opportunity of 200% of salary
for Chief Executive and 175% of salary
for other Executive Directors.
One-third of the bonus earned is subject
to compulsory deferral into shares (or
equivalent) in a Deferred Annual Bonus
Plan (DABP), typically for a period of three
years, and is normally subject to continued
employment. Executive Directors can
choose to voluntarily defer a further portion
of their bonus into shares for three years
which may be eligible for a Matching Share
Award under the LTIP (see below).
The remainder of the bonus is paid in
cash. Matching Share Awards will operate
for the final time in the year ending
30 September 2015.
Dividend equivalent payments may be
made (in cash or shares) under the DABP, at
the time of vesting and may assume the
reinvestment of dividends.
All bonus payments are at the discretion of
the Committee, as shown following
this table.
Bonuses are based on stretching financial,
operational and, in some cases, personal/
departmental performance measures as set
and assessed by the Committee in its discretion.
Financial measures (e.g. profit before tax) will
represent the majority of bonus, with other
measures representing the balance. A graduated
scale of targets is set for each measure, with
10% of each element being payable for achieving
the relevant threshold hurdle.
Safety underpins all of the operational activities of
the Group and the bonus plan includes an underpin
that enables the Remuneration Committee to scale
back the bonus earned in the event that there is a
safety event which it considers warrants the use
of such discretion.
The cash and deferred elements of bonuses are
subject to provisions which enable the Committee
to recover the cash paid (clawback) or to lapse
the associated deferred shares (malus) in the event
of a misstatement of results for the financial year to
which the bonus relates, or an error in determining
the cash bonus or the number of shares comprising
a deferred share award, within three years of the
payment of the cash bonus.
LTIP Matching Share
Award (operating for the
final time in the financial
year commencing
1 October 2014)
To incentivise and
recognise execution
of the business strategy
over the longer term.
Rewards strong financial
performance and
sustained increase
in shareholder value.
Each year, the Executive Directors can
voluntarily defer a portion of their bonus
which is invested (after tax) into shares
for three years. The maximum voluntary
deferral is restricted to:
• Chief Executive: half of bonus; and
• Other Executive Directors: one-third
of bonus.
The maximum voluntary investment is
therefore limited to 100% of salary in
the case of the Chief Executive and
50% of salary in the case of other
Executive Directors.
The amount deferred may be eligible
for a 1:1 match, based on the number
of pre-tax shares deferred. Vesting of
Matching Shares is dependent on the
achievement of performance targets.
Awards normally vest over a three
year period.
A dividend equivalent provision exists which
allows the Committee to pay dividends on
vested shares (in cash or shares) at the time
of vesting and may assume the
reinvestment of dividends.
Matching Share Awards vest based on three year
performance against a challenging range of financial
targets and relative Total Shareholder Return (TSR)
performance set and assessed by the Committee
in its discretion. Financial targets will determine
vesting in relation to at least 50% of a Matching
Share Award.
In order for the TSR portion of the award to be
earned, the Company’s absolute TSR performance
must also be positive over the performance period.
25% of each element vests for achieving the
threshold performance target with 100% of the
awards being earned for maximum performance.
(There is straight-line vesting between these points).
The Matching Share Awards include provisions
which enable the Committee to recover value
in the event of a misstatement of results for the
financial year to which the vesting of a Matching
Share Award related, or an error in calculation when
determining the vesting result within three years
of the vesting (i.e. clawback provisions apply). The
mechanism through which the clawback can be
implemented enables the Committee to: (i) reduce
the cash bonus earned in a subsequent year and/or
reduce the outstanding LTIP share awards (i.e. malus
provisions may be used to effect a clawback),
or (ii) for the Committee to require that a net of
tax balancing cash payment be made.