EasyJet 2014 Annual Report Download - page 79

www.easyJet.com 77
Governance
Any use of the above discretions would, where relevant,
be explained in the Annual Report on Remuneration and
may, as appropriate, be the subject of consultation with
the Company’s major shareholders.
The use of discretion in relation to the Company’s
Sharesave and Share Incentive Plans will be as permitted
under HMRC rules and the Listing Rules.
Details of share awards granted to existing Executive
Directors are set out on page 84 of the Annual Report
on Remuneration. These remain eligible to vest based
on their original award terms.
How did we choose performance metrics and how
do we set performance targets?
The performance metrics used for the annual bonus plan
and LTIP have been selected to reflect the Group’s key
performance indicators.
Profit before tax is used to assess annual performance
as this reflects how successful we have been in managing
our operations effectively (e.g. in maximising profit per
seat whilst maintaining a high load factor). The balance
is determined based on how well we perform against
other specific key performance indicators set annually
(e.g. on-time performance and customer satisfaction)
to ensure that Executive Directors are motivated to deliver
across a scorecard of objectives.
Since safety is of central importance to the business, the
award of any bonus is subject to an underpin that enables
the Remuneration Committee to reduce the bonus earned
in the event that there is a safety event that it considers
warrants the use of such discretion.
LTIP awards are earned for delivering performance against
ROCE (which, since December 2012, has included operating
lease adjustments) and relative TSR targets. These seek to
assess the underlying financial performance of the business
while maintaining clear alignment between shareholders
and Executive Directors. Targets are set based on a sliding
scale that takes account of relevant commercial factors.
Only modest awards are available for delivering threshold
performance levels with maximum awards requiring
substantial outperformance of challenging plans.
No performance targets are set for Sharesave and
Share Incentive Plan awards since these form part of
all-employee arrangements that are purposefully designed
to encourage employees across the Group to purchase
shares in the Company.
Have LTIP Awards always been granted subject to
the same performance targets?
The LTIP, under which the Performance and Matching
Share Awards are granted, was approved by shareholders
in 2008. Further details on how the awards are structured
and operated are set out in the plan rules which are
available, on request, from the Company.
The policy set out above applies to awards granted from
the 2013 financial year onwards. Awards granted under
the previous policy are subject to different performance
measures (typically Return on Equity (ROE) or ROCE as
the sole performance measure), have different award levels
and may be earned in line with the terms of their grant in
due course. Details of all the outstanding share awards
granted to existing Executive Directors are set out in the
Annual Report on Remuneration.
How does the executive pay policy differ from that
for other easyJet employees?
The remuneration policy for the Executive Directors is
more heavily weighted towards variable pay than for other
employees, to make a greater part of their pay conditional
on the successful delivery of business strategy. This
aims to create a clear link between the value created
for shareholders and the remuneration received by the
Executive Directors. However, in line with the Company’s
policy to keep remuneration simple and consistent, the
benefit and pension arrangements for the current
Executive Directors are on the same terms as those
offered to eligible employees in the wider workforce.
How much could the Executive Directors earn
under the remuneration policy?
A significant proportion of remuneration is linked to
performance, particularly at maximum performance
levels. The charts on page 78 show how much the
Chief Executive and Chief Financial Officer could earn
under easyJet’s remuneration policy (as detailed above)
under different performance scenarios (based on their
salaries as at 1 October 2014). The following assumptions
have been made:
Minimum (performance below threshold) – Fixed pay
only with no vesting under any of easyJet’s incentive plans.
In line with expectations – Fixed pay plus a bonus at
the mid-point of the range (giving 50% of the maximum
opportunity and assuming half of the maximum voluntary
deferral) and vesting of one-third of the maximum under
the Performance and Matching Share elements of the LTIP.
Maximum (performance meets or exceeds maximum)
– Fixed pay plus maximum bonus (with maximum voluntary
deferral) and maximum vesting under the Performance
and Matching Shares elements of the LTIP.
Fixed pay comprises:
• salaries – salary effective as at 1 October 2014;
• benefits – amount received by each Executive Director
in the 2014 financial year;
• pension – employer contributions or cash-equivalent
payments received by each Executive Director in the
2014 financial year; and
• Free and Matching Shares under the all-employee
share incentive plan.