EasyJet 2014 Annual Report Download - page 83

www.easyJet.com 81
Governance
What bonus will be awarded in respect of
performance in the 2015 financial year?
The annual bonus for the 2015 financial year will operate
on the same basis as for the 2014 financial year and will
be consistent with the policy detailed in the remuneration
policy section of this report in terms of deferral and
clawback provisions. The maximum bonus opportunity
remains at 200% of salary for the Chief Executive and
increases from 150% to 175% for the Chief Financial Officer.
The measures have been selected to reflect a range of
financial and operational goals that support the key
strategic objectives of the Company.
The performance measures and weightings will be as follows:
As a percentage of
maximum bonus opportunity
Measure CE CFO
Profit before tax 70% 60%
On-time performance 10% 10%
Customer satisfaction targets 10% 10%
Operating costs (excluding fuel)
per seat at constant currency 10% 10%
Departmental objectives – 10%
The proposed target levels for the 2015 financial year have
been set to be challenging relative to the business plan.
In setting the targets, the Committee was mindful that the
maximum opportunity has been increased for the Chief
Financial Officer. 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.
The targets relating to on-time performance, cost per seat
and customer satisfaction are also considered demanding.
Therefore, overall, the Committee is comfortable that the
bonus targets for both Executive Directors are appropriately
demanding in light of their respective bonus opportunities.
The targets themselves, as they relate to the 2015 financial
year, are deemed to be commercially sensitive. However,
retrospective disclosure of the targets and performance
against them will be provided in next year’s remuneration
report to the extent that they do not remain commercially
sensitive at that time. The safety of our customers and
people 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 that
occurs that it considers warrants the use of such discretion.
How will the LTIP be operated in relation to the 2015
financial year awards?
The award levels of Performance Shares for the Executive
Directors in the 2015 financial year are as per the policy
approved by shareholders at the 2014 AGM at 200% of
salary for the Chief Executive and 150% of salary for the
Chief Financial Officer.
The annual bonus plan operated in 2014 was the last
opportunity for voluntary deferral of part of the bonus into
shares for the purposes of receiving Matching Share Awards.
The Awards will operate for the final time in the financial year
ending 30 September 2015. Accordingly, where Executive
Directors have elected to voluntarily defer more of their bonus
into shares beyond the compulsory deferral element, Matching
Share Awards will be granted. The amount voluntarily deferred
may be eligible for a 1:1 match dependent on the delivery of
performance goals, with awards vesting over a three year
period. The Chief Executive could have voluntarily deferred
up to 50% of the annual bonus earned and the Chief
Financial Officer up to two-thirds of the bonus earned. The
Chief Executive deferred the maximum amount of her 2014
financial year bonus and the Chief Financial Officer deferred
two-thirds of the maximum amount. Both amounts will be
eligible for Matching Share Awards.
The 2015 financial year LTIP awards (Performance and
Matching Share Awards) will be subject to the following
performance conditions:
Below
threshold
(0% vesting)
Threshold
(25%
vesting)
On-target
(40%
vesting)
Maximum
(100%
vesting)
ROCE (50% of
total award) <15.0% 15.0% 18.2% 20.0%
Below threshold
(0% vesting)
Threshold
(25%
vesting)
Maximum
(100%
vesting)
TSR
(50% of total award) < median median
upper
quartile
Awards vest on a straight-line basis between these
points. As with the awards granted in the 2014 financial
year, ROCE targets are based on average ROCE
(including operating lease adjustments) over a three year
performance period, commencing on 1 October 2014. TSR
targets are based on relative TSR compared to companies
ranked FTSE 31-130 at the date of grant, where the average
share price is calculated over three months at the start and
end of the period. In addition, in order for the TSR-based
awards to vest, easyJet must have achieved positive
absolute TSR performance over the performance period.
These targets will require management to deliver strong,
sustainable performance over the period. The Committee
considers the range of ROCE targets set to be demanding,
given that the level of return required to be created for vesting
to take place will be calculated from a materially higher capital
base reflecting the growth in the Company’s fleet numbers
during the period through to 30 September 2017.
As detailed in the policy report, Matching Share Awards will no
longer operate with effect from the financial year commencing
on 1 October 2015 with the revised award levels detailed in the
policy report applying at the time of grant. Similarly challenging
performance targets to those described above will apply to
awards granted under the revised policy with any substantial
change the subject of appropriate dialogue with the
Company’s major shareholders.
How will the Non-Executive Directors be paid in the
2015 financial year?
The fees for the Chairman and Non-Executive Directors
will be as follows:
Chairman £300,000
Basic fee for other Non-Executive Directors £60,000
Fees for Deputy Chairman and SID role(1) £25,000
Chair of the Audit, Safety and Remuneration
Committees(1) £15,000
Chair of the Finance Committee(1) £10,000
(1) Supplementary fees.
There are no changes to basic fees, which were last
reviewed and increased on 1 October 2013.