EasyJet 2015 Annual Report Download - page 71

Strategic report Governance Accounts
67
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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 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.
The remainder of the bonus is paid in cash.
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 provision
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 Performance Share
Award
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 LTIP awards may be granted subject
to the achievement of performance targets.
Awards normally vest over a three-year period.
The maximum opportunity contained within
the plan rules for Performance Share Awards
is 250% of salary (with awards up to 300%
of salary eligible to be made in exceptional
circumstances, such as recruitment).
The normal maximum face value of annual
awards will be 250% of salary for the Chief
Executive and 200% of salary for other
Executive Directors.
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. A holding period applies to share
awards granted in the financial year ended
30 September 2015 and beyond. The holding
period will require the Executive Directors
to retain the after-tax value of shares for
24 months from the vesting date.
LTIP awards vest based on three-year performance
against a stretching range of financial targets and
relative TSR performance set and assessed by the
Committee in its discretion. Financial targets will
determine vesting in relation to at least 50%
of awards.
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 LTIP includes 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 awards 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 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.
Share ownership
To ensure alignment
between the interests of
Executive Directors and
shareholders.
200% of salary holding required for the Chief
Executive and 175% of salary for the Chief
Financial Officer which is expected to be
reached within five years of appointment.
Executive Directors are required to retain half
of the post-tax shares vesting under the LTIP
until the guideline is met.
Not applicable.