EasyJet 2015 Annual Report Download - page 72

68 easyJet plc Annual report and accounts 2015
What discretion is retained by the Committee in operating
its incentive plans?
The Committee will operate the annual bonus plan, LTIP and
Deferred Annual Bonus Plan according to their respective rules
(or relevant documents) and in accordance with the Listing Rules
where relevant. The Committee retains discretion, consistent
with market practice, in a number of regards to the operation
and administration of these plans. These include, but are not
limited to, the following in relation to the LTIP and Deferred
Annual Bonus Plan:
• the participants;
• the timing of grant of an award;
• the size of an award;
• the determination of vesting;
• discretion required when dealing with a change of control
or restructuring of the Group;
• determination of the treatment of leavers based on the rules
of the plan and the appropriate treatment chosen;
• adjustments required in certain circumstances (e.g. rights
issues, corporate restructuring events and special dividends);
and
• the annual review of performance measures and weighting,
and targets for the LTIP from year to year.
In relation to the annual bonus plan, the Committee retains
discretion over:
• the participants;
• the timing of grant of a payment;
• the determination of the bonus payment;
• dealing with a change of control;
• determination of the treatment of leavers based on the rules
of the plan and the appropriate treatment chosen; and
• the annual review of performance measures and weighting,
and targets for the annual bonus plan from year to year.
In relation to both the Company’s LTIP and annual bonus plan,
the Committee retains the ability to adjust the targets and/or set
different measures if events occur which cause it to determine
that the conditions are no longer appropriate (e.g. material
acquisition and/or divestment of a Group business), and the
amendment is required so that the conditions achieve their
original purpose and are not materially less difficult to satisfy.
Any use of the above discretions would be explained in the
Annual Report on Remuneration and may be the subject of
consultation with the Company’s major shareholders.
The use of discretion in relation to the Company’s Save As You
Earn 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 75 of the Annual Report on Remuneration.
These remain eligible to vest based on their original award terms.
How were the performance metrics chosen and how were
the performance targets set?
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 the Company has been in managing
operations effectively (e.g. in maximising profit per seat whilst
maintaining a high load factor). The balance is determined based
on how well the Company performs 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
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 Save As You Earn 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.
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.
Directors’ remuneration report continued