EasyJet 2015 Annual Report Download - page 76

72 easyJet plc Annual report and accounts 2015
2. A performance adjusted award of 22,762 easyJet shares will
be made to compensate for the forfeiture of the long-term
incentive award he received in August 2013 from his previous
employer. Since around two-thirds of the vesting period for
this award had already run its course, the Committee assessed
the extent to which the performance targets were likely to
be met (based on current market forecasts) in respect of the
shares comprising two-thirds of the award and converted this
number of shares into an equivalent value of easyJet shares
on joining. These will vest, subject to continued employment
with easyJet, on 7 August 2016, so as to mirror the original
time horizon of the award. A further award of 14,625 easyJet
shares relating to the forfeiture of the August 2013 award was
also granted. This award was calculated based on the value of
one-third of the award at the time of joining easyJet, but these
shares will only vest to the extent that the performance
targets set for the 2013 easyJet LTIP award are met and
continued employment to 17 December 2016. The Committee
was comfortable with providing this form and level of
compensation since it replicated its assessment of the value
forfeit and also, in part, switched into easyJet performance
on a pro-rata basis for part of the award.
3. An award of 39,923 easyJet shares will be made to
compensate for the forfeiture of the award granted to the
individual in August 2014. This award comprised an exchange
of the maximum number of shares that could vest under his
previous employers’ award which were then converted to
easyJet shares on joining. These shares will only vest based on
the extent to which the performance targets applying to the
2014 easyJet LTIP award are met and the individual remaining
in employment until 19 December 2017, being the ordinary
vesting date for the easyJet award and later than the vesting
date of the original award at his former employer. The
Committee was comfortable with providing this form of
compensation given the performance period at the individual’s
previous employer for this award had only recently
commenced and so switching to an equivalent value in
performance related easyJet shares resulted in alignment
being achieved with the wider executive team at easyJet.
Each of the replacement share awards detailed above will be
subject to easyJet’s shareholding guidelines whereby Andrew
Findlay will be required to retain at least half of the (after tax)
number of shares exercised from the awards until he has built
a shareholding that, when aggregated with his other easyJet
shareholdings, is of equivalent value to 175% of salary.
How will the remuneration policy be applied for the 2016
financial year?
What are the Executive Directors’ current salaries?
The current and proposed salaries of the Executive Directors are:
1 January 2016
salary
1 January 2015
or on
appointment
to the Board
salary Change
CEO £705,600 £698,600 1%
CFO(1) £425,000 £425,000 0%
(1) The current CFO, Andrew Findlay, was appointed to the Board on
2 October 2015. His base salary on appointment was set at £425,000
and no increase will be awarded in the 2016 financial year. The salary
of former CFO, Chris Kennedy, was £430,800.
The increase to be awarded to the Chief Executive is consistent
with the typical rate of increase being awarded across the Group.
What bonus will be awarded in respect of performance in the
2016 financial year?
The maximum bonus opportunity remains at 200% of salary for
the Chief Executive and at 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 CEO CFO
Profit before tax 70% 60%
On-time performance 10% 10%
Customer satisfaction 10% 10%
Operating costs (excluding fuel)
per seat at constant currency 10% 10%
Departmental objectives – 10%
The proposed target levels for the 2016 financial year have been
set to be challenging relative to the business plan.
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 2016 financial year,
are commercially sensitive. However, retrospective disclosure of
the targets and performance against them will be provided in
next year’s remuneration report unless they remain commercially
sensitive. The safety of our customers and people underpins
all of the operational activities of the Group and the bonus plan
includes a provision 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 2016 financial year
awards?
The 2015 financial year was the last time that LTIP awards were
made via a combination of Performance and Matching Share
Awards. Matching Share Awards will no longer operate from
the 2016 financial year onwards and LTIP awards will be made
as Performance Shares only.
The award levels for the Executive Directors in the 2016 financial
year will be 250% of salary for the Chief Executive and 200% of
salary for the Chief Financial Officer.
The 2016 financial year LTIP awards will be subject to the
following performance conditions:
Below
threshold
(0% vesting)
Threshold
(25% vesting)
On-target
(50%
vesting)
Maximum
(100%
vesting)
ROCE (70%
of total award) <15% 15% 18% 20%
Below
threshold
(0% vesting)
Threshold
(25% vesting)
Maximum
(100%
vesting)
TSR (30% of total award) <Median Median
Upper
quartile
Directors’ remuneration report continued