Holiday Inn 2003 Annual Report Download - page 22

20 InterContinental Hotels Group 2003
REMUNERATION REPORT
achievement of specific Key Performance Objectives. At the
executive level, Key Performance Objectives are linked directly
to the Group’s strategic priorities. At a minimum, the individual
performance of the executive directors is assessed on an
annual basis.
The normal policy for executive directors is that, using ‘target’
or ‘expected value’ calculations, their performance-related
incentives will equate to approximately 70% of total annual
remuneration (excluding benefits).
The main components of remuneration are:
Basic salary The salary for each executive director is based
on individual performance and on information from independent
professional sources on the salary levels for similar jobs in
groups of comparable companies. Internal relativities and
salary levels in the wider employment market are also taken
into account.
In addition, benefits are provided to executive directors
in accordance with the policy applying to other executives
in their geographic location.
Annual performance bonus Within the Short Term Deferred
Incentive Plan, challenging performance goals are set and
these must be achieved before the maximum bonus becomes
payable. These goals include both personal objectives and
targets linked to the Group’s financial performance. For
executive directors, the maximum bonus opportunity is 100%
of salary, with 30% linked to personal objectives, 35% to
adjusted earnings per share and 35% to earnings before
exceptional items, interest and taxation. The bonus will
normally be paid in IHG PLC shares and deferred. Matching
shares may also be awarded up to 0.5 times the deferred
amount. Such awards are conditional on the directors’
continued employment with the Group until the release date.
The shares will normally be released in equal amounts at
the end of each of the three years following deferral.
The executive directors will be expected to hold all shares
earned from the Group’s remuneration plans until the value
of their holding equates to twice their basic salary or three
times in the case of the Chief Executive.
Bonuses are not pensionable.
Executive share options The Committee believes that share
ownership by executive directors and senior executives
strengthens the link between the individual’s personal interest
and that of the shareholders. Grants of options are normally
made annually and, except in exceptional circumstances,
will not, in any year, exceed three times annual salary for
executive directors.
A performance condition has to be met before options can be
exercised. The performance condition is set by the Committee.
For options granted in 2003, the Company's adjusted earnings
per share over the three-year period ending 31 December 2005
must increase by at least nine percentage points over the
increase in the UK Retail Prices Index (‘RPI’) for the same period
for one-third of the options granted to vest; 12 percentage points
over the increase in RPI for the same period for two-thirds of
the options granted to vest; and 15 percentage points over the
increase in RPI for the same period for the full award to vest.
This was felt to be a realistic but challenging condition in the
current economic climate. The achievement or otherwise of
the performance condition is assessed, based on the Group’s
published results; such assessment is then reviewed by the
external auditor.
Executive directors were granted options on 30 May 2003
as shown in the table on page 26.
It is the current intention for similar performance conditions
to apply to options granted in 2004 and later years.
Executive share options are not pensionable.
Executive directors are entitled to participate in all-employee
share schemes. Options granted under the IHG Sharesave
Plan are not subject to performance conditions and
are not pensionable.
Performance Restricted Shares The Performance Restricted
Share Plan allows executive directors and eligible employees
to receive share awards, subject to the satisfaction of a
performance condition, set by the Committee, which is
normally measured over a three-year period. Awards are
normally made annually and, except in exceptional
circumstances, will not exceed three times annual salary for
executive directors. In determining the level of awards within
this maximum limit, the Committee takes into account the level
of executive share options granted to the same person. The
grant of awards is restricted so that in each year the aggregate
of (i) 20% of the market value of the executive share options
and (ii) 33% of the market value of Performance Restricted
Shares, will not exceed 130% of annual salary, taking the
market value in each case as at the date of grant.