Holiday Inn 2006 Annual Report Download - page 35

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Remuneration report
IHG The Board, senior management and their responsibilities 33
In respect of TSR performance, 10% of the award will be released
for the achievement of fifth place within the TSR group and 50% of
the award will be released for the achievement of first or second
place. In respect of rooms growth performance, 10% of the award
will be released for the achievement of median growth and 50% of
the award will be released for the achievement of upper quartile
growth. Vesting between all stated points will be on a straight line
basis which is the simplest and fairest method of calculating
awards that lie between threshold and maximum levels.
Awards under the PRSP lapse if the performance conditions are
not met – there is no retesting.
As indicated in last year’s report, the Committee believes that
relative TSR and a rooms growth related performance measure are
appropriate performance measures, effectively aligning appropriate
elements of incentive pay with shareholder interests and the
Group’s stated objective of increasing organic growth and the
number of rooms in the IHG system.
The target date for achieving the current rooms growth objective
is the end of 2008 and therefore the Committee has concluded that
the rooms growth related measure is now more appropriately
measured and awarded through the annual bonus plan. For the
2007/09 cycle, the performance measures for the PRSP will
therefore be as follows:
• 50% of the award will continue to be based on IHG’s TSR
relative to its peer comparator companies. 10% of the award
will be released for the achievement of median growth and 50%
of the award will be released for the achievement of first place
only (previously first or second place). Vesting between all
stated points will continue to be on a straight line basis.
• The other 50% of the award will depend on growth in adjusted
Earnings Per Share (EPS) over the period. 10% of the award will
be released if adjusted EPS growth is 10% per annum and 50%
of the award will be released if adjusted EPS growth is 20% per
annum or more. There will be no adjustment for any increase
in the UK Retail Price Index (RPI) because this does not
significantly affect IHG’s results.
Executive share options As reported last year, executive share
options do not presently form part of the Group’s remuneration
strategy. Details of prior executive share option grants are given
in the table on page 38.
For options granted in 2004 and 2005, a performance condition has
to be met before options can be exercised. For both grants, the
Company’s adjusted EPS over a three-year period must increase by
at least nine percentage points over the increase in 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.
Share ownership 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.
The Executive Directors are expected to hold all shares earned
(net of any share sales required to meet personal tax liabilities)
from the Group’s remuneration plans while the value of their
holding is less than twice their base salary or three times in the
case of the Chief Executive.
3.3 Policy on external appointments
The Company recognises that its Directors may be invited to
become Non-Executive Directors of other companies and that such
duties can broaden experience and knowledge, and benefit the
business. Executive Directors are, therefore, allowed to accept one
non-executive appointment (excluding positions where the Director
is appointed as the Group’s representative), subject to Board
approval, as long as this is not likely to lead to a conflict of interest,
and to retain the fees received.
Andrew Cosslett is Non-Executive Chairman of Duchy Originals
Limited, for which he receives no remuneration.