Holiday Inn 2007 Annual Report Download - page 40

Awards under the Annual Bonus Plan will be linked to individual
performance (30% of total award), EBIT (50% of total award)
and net annual rooms additions (20% of total award). Individual
performance is measured by the achievement of specific
Key Performance Objectives that are linked directly to the
Group’s strategic priorities, and an assessment of performance
against leadership competencies and behaviours.
Under the financial measure (EBIT), threshold payout is 90%
of target performance, with maximum payout at 110% of target.
If performance under the financial measure in any year is below
threshold, payouts on all other measures are reduced by half.
Long Term Incentive Plan
The Long Term Incentive Plan (LTIP) was formerly called the
Performance Restricted Share Plan. It 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, other than in exceptional
circumstances, will not exceed three times annual salary for
Executive Directors.
For the 2007/09 LTIP cycle, performance will be measured
by reference to:
• the increase in IHG’s Total Shareholder Return (TSR) over
the performance period relative to eight* identified
comparator companies: Accor, Choice, Marriott Hotels,
Millennium & Copthorne, NH Hotels, Sol Melia,
Starwood Hotels and Wyndham Worldwide; and
• growth in adjusted Earnings Per Share (EPS) over the period.
* Following the delisting of Hilton Hotels Corp. shares in October 2007.
In respect of TSR performance, 10% of the award will be released
for the achievement of median performance and 50% of the award
will be released for the achievement of first place only (previously
first or second place). In respect of EPS performance, 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.
Vesting between all stated points will continue to be on
a straight-line basis. Awards under the LTIP lapse if the
performance conditions are not met – there is no retesting.
For the 2008/10 cycle, the performance measures for the LTIP
will be as follows:
• 50% of the award will be based on IHG’s TSR relative to
the Dow Jones World Hotels index. 10% of the award will be
released for the achievement of growth equal to the index and
50% of the award will be released for the out-performance of
the index by 8% per annum. Vesting between all stated points
will continue to be on a straight-line basis; and
• the other 50% of the award will depend on growth in adjusted
EPS over the period. 10% of the award will be released for
threshold performance and 50% of the award will be released
for superior performance. The Committee reviews the EPS
targets each year and, at the time of this report, the target had
not yet been determined. It will be disclosed when awards are
made in due course. In setting the target, the Committee will
take into account a range of factors, including IHG’s strategic
plans, City analysts’ expectations for IHG’s performance and
for the industry as a whole, the historical performance of the
industry and FTSE 100 market practice.
Executive share options
Since 2006, executive share options have not formed part of
the Group’s remuneration strategy. Details of prior share option
grants are given in the table on page 43.
For options granted in 2005, a performance condition has to be
met before options can be exercised. The Company’s adjusted
EPS over a three-year period must increase by at least nine
percentage points over the increase in the UK Retail Price 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.
Share capital
During 2007, no awards or grants over shares were made that
would be dilutive of the Company’s ordinary share capital. Current
policy is to settle all awards or grants under any of the Company’s
share plans with shares purchased in the market, with the
exception of a number of options granted before 2005, which
are yet to be exercised and settled with the issue of new shares.
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.
2.4 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 (not including 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.
38 IHG Annual Report and Financial Statements 2007
Remuneration report continued