Holiday Inn 2008 Annual Report Download - page 44

For 2008, awards under the ABP were linked to individual
performance (30% of total award), EBIT (50% of total award)
and net annual rooms additions (20% of total award). Individual
performance was 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% or more of
target. If performance under the financial measure in any year is
below threshold, payout on all other measures is reduced by half.
For awards in respect of the 2009 financial year, the ABP will operate
as described above, except for an increase in the weighting of the
EBIT measure to 70% of the total bonus opportunity. In addition,
if EBIT performance is lower than 85% of target, there will be no
annual bonus payout on any measures for the 2009 financial year.
A summary of the operation of the ABP for 2008 and 2009
is shown below:
Long Term Incentive Plan
The Long Term Incentive Plan (LTIP) allows Executive Directors
and eligible employees to receive share awards, subject to the
achievement of performance conditions set by the Committee,
normally measured over a three-year period. Awards are made
annually and, other than in exceptional circumstances, will not
exceed three times annual salary for Executive Directors.
The performance conditions for the LTIP are:
• IHG’s TSR relative to the Dow Jones World Hotels index
(index); and
• growth in adjusted EPS over the period.
As indicated to major shareholders last year, the Remuneration
Committee will be carrying out a more detailed review during 2009
of IHG’s executive incentive plans, with a particular focus on the
performance measures used in the LTIP. If it is concluded that
changes are desirable, they will be introduced in 2010 for the
2010/2012 LTIP cycle.
For the 2008/2010 LTIP cycle, performance will be measured
by reference to two components:
TSR (Maximum award of 135% of salary)
• 20% of the TSR award will be released if TSR compound
annual growth is equal to the index (threshold performance);
• 100% of the TSR award will be released if TSR compound
annual growth exceeds the index by 8% or more.
EPS (Maximum award of 135% of salary)
• 20% of the EPS award will be released if compound annual
growth in adjusted EPS is 6% (threshold performance);
• 100% of the EPS award will be released if compound
annual growth in adjusted EPS is 16% or more (maximum
performance).
For the 2009/2011 LTIP cycle, performance will be measured
by reference to two components:
TSR (Maximum award of 135% of salary)
• 20% of the TSR award will be released if TSR compound
annual growth is equal to the index (threshold performance);
• 100% of the TSR award will be released if TSR compound
annual growth exceeds the index by 8% or more.
EPS (Maximum award of 70% of salary)
• 0% of the EPS award will be released if compound annual
growth in adjusted EPS is 0% (threshold performance);
• 100% of the EPS award will be released if compound
annual growth in adjusted EPS is 10% or more (maximum
performance).
For all award cycles, vesting between all stated points will be on
a straight-line basis and will continue to be measured in constant
currency. Awards under the LTIP lapse if performance conditions
are not met – there is no re-testing. In setting the targets, the
Committee has taken into account a range of factors, including IHG’s
strategic plans, 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 on page 47.
Share capital
During 2008, no awards or grants over shares were made that
would be dilutive of the Company’s ordinary share capital. Current
policy is to settle the majority of awards or grants under any of
the Company’s share plans with shares purchased in the market.
A number of options granted before 2005 are yet to be exercised
and will be 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.
Annual
Bonus
Plan
50%
Deferred
Shares
50%
Cash
EBIT
(70%)
Individual
(30%)
Target 115%
Maximum 200%
Structure
2009
Performance
measures
EBIT
(50%)
Individual
(30%)
Rooms
(20%)
2008
Performance
measures
Key
EBIT = Earnings
Before Interest
and Tax
42 IHG Annual Report and Financial Statements 2008
Remuneration report continued