Lenovo 2011 Annual Report Download - page 34

2010/11 Annual Report Lenovo Group Limited 37
COMPENSATION POLICY
Lenovo recognizes the importance of attracting and
retaining top-caliber talent and is strongly committed
to effective corporate governance. Consistent with this
philosophy, the Company has a formal, transparent and
performance-driven compensation policy covering its
directors and senior management.
Lenovo’s compensation policy for its directors and
senior management is to ensure that compensation is
aligned to support the Company’s strategy, attract and
retain top talent, reinforce the Company’s performance
driven culture, and reflects the market practices of other
leading international and IT-focused enterprises, with
particular focus on those who compete in the PC sector.
Non-Executive Directors
To ensure that non-executive directors are appropriately
remunerated, the Compensation Committee will engage
an independent international compensation consulting
firm to conduct an analysis of the compensation
package of non-executive directors and make
recommendation to the Board (comprising only executive
director) for approval. In making its recommendation,
the firm will also review other relevant factors such
as the time commitment, workload, job requirements
and responsibilities of the non-executive directors and
compare with those of the peers companies and general
industry.
The compensation of non-executive Directors is
comprised of an annual cash retainer equal to
US$80,000 (approximately HK$621,000) and an
annual award of Stock Appreciation Rights (SARs) and
Restricted Stock Units (RSUs) which can be settled
in either Lenovo shares or their cash equivalent upon
exercise. SARs and RSUs are subject to a three-year
vesting period and are otherwise subject to the same
terms and conditions of the SAR and RSU schemes
described below.
The Chairman of the Audit Committee also receives
an additional cash retainer equal to US$20,000
(approximately HK$156,000). The Chairman of the
Compensation Committee receives an additional cash
retainer of US$10,000 (approximately HK$78,000).
Details of the compensation of the non-executive
directors are included in note 11 to the financial
statements. SAR and RSU awards outstanding for non-
executive directors as of March 31, 2011 under this
scheme are presented below.
Chairman, Executive Director and Senior
Management
To ensure that Lenovo’s compensation reflects the
policy principles described above, the Compensation
Committee considers a number of relevant factors
including: salaries and total compensation paid by
comparable companies, job responsibilities and scope,
employment conditions elsewhere in the Company,
location and market practices, Company’s business
performance and individual performance.
Lenovo’s compensation structure for its employees,
including the Chairman of the Board, executive director
and senior management, is comprised of base salaries
and allowances, performance bonus, long-term
incentives, retirement benefits, and benefits in kind.
These components are described in more detail below.
Fixed Compensation
Fixed compensation includes base salary, allowances
and benefits-in-kind (e.g. medical, dental and life
insurance, etc.). Base salary and allowances are set
and reviewed annually for each position, reflecting
competitive market positioning for comparable positions,
market practices, as well as the Company’s performance
and individual contribution to the business. Allowances
are also provided to facilitate temporary and permanent
staff relocations. Benefits-in-kind are reviewed regularly
taking into consideration relevant industry and local
market practices.
Performance Bonus
Chairman of the Board and CEO, as well as senior
management and selected employees of the Company
are eligible to receive a performance bonus payable in
cash. The amounts paid under the plan are based on
the performance of the Company and its subsidiaries,
performance groups and/or geographies as appropriate,
as well as the performance of the individual.