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56
Directors’ Report
for the year ended 30 June 2006
2006 EXECUTIVE REMUNERATION PHILOSOPHY AND OBJECTIVES CONTINUED
Termination Payments
Qantas will honour contractual and statutory entitlements of its Executives on termination. Additional payments to terminating Executives may be made to a
reasonable level where legal or other considerations make it appropriate to do so. In all cases, an appropriate release agreement is required to be signed.
Operation of Incentive Plans
Under all of the Executive Incentive Plans operating within Qantas, the Chief Executive Offi cer may recommend changes to the Board, which has discretion to
amend the operation of the Plan as appropriate, given changes in business circumstances or to recognise a particular degree of diffi culty or the effects of events
external to management, in any performance year. Any such change and its outcome for reward would be disclosed in the relevant Qantas Annual Report.
Total Reward Mix
Consistent with market practice, the proportion of Remuneration attributable to each component of the Performance Plan is dependent on the level of seniority
of the Executive. The Board obtains extensive independent advice on market practice and relevant benchmarking data from its external advisers in setting
Target Reward Amounts and Mix. The total reward mix on average is as follows:
% of Total Reward Opportunity (at Target)
FAR
%
Performance
Cash Plan
%
Performance
Equity Plan
%
Chief Executive Officer 50 30 20
Chief Financial Officer / Executive General Manager Qantas 55 25 20
Other Executive General Managers 60 25 15
Other Executives depending on level of seniority 70 to 90 5 to 15 5 to 15
The above table is used to determine the allocation of performance-based remuneration and is based on the Executive’s FAR at the date of the allocation.
It excludes accrual of end of service payments and any non-cash benefits.
This target reward mix reflects remuneration over a holding lock period subject to meeting vesting conditions and does not necessarily reflect the actual
remuneration received by the Executive in the current year.
For those Executives selected to participate in the PRP, the “at target” component of the Performance Equity Plan is expected to be delivered in equal
proportions via the PSP and the PRP.
Concessionary Travel Entitlements, Service Payments and Retention Arrangements
Travel concessions are provided to all Executives within Qantas, consistent with practice in the airline industry. Travel at concessionary prices is on a sub-load
(stand-by) basis, ie subject to considerable restrictions and limits on availability and includes specified direct family members or parties. There is also a post
retirement element of this entitlement for all staff who qualify through retirement or redundancy.
In addition to this and consistent with practice in the airline industry, a small number of Senior Executives and their specified direct family members or parties
are entitled to a number of free trips for personal purposes. The present value of these entitlements is accrued over the expected service of the individual.
Eligibility for new participants is generally restricted to members of the Qantas Executive Team.
The primary elements of retention within Qantas are the provision of appropriate development opportunities for high performing Executives and the
recognition of performance on an ongoing basis through the remuneration programs detailed above. In addition, it is occasionally appropriate to establish
specific milestone reward programs which link agreed performance outcomes to an opportunity for award either in the form of cash, or by way of special
allocations under the PSP or PRP.
For Executives appointed to senior roles, fixed term contracts of up to five years were, until recently, agreed on appointment. This could also involve eligibility
for a payment on termination provided that a period of five years service was completed under a fixed term contract. The approach being adopted from
2006 is to have ongoing contracts of employment for all Executives and the remaining fixed term contracts in place are being progressively converted to
ongoing contracts.
Since 1999, all other Executives in the Qantas Group are on ongoing individual employment agreements.
Continuous Improvement
Qantas continually reviews all elements of its Executive Remuneration Philosophy and Objectives to ensure that they are appropriate from the perspectives of
governance, disclosure, reward and market conditions.