Qantas 2012 Annual Report Download - page 56

FOR THE YEAR ENDED 30 JUNE 2012
Directors’ Report continued
Annual Incentive
also referred
to as the Short
Term Incentive
Plan or STIP
(continued)
What was the STIP award for the CEO for the year ended 30 June 2012 and how was it calculated?
Mr Joyce would have been entitled to receive an award under the 2011/12 STIP of $792,000, however
he declined this award, and no award was made. The award entitlement was calculated as follows:
Value of the STIP Award
declined by the CEO = FAR x “At Target” Opportunity x Scorecard Result x Individual Performance Factor (IPF)
$792,000 = $2,125,000 x 120% x 27% x 1.15
As Mr Joyce declined this
STIP award, his actual
2011/12 STIP outcome
was $0.
Mr Joyce’s FAR
for 2011/2012.
Mr Joyce’s ‘at
target’ reward
under the STIP,
expressed as a
percentage of FAR.
Performance
against the
STIP scorecard
(expressed as
a percentage).
The Board determined the IPF for Mr Joyce
based on an assessment of his performance
against his KPIs and objectives (including an
assessment of his behaviours / how he went
about achieving his objectives).
How were 2011/2012 STIP awards delivered?
The Board has again taken the decision to defer the payment of all bonuses to Executives under the STIP (other
than for the CEO who did not receive a STIP award). The Board considers this treatment to be appropriate in view
of the reduced Underlying PBT result and the challenging trading conditions that Qantas continues to face.
The component of the STIP award that would normally be awarded in cash and paid immediately (two-thirds
of the STIP award) will be deferred until the end of February 2013. As part of the deferral, the awards (calculated
in August 2012 based on the approved STIP outcome) will be linked to the Qantas share price up until the end
of the deferral period.
The component of the STIP award that would normally be awarded in deferred shares (one-third of the STIP
award) will still be awarded as deferred shares, with a two-year restriction period.
This decision to defer both elements of the STIP award is also intended as a retention initiative through this period
of considerable challenge and change as during the restriction period awards are forfeited if the Executive resigns.
Awards linked to share price in this way are classified for accounting purposes as share-based payments and
accounting standards require that such payments are expensed over the required service period. Accordingly,
a portion of the value of the 2011/12 STIP awards does not appear in the statutory remuneration table for the
current year and will be disclosed as a share-based payment in the statutory disclosures of future periods.
Similarly, a portion of the value of deferred awards under the 2009/10 STIP and the 2010/11 STIP are required
to be reported in this year’s statutory remuneration table as a share-based payment.
What is the maximum outcome under the STIP?
In previous years, the STIP scorecard has had a hypothetical maximum outcome of 172 per cent of “at target”,
which could only be achieved if the maximum overdrive level of performance is achieved on every STIP
performance measure. Given the challenging trading conditions Qantas faced during 2011/2012, the STIP
scorecard did not consider the possibility of a scorecard outcome above the “at target” amount. The minimum
outcome is nil, which would occur if the threshold level of performance is missed on each STIP measure.
Long Term
Incentive Plan
also referred
to as the LTIP
What is the LTIP?
The LTIP involves the granting of Rights over Qantas shares. If performance and service conditions are satisfied,
the Rights vest and convert to Qantas shares on a one-for-one basis. If performance conditions are not met,
the Rights lapse.
Remuneration Report (Audited) continued
QANTAS ANNUAL REPORT 2012054