Qantas 2016 Annual Report Download - page 40

Directors’ Report continued
For the year ended 30 June 2016
The Board sets targets for each scorecard measure, and at the end of the financial year the Board assesses
performance against each scorecard measure and determines the overall STIP scorecard outcome.
A detailed description of the STIP scorecard is provided on pages 41 to 43.
An individual’s performance is recognised via an Individual Performance Factor (IPF). IPFs are generally
in the range of 0.8 to 1.2, however in case of under-performance the IPF may be zero and in exceptional
circumstances the IPF may be as high as 1.5.
Board Discretion The Board retains discretion over any awards made under the STIP. For example, the Board may decide to
adjust the STIP scorecard outcome where it determines that it does not reflect the performance achieved
during the year. Circumstances may occur where scorecard measures have been achieved or exceeded, but
in the view of the Board it is inappropriate to make a cash award under the STIP.
The Board may determine that either no award will be made (as it did for the CEO in 2011/2012 and
2013/2014), only a partial award be made (as it did in 2010/2011 and 2012/2013), or that any award will be
entirely deferred and/or delivered in Qantas shares (as it did in 2010/2011).
On the other hand, there may be circumstances where performance is below an agreed target, however,
the Board determines that it is appropriate to pay some STIP award. While the Board sees this balanced
scorecard approach as an important design element of the STIP, it also recognises that the overall STIP
outcome must be considered in the context of the Group’s financial performance.
Calculation of STIP
Awards
STIP awards are calculated as follows:
Value of
STIP Award =Base Pay X‘At Target’
Opportunity XScorecard
Result X
Individual
Performance
Factor (IPF)
Payment of Awards In a year where STIP awards are made, two-thirds of the STIP award would be paid as a cash bonus, with the
remaining one-third deferred into Qantas shares with a two year restriction period.
The Board retains discretion as to how STIP awards are delivered.
Maximum Outcome The STIP scorecard has a hypothetical maximum outcome of 175 per cent of ‘At Target’, which could only be
achieved if the maximum overdrive level of performance is achieved on every STIP performance measure.
The scorecard result is then applied to an individual’s ‘At Target’ opportunity and their IPF. As IPFs are
generally between 0.8 and 1.2, a hypothetical maximum has been modelled using an IPF at the top of this
range of 1.2. In the past and in extraordinary circumstances, participants have been allocated an IPF of up
to1.5, however this has never been given to date where there has been a maximum scorecard outcome.
Hypothetically, a STIP award to the CEO equal to 252 per cent of Base Pay could result (i.e. the ‘At Target’
opportunity for 2015/2016 of 120 per cent of Base Pay multiplied by a hypothetical Scorecard Result of 175
per cent and multiplied by an example IPF of 1.2).
The minimum outcome is nil, which would occur if the threshold level of performance is missed on each STIP
measure or when the Board determines that no award be made.
Disclosure The full value of the STIP awarded for the corresponding year is disclosed in the Remuneration Outcomes
Table on page 35.
Disclosure of STIP awards in the Statutory Remuneration Table on page 36 is based on the requirements of
the Corporations Act 2001 and applicable Australian Accounting Standards. The STIP awards are disclosed
as either:
–A cash incentive for any cash bonus paid or
–A share-based payment for any component awarded in deferred shares
Where share-based STIP awards involve deferral over multiple reporting periods, they are reported against
each period in accordance with accounting standards.
Long Term Incentive
Plan (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.
Review of
Performance
Conditions
During 2015/2016, the Remuneration Committee reviewed the LTIP performance measures and considered
a number of other LTIP performance measures, such as ROIC. The Committee concluded that the current
LTIP performance measures, of relative TSR of Qantas compared to companies in the ASX100 and Global
Listed Airlines, remains the most appropriate measure. The current LTIP performance measures are aligned
to the Qantas Group’s Financial Framework which also targets total shareholder returns in the top quartile
of the ASX100 and Global Listed Airlines.
REMUNERATION REPORT (AUDITED) CONTINUED
38
QANTAS ANNUAL REPORT 2016