Telstra 2007 Annual Report Download - page 95

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Telstra Corporation Limited and controlled entities
Remuneration Report
At the end of each financial year, the Remuneration Committee reviews the company’s audited financial
results and the results of the other performance measures, and assesses performance against each measure
to determine the percentage of STI that is payable. Measures are tracked by an internal project office and,
where appropriate, the achievement against targets is independently audited.
As illustrated in Figure 4, each of the performance measures has three different levels of performance.
Figure 4: STI opportunity for differing levels of performance
The level of performance determines the level of payment against each weighted measure. For example,
achieving the target level of performance on every measure would equate to the individual receiving half of
their maximum possible STI payment.
Details regarding the STI payments awarded for fiscal 2007 are set out in section D below.
Short Term Incentive Shares
As part of the fiscal 2007 STI the senior executives, excluding the CEO and COO (refer to pages 95 - 98), will
receive 25% of their actual STI payment in the form of Incentive Shares. These Incentive Shares are held in
trust for the earlier of:
• 5 years from allocation; or
• until the senior executive meets the minimum shareholding level specified under the Executive Share
Ownership Policy; or
• the senior executive ceases employment with Telstra; or
• a date the Board determines (in response to an actual or likely change in control).
6. Long term incentive (LTI)
The LTI component rewards delivery of sustained shareholder growth and achievement of key
transformation milestones.
Following a review of the LTI arrangements, the LTI plan for fiscal 2007 has been strengthened to focus
executives on delivering superior Total Shareholder Return (TSR) through the successful delivery of the
transformation strategy. The LTI plan drives this objective by:
• incorporating a TSR gateway of 11.5% compound annual growth, tested over the 4 years of the plan
to 2010, to guarantee a minimum level of shareholder value that must be achieved before any
Options can be exercised (including those that have previously vested);
• calibrating performance measures with the transformational outcomes and timeframes;
• using Options to leverage reward outcomes for executives and drive share price growth; and
• providing reward only for significant performance.
Level of
performance Description % of STI
opportunity
awarded
Gateway The “ gateway” level must be reached before any value
can be attributed to each measure. 25%
Target The “ target” level represents challenging but achievable
levels of performance. 50%
Maximum Achievement of the “ maximum” level requires
significant performance above and beyond normal
expectations and will result in significant improvement
in key operational areas. 100%