Telstra 2009 Annual Report Download - page 82

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Telstra Corporation Limited and controlled entities
Remuneration Report
The target and stretch performance measures for ROI are
detailed in the table below:
The number of restricted shares that will vest is calculated as
follows:
• If Target level is achieved, 50 per cent of the allocation
of restricted shares for that period will vest;
• If Stretch level is achieved, 100 per cent of the
restricted shares for that period will vest;
• If the result achieved is between Target and Stretch,
the number of vested restricted shares for that period
is scaled proportionately between 50 per cent and 100
per cent; and
• No restricted shares will vest if ROI is below Target.
There is no retesting of restricted shares and any restricted
shares which do not vest following their respective
performance periods will lapse.
3.4.2 Changes to the fiscal 2007 LTI Plan
On 23 October 2008 the Remuneration Committee
recommended to the Board (who subsequently provided
approval on 18 November 2008) the removal of Soft Switch
Build and Migration performance measures from the fiscal
2007 LTI Plan. The original Soft Switch performance measures
represented 5.8 per cent of the fiscal 2007 LTI plan. There was
no impact on the fair value of the options granted under this
Plan as a result of this change.
The Board formed the view, based on the information available
to it, that the Soft Switch performance measure, although
achievable, was no longer relevant to Telstra's strategic
direction, nor was it the most effective use of shareholder
funds. Accordingly, the Board approved the removal of the Soft
Switch program from Telstra's business objectives in
accordance with the terms for the plan. Unified Messaging was
selected as a replacement measure due to its relevance to
Telstra's strategic direction to expand into mass market
product developments.
Telstra achieved its product launch objective for Unified
Messaging with its release of MyConnect, which allows
BigPond® and NextG™ customers to manage their email,
voicemail (including Voice2Text) and picture messaging (MMS)
communications in one secure, integrated service.
The second performance hurdle for Unified Messaging will
measure Telstra's success at deploying Unified Messaging in
fiscal 2010 across a set of technology platforms to significantly
improve our customer experience.
All key terms of the fiscal 2007 LTI plan, including exercise
period and expiry date, remain unchanged. As per the terms of
the fiscal 2007 LTI Plan, any reward to Senior Executives is
underpinned by options with an exercise price of $3.67 and
subject to a separate Total Shareholder Return gateway.
The closing share price of Telstra on 18 November 2008 was
$4.08. Section 8.3 and table 9.4 contain further information in
relation to the fiscal 2007 LTI plan.
3.4.3 Vesting LTI Plans in fiscal 2009
Section 8 of this Report provides full details of vesting events
that occurred during fiscal 2009 for all LTI plans.
3.5 Company Secretary and Telstra Legal Remuneration
Structure
Effective 1 July 2009, the reporting relationship of the
Company Secretary was changed so that the role reported to
Telstra's Board of Directors via the Chairman. From this date,
the at-risk component of the Company Secretary's
remuneration that was based on corporate performance
measures was transitioned to measurements based on
performance specific to the role to ensure the position operates
independent of company financial performance measures.
Similarly, Telstra has elected to exclude its senior internal legal
counsel from equity based LTI plans and STI plans based on
corporate financial measures and place them in alternative
cash based LTI and STI plans that are based on internal legal
performance measures to ensure their remuneration package
is independent of company financial performance measures.
3.6 Retention Incentives
In exceptional circumstances, Telstra has put in place
structured retention plans for key personnel. This is designed
to protect the company from the loss of employees who
possess specific skill sets considered critical to major projects
and where Telstra is vulnerable to losing those personnel to
competitors. Such retention plans are not restricted to Senior
Executives. Table 9.1 provides details of any retention
payments that applied to Senior Executives in fiscal 2009.
3.7 Executive Share Ownership Policy
Telstra's Executive Share Ownership Policy requires Senior
Executives to acquire and retain a number of shares equivalent
in value to a minimum of 100 per cent of their fixed
remuneration. Shares need to be acquired by 30 June 2012 or
within five years of appointment to Senior Executive level.
Performance
Period
Test Date ROI
(at Target)
ROI
(at Stretch)
1 30 June 2010 24.6% 27.0%
2 30 June 2011 26.2% 28.5%
3 30 June 2012 28.2% 30.6%