Vodafone 2001 Annual Report Download - page 16

14 BOARD’S REPORT TO SHAREHOLDERS ON DIRECTORS’ REMUNERATION
Vodafone Group Plc
Annual Report & Accounts
for the year ended
31 March 2001
Com pon ents of execu tive directors’ remuneration
Overview
The components of executive directors’ remuneration packages are salary, on which pension
benefits are calculated, short term incentives, long term incentives, pension benefits and a car.
Each of these components, and key terms of the various incentive and benefit programmes, are
explained further below.
The vesting of all short and long term incentives is subject to the achievement of performance
targets that are set by the Remuneration Committee before the awards are granted.
Salary
Salaries are reviewed annually with effect from 1 July and adjustments may be made to reflect
competitive pay levels, changes in responsibilities and Group performance. If the responsibilities
of executive directors change during the year the Remuneration Committee reviews remuneration
packages, including salaries, at that time. Only base salary is used to determine pensionable salary.
Short Term Incentives
Executive directors are eligible to participate in the Vodafone Group Short Term Incentive Plan
(STIP). The STIP comprises two elements: a base award and an enhancement award. The target
level for base awards granted to executive directors for the year ended 31 March 2001 was 100%
of salary with a maximum of 200% of salary. Awards are contingent on achievement of a one year
performance target. The base award is delivered in the form of shares, receipt of which is
deferred for a further two years. An enhancement award of up to 50% of the original value of the
base award may be payable, subject to the achievement of a further two year performance target.
Release of the base award and the enhancement award after the total three year period is also
dependent upon the continued employment of the participant. No enhancement awards vested
during the year.
Remuneration Committee
The Remuneration Committee of the Board
consists of independent non-executive
directors of the Company and comprises
David Scholey (Chair), Ian MacLaurin, Michael
Boskin, Penny Hughes and Jürgen Schrempp.
Penny Hughes will chair the Committee from
1 August 2001.
When appropriate, the Committee invites
the views of the Chief Executive and the
Group Human Resources Director and
commissions reports from expert
remuneration consultants. The results of
market surveys and other analyses from
external sources are also made available to
the Committee, which has resolved to review
its policy with the Board on a regular basis to
ensure it continues to meet the Company’s
requirements. The Company is committed
both to complying with and being seen as a
leader in best practice in areas of corporate
governance and executive remuneration.
STIP Performance Targets
For the year to 31 March 2001 the one year
target was the achievement of Group
budgeted pro forma proportionate EBITDA.
For the two years from 1 April 2000 the
additional two year target was that the growth
in adjusted earnings per share must exceed
the growth in the UK retail price index by
6 percentage points over the two year period.
Short Term Incentives – changes from
prior year policy or departures from prior
year policy
The target and maximum levels of STIP awards
were increased for 2000 awards from previous
levels, in line with shareholder approvals
obtained in July 2000.
Rem u n eration policy
It is vital for the Group to employ people of the high calibre essential to the successful leadership and efficient management of a global
business at the leading edge of the telecommunications industry. The scale and complexity of the Group continues to grow, with operations
in 29 countries in five continents.
The executive talent needed to maximise returns for shareholders in this industry is very scarce and the future success of the Group will
depend on its ability to provide remuneration packages which are competitive in actual and prospective value when measured against the
best in the industry.
In determining the Group’s policy, and in constructing the remuneration arrangements of each executive director, the Board, advised by the
Remuneration Committee consisting entirely of independent non-executive directors, aims to provide remuneration which ensures the
retention, motivation and incentivisation of the senior executives.
The key principles of the Global Market-related Remuneration programme (GMR), which was implemented following shareholders’ approval
of the Remuneration Policy at last year’s Annual General Meeting, are as follows:
•the remuneration of executives with global responsibilities is set by reference to a global peer group, with a high proportion contingent
upon a demanding level of corporate performance and compliance with share ownership requirements;
•base salary and short term incentive plans (at 100% of base salary target level) represent approximately 20% of total stretch target
remuneration; and
•approximately 80% of total stretch target remuneration will be delivered by share incentive awards which will only vest on the
achievement of very demanding performance targets.
The award levels are determined using the Black-Scholes formula, an internationally accepted methodology of valuing options, and at the
date of vesting will be exercisable at the market price at the time of grant.