Vodafone 2003 Annual Report Download - page 61

and the US. Options will have a ten-year term and vesting will be after three
years with the opportunity to measure performance again after years four and
five from a fixed base year. To the extent that the performance condition has not
been satisfied at the end of the five-year performance period, the options will
lapse. The following graph illustrates the basis on which share options vest:
Illustration
Based on the analysis of externally provided market data on the total
remuneration levels of chief executives of major European companies, the Chief
Executive received in 2002 performance shares with a face value of one and
three quarters-times salary and options with a face value of seven-times salary.
The graph below illustrates the approximate pre-tax long term incentive gains to
the Chief Executive that would be achieved based on various Company growth,
EPS and TSR performance scenarios:
For example, if the Company’s share price increases by over 60% from
120 pence to approximately 193 pence, the Company’s value increases by
£50 billion, and there is 50% vesting of long term incentives, the Chief Executive
would have a pre-tax gain of just under £4 million, representing less than
0.008% of the total increase in shareholder value.
The awards of performance shares and share options were made to executive
directors following the 2002 AGM on 31 July 2002.
It is intended that awards of performance shares and share options will be
granted to executive directors on a similar basis in 2003.
Awards are delivered in the form of ordinary shares of the Company. All awards
are made under plans that incorporate dilution limits that are set out in the
Guidelines for Share Incentive Schemes published by the Association of British
Insurers. The current estimated dilution from subsisting awards, including
executive and all-employee share awards, is approximately 2.0% of the
Company’s share capital at 31 March 2003.
Share ownership guidelines
Executive directors participating in these long term incentive plans must comply
with the Company’s share ownership guidelines. These guidelines, which were
first introduced in 2000, require the Chief Executive to have a shareholding in
the Company of four times base salary and other executive directors to have a
shareholding of three times base salary.
It is intended that these ownership levels will be attained within five years from
the director first becoming subject to the guidelines and be achieved through the
retention of shares awarded under long term incentive plans.
Pensions
Sir Christopher Gent, Julian Horn-Smith, Ken Hydon and Peter Bamford, being
UK-based directors, are contributing members of the Vodafone Group Pension
Scheme, which is a scheme approved by the Inland Revenue.
Peter Bamford, whose benefits under the Scheme are restricted by Inland
Revenue earnings limits, also participates in the defined contribution Vodafone
Group Funded Unapproved Retirement Benefits Scheme to enable pension
benefits to be provided on his basic salary above the Inland Revenue earnings
cap. Thomas Geitner participates in the Essener Verband Retirement Scheme.
Vittorio Colao will receive retirement benefits in accordance with Italian National
Collective Agreements. A contribution is made to a defined contribution plan for
dirigenti in Vodafone Italy which includes the supplementary dirigenti contribution
required under the national collective agreements. No other pension benefits are
provided. Further details of the pension benefits earned by the directors in the
year to 31 March 2003 can be found on page 62. Liabilities in respect of the
pension schemes in which the executive directors participate are funded to the
extent described in note 34 to the Consolidated Financial Statements,
“Pensions”.
Other remuneration matters
All-employee share incentive schemes
GEM Options
In July 2002, share options were granted to all employees of subsidiary
companies in all countries in which the Company operates, other than Japan
and Sweden. A key objective of the grant was to promote the Vodafone vision,
values and brand across the enlarged Group and to reinforce membership of
the Group’s worldwide employee community. Executive directors did not receive
GEM options. Vittorio Colao received GEM options in 2001 prior to his
appointment to the Board.
Sharesave Options
The Vodafone Group 1998 Sharesave Scheme is an Inland Revenue approved
scheme open to all UK permanent employees.
The maximum that can be saved each month is £250 and savings plus interest
may be used to acquire shares by exercising the related option. The options have
been granted at up to a 20% discount to market value. UK based executive
Vodafone Group Plc Annual Report & Accounts and Form 20-F 2003 59
100%
80%
60%
40%
20%
0%
0% 5% 10% 15% 20%
Share Option Vesting Schedule
% of options vesting
Annualised EPS Growth in excess of RPI
10.48
+£25 bn
+£50 bn
+£75bn
100% Vesting (80th percentile
TSR ranking & UK RPI+15%
EPS growth per annum)
75% Vesting (73rd percentile
TSR ranking & UK RPI+11.7%
EPS growth per annum)
50% Vesting (64th percentile
TSR ranking & UK RPI+8.3%
EPS growth per annum)
25% Vesting (median TSR
ranking & UK RPI+5% EPS
growth per annum)
12
10
8
6
4
2
0
Chief Executive Pre-Tax Gain (£’millions)
Growth in value of Company from grant date