Vodafone 2007 Annual Report Download - page 81

Vodafone Group Plc Annual Report 2007 79
The principles of the Policy are cascaded, where appropriate, to executives
below Board level as set out below:
Cascade of policy to Executive Committee
Base salary Set against national market
Annual Target bonus level competitive in local market, with
deferred payout conditional on business performance relevant
share bonus to individual executive
Opportunity to defer bonus in order to receive the
deferred share bonus matching award
Long term Annual awards of performance shares and share
incentive options with performance conditions
Report on Executive Directors’ Remuneration for the
2007 Financial Year and Subsequent Periods
Total remuneration levels
In accordance with the Policy, the Company benchmarks total remuneration
levels against other large European domiciled companies, using externally
provided pay data. Total remuneration for these purposes means the sum of
base salary and short, medium and long term incentives calculated on an
expected value basis. The European focus was selected because Europe
continues to be Vodafone’s major market and the Company is one of the
top ten companies in Europe by market capitalisation. The competitive data
is used as one input to determine the remuneration level of the Chief
Executive and Board. The Remuneration Committee also takes into account
other factors, including personal and Company performance, in determining
the target remuneration level.
Components of executive directors’ remuneration
Executive directors receive base salary, short and medium term incentive
(annual deferred share bonus), long term incentives (performance shares
and share options) and pension benefits. Vesting of all incentives is
dependent on the achievement of performance targets that are set by the
Remuneration Committee prior to the awards being granted.
Base salary
Salaries are reviewed annually and adjustments may be made to reflect
competitive national pay levels, the prevailing level of salary reviews of
employees within the Group, changes in responsibilities and Group and
individual performance. External remuneration consultants provide data
about market salary levels and advise the Remuneration Committee
accordingly. Pension entitlements are based only on base salary. In
July 2006, the Chief Executive’s base salary was set at £1,272,000.
Incentive awards
Short and medium term incentive
The purpose of the Group Short Term Incentive Plan (“GSTIP”) is to focus
and motivate executive directors to achieve annual business KPIs that will
further the Company’s medium term objectives. The Deferred Share Bonus
offers an incentive for executives to co-invest. Share awards made in
Summary of the components of executive directors’ remuneration
2006/07 Performance 2007/08 Performance
Purpose Grant policy Measure(s) Measure(s)
Base salary •Reflects competitive •Benchmarked against top •Individual •Individual
market level, role European companies contribution contribution
and individual
achievement
Group Short Term •Motivates achievement •100% on target bonus, 200% •Adjusted operating •Adjusted operating
Incentive Plan of annual business KPIs maximum bonus for all Main profit (30%) profit (30%)
(“GSTIP”) •Aligns with new Board executive directors •Free cash flow (20%) •Free cash flow (20%)
business strategy •Bonus can be taken in cash or •Revenue (35%) •Total service revenue (25%)
deferred into shares for two years •Customer •Total communications
satisfaction (15%) revenues (10%)
•Customer satisfaction
(15%)
Deferred Share •Provides incentive •The entire bonus must be •Two year adjusted •Two year adjusted free
Bonus (“DSB”) to co-invest deferred into shares to EPS growth (for the cash flow (for the award to
•Motivates achievement participate in the DSB award granted in be granted in July 2007
of medium term KPIs •50% of the value of July 2006 based on based on the 06/07 GSTIP)
•Aligns executives’ and the deferred bonus the 05/06 GSTIP)
shareholders’ interests conditionally awarded in shares
Global Long Term •Incentivise earnings •CEO – 250% of base •Three year adjusted •Three year adjusted EPS
Incentive Plan growth and share salary expected value EPS growth growth
(“GLTI”) Options price growth for overall GLTI (options and
•Aligns executives’ and performance shares)
shareholders’ interests •Main Board executives –
200% of base salary expected
value for overall GLTI
(options and performance
shares)
Global Long Term •Incentivise share price •CEO – 250% of base salary •Relative Total •Relative Total
Incentive Plan and dividend growth expected value for overall Shareholder Return Shareholder Return
(“GLTI”) Shares •Aligns executives’ and GLTI (options and (“TSR”) against the (“TSR”) against the
shareholders’ interests performance shares) companies in top 50% of companies
•Main Board executives – the FTSE Global in the FTSE Global
200% of base salary expected Telecommunications Telecommunications
value for overall GLTI (options Index Index by market
and performance shares) capitalisation
GovernanceGovernance