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How the executive directors were paid in the 2008 financial year
The table below summarises the plans used to reward the executive directors in the 2008 financial year. Details on performance measures, the link to strategy and
grant policy are also included.
2007/08 performance measure(s) Purpose – link to strategy Grant policy
Base salary
2007/08 • Not applicable • Reflects competitive market level, role and individual
contribution
• Set annually at 1 July
Annual bonus
2007/08 Group Short
Term Incentive Plan
(“GSTIP”)(1)
• Adjusted operating profit (30%)
• Free cash flow (20%)
• Service revenue (25%)
• One year KPIs against budget and linked to performance
targets – delivered in either cash or deferred into shares
(see DSB below)
• Target bonus is 100% of
salary earned over the
financial year, with 200%
maximum available for
exceptional performance
• The Remuneration
Committee reviews and
sets the GSTIP
performance targets
on an annual basis
• Total communications
revenue (10%)
• Customer delight (15%)
• Three key measures: Adjusted operating profit, service
revenue and free cash flow – cover the key financial elements
of the strategy (revenue stimulation, cost control
and overall growth in EMAPA)
• Total communications revenue continues to focus attention
on this important element of the strategy
• Customer delight – satisfied customers directly impact
our key financial metrics
Bonus deferral arrangement
2007 Deferred Share
Bonus (“DSB”)
• Two year cumulative adjusted
free cash flow
• If executive directors choose to defer their annual bonus
into shares, then they will be eligible for an award of
matching shares under the DSB arrangement equal to 50%
of the value of the deferred bonus conditionally awarded
in shares
• The matching award is earned by achievement of the
performance target over the following two years
• Incentivises the purchase of shares to meet share
ownership guidelines. This acts as a key part of alignment
with shareholders’ interests
• The entire bonus must
be deferred into shares to
participate in the DSB
• 50% of the value of the
deferred bonus
conditionally awarded
in shares
• The target for the June 2007
award was a hurdle of 85% of
the Long Range Plan target over
the 2008 and 2009 financial years
Long term incentives
2007 Global Long Term
Incentive Plan (“GLTI”)
share options
• Three year cumulative growth
in adjusted EPS
• For the July 2007 grants, the
performance range was 5% – 8% p.a.
• As in previous years, 25%
vests at threshold (5% p.a.)
with a straight line up to
100% vesting at maximum
(8% p.a.)
• In setting this target, the
Remuneration Committee took
the internal Long Range Plan,
market expectations and market
practice into account
• GLTI share options have a ten year term and will vest after
three years, subject to performance achievement. To the
extent that the performance target is not met, the options
will lapse (re-testing is not permitted)
• The share options incentivise underlying business growth
through earnings and only deliver value if the share price
increases. The price at which shares can be acquired on
option exercise will be no lower than the market value of
the shares on the day prior to the date of grant of the options
• Annual grants are made
in July
• The number of shares
granted are based on
expected values
• For the Chief Executive,
the expected value is 75%
of base salary
• For the other executive
directors the expected
value is 60% of base salary
2007 GLTI performance
shares
• Relative Total Shareholder Return
(“TSR”) against the top 50% of
companies in the FTSE Global
Telecommunications Index by
market capitalisation
• Awards will vest to the extent that the performance
condition has been satisfied at the end of the three-year
performance period. To the extent that the performance
target is not met, the awards will be forfeited
• The performance shares focus on shareholder alignment
through the TSR performance condition and through the
delivery of the award in shares
• Annual grants are made
in July
• The number of shares
granted are based on
expected values
• For the Chief Executive,
the expected value is
175% of base salary
• For the other executive
directors expected value is
140% of base salary
• 25% vests for achieving median
performance in the comparator
group with a straight line up to
100% vesting for achieving upper
quintile performance relative to
the comparator group
Note:
(1) GSTIP targets are not disclosed as they are commercially sensitive.
Vodafone Group Plc Annual Report 2008 73