Vodafone 2014 Annual Report Download - page 71

Dear fellow shareholder
I am pleased to present you with Vodafone’s remuneration report for 2014.
This year will be the rst time we will ask shareholders to vote on our remuneration policy in addition to the rest of the remuneration report.
With the new remuneration disclosure regulations in mind we have changed the structure of our report to present rst our policy and then detail its
implementation. Apart from some changes which I outline below, our policy and practice remain essentially unchanged.
As always we have tried to ensure that the remuneration policy and practice atVodafone drive behaviours that are in the long-term interests
of the Company and its shareholders. The Remuneration Committee continues to be mindful of the considerable interest that exists in executive
compensation and we are very conscious of the many and varied concerns.
Our remuneration principles
Our remuneration principles, which our detailed policy supports, are as follows:
a we offer competitive and fair rates of pay and benets to attract and retain the best people;
a our policy and practices aim to drive behaviours that support our Company strategy and business objectives;
a our ‘pay for performance’ approach means that our incentive plans only deliver signicant rewards if and when they are justied by performance;
and
a our approach to share ownership is designed to help maintain commitment over the long-term, and to ensure that the interests of our senior
management team are aligned with those of shareholders.
Pay for performance
Pay for performance continues to be an important principle for Vodafone when setting remuneration policy.
A high proportion of total reward is awarded through short-term and long-term performance related remuneration. At target around 70% of the
package is delivered in the form of variable pay, which rises to around 85% if maximum payout is achieved.
We ensure our incentive plans only deliver signicant rewards if and when they are justied by performance. For the Remuneration Committee this
means two things:
a ensuring the targets we set for incentive plans are suitably challenging (as can be seen by the historic levels of achievement for both short-
and long-term incentive plans shown on page 82); and
a if needed, exercising discretion. The Committee reviews all incentive plans before any payments are made to executives and has full discretion
to adjust payments downwards if it believes circumstances warrant it.
Company performance and the link to incentives
During the 2014 year our emerging markets businesses have delivered strong organic revenue growth along with good cash ow and EBITDA
performance. However, this has been offset by signicant ongoing competitive, regulatory and macroeconomic pressures in our European
operations where revenue has declined. Taken in the round this led to slightly below target performance which is reected in our annual bonus
payout of 88.5% of target. More details can be found on page 78.
Over the last three years our adjusted free cash ow performance, although strong in our emerging markets, has been below our target levels
in Europe for similar reasons to those described above. However, we have taken signicant strategic steps which have led to strong growth in the
share price and Total Shareholder Return (‘TSR’) which, when combined with adjusted free cash ow, result in a payout for the executive directors’
long-term incentive awards of 37.2% of maximum. More details can be found on page 79. Strategic initiatives include:
a the sale of our 45% stake in Verizon Wireless;
a the record US$85 billion return to shareholders;
a the announcement of Project Spring – the acceleration of our capital investment to strengthen further our network and customer experience;
a the acquisition of a leading cable operator in Germany as well as xed line businesses such as CWW and TelstraClear;
a launching Vodafone Red which is now available in 20 markets; and
a developing our M-Pesa footprint.
Luc Vandevelde
Chairman of the Remuneration Committee
Letter from the Remuneration Committee Chairman
69Overview
Strategy
review Performance Governance Financials Additional information
Directors’ remuneration