Vodafone 2015 Annual Report Download - page 92

Annual Report on remuneration (continued)
2016 remuneration
Details of how the remuneration policy will be implemented for the 2016 nancial year are set out below.
2016 base salaries
The Remuneration Committee considered business performance, salary increases for other UK employees and external market information and
decided to increase the salary of the Chief Financial Ofcer by 3.7% (Nick Read). This constitutes Nick Read’s rst increase since appointment
to the role of designate-CFO in January 2014, and reects how he is performing well in the role and has now completed a full year in the position.
The salaries of the Chief Executive (Vittorio Colao) and Chief Technology Ofcer (Stephen Pusey) will remain unchanged. The average salary
increase for Executive Committee members will be 1.7%; this compares to the salary increase budget in the UK of 2.0%.
The annual salaries for 2016 (effective 1 July 2015) are as follows:
a Chief Executive: Vittorio Colao £1,150,000;
a Chief Financial Ofcer: Nick Read £700,000; and
a Chief Technology Ofcer: Stephen Pusey £600,000.
2016 annual bonus (‘GSTIP’)
In line with our strategic focus, customer appreciation KPIs will replace competitive performance assessment as the strategic measure for the 2016
GSTIP and, given the importance of this measure in the current phase of our strategy, will constitute 40% of the total bonus.
The performance measures and weightings for 2016 are as follows:
a Service revenue (20%);
a EBITDA (20%);
a adjusted free cash ow (20%); and
a customer appreciation KPIs (40%). This includes an assessment of net promoter score (‘NPS’) and brand consideration measures.
In respect of the measures included under the customer appreciation KPIs, NPS is used as a measure of customer advocacy whilst brand
consideration acts as a measure of the percentage of people who would consider using a certain brand as their telecoms provider. Both measures
utilise data collected in our local markets which is validated for quality and consistency by independent third party agencies. The data is sourced
from studies involving both our own customers and customers of our competitors for the NPS measure, and both Vodafone users and non-users for
the brand consideration measure. In formulating a nal assessment of performance under the customer appreciation KPIs, the Committee will also
consider other relevant customer factors such as churn, customer growth and service levels.
Annual bonus targets are commercially sensitive and therefore will be disclosed in the 2016 remuneration report following the completion of the
nancial year.
Long-term incentive (‘GLTI’) awards for 2016
As described in our policy on pages 78 to 80 the performance conditions are a combination of adjusted free cash ow and TSR performance.
The details for the 2016 award are provided in the table below (with linear interpolation between points). Following the annual review of the
performance measure, the Committee decided that for the 2016 award the TSR outperformance range should revert back to 0% to 9%. This range
was used in all years other than 2015, remains positioned at the upper end of market practice and is considered appropriately stretching against
forecast performance. The Committee will keep the calibration of the range under review and continue to only make changes where there
is sufcient evidence to suggest this is appropriate.
Adjusted free cash ow measure
TSR outperformance
£bn
0%
(Up to median)
4.5%
(65th percentile equivalent)
9%
(80th percentile equivalent)
Below threshold <7.3 0% 0% 0%
Threshold 7.3 50% 75% 100%
Target 9.0 100% 150% 200%
Maximum 10.7 125% 187.5% 250%
TSR peer group
Bharti Orange
BT Group Telecom Italia
Deutsche Telekom Telefónica
MTN
The combined vesting percentages are applied to the target number of shares granted.
Long-term incentive (‘GLTI’) awards vesting
As discussed in detail in last year’s Annual Report, Project Spring involves signicant organic investment over the next two years to enhance network
and serviceleadership further. This investment will have a signicant impact on adjusted Free Cash Flow (‘FCF’), which is the primary performance
condition for the GLTI and we expect an initial drop in FCF that will then build again as the investment pays off over the longer term. The impact
is predicted as follows:
Financial year of award Performance period end Impact
2014 March 2016 Targets for the 2014 awards were set prior to the announcement of Project Spring
therefore we will remove the impact on FCF when calculating the vesting results
following the end of the performance period.
2015 onwards March 2017 onwards The 2015 awards (and all future years) will have the full impact of Project Spring
included in the targets and no further adjustments will be necessary.
Vodafone Group Plc
Annual Report 2015
90
Directors’ remuneration (continued)