Aer Lingus 2009 Annual Report Download - page 41

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Remuneration Committee Report Aer Lingus Group Plc – Annual Report 2009
Performance related bonuses
Performance related bonuses are payable to executive Directors
for meeting clearly defined and stretching annual profit targets and
strategic goals set and monitored by the Remuneration Committee.
No bonuses were awarded in 2009. In previous years, deferral periods
have not been required in respect of any performance related bonuses
which have been paid.
Long-Term Incentive Plan (“LTIP”)
Conditional awards of shares are granted to executive Directors
under the Company’s LTIP. The LTIP is a share-based performance
award scheme which provides for the vesting of shares subject to
the achievement of minimum performance objectives, as specified
by the Remuneration Committee. In order to promote the long-term
sustainability of the Company, the performance conditions are measured
over a three-year period and include both a financial criteria and a
non-financial criteria which is linked to the Company’s long-term value
creation. The performance objectives for the awards granted in 2007,
2008 and 2009 consist of both Total Shareholder Return (TSR) and
Compound Growth in EBITDAR. TSR measures the change in value
for shareholders arising from changes in the Company’s share price
plus the returns that would arise for shareholders if dividends were
reinvested in the Company’s shares on the relevant ex-dividend date,
net of corporation tax and but before income tax. For 2007, 2008 and
2009 the TSR element is assessed over a three year period against a
peer group of European airlines. For 2007, 2008 and 2009 the EBITDAR
element is assessed over a three year period by reference to the EBITDAR
figures in the Company’s Consolidated Financial Statements. The maximum
award under the LTIP is 150% of base salary. The maximum number
of shares that can vest is set at 125% of the maximum salary multiple.
Awards under the LTIP can be made on an annual basis at the discretion
of the Remuneration Committee. There is no requirement in the LTIP
for shares to be held for a period following vesting.
Share Option Grant and Conditional Share Award
in respect of Mr Mueller
As announced on 9 September 2009, Mr Christoph Mueller was
granted share options in respect of 1,500,000 shares in the Company
and a conditional award of 500,000 shares in the Company. The share
options will vest and become exercisable provided the closing price
of the Company’s shares remain above certain fixed prices (detailed
below) for at least 25 of the 40 days prior to certain specific dates and
further details relating to the options are set out in Table 2.4 below.
The Remuneration Committee selected performance criteria which it
believes are sufficiently stretching to reasonably incentivise Mr Mueller
to deliver value for Aer Lingus shareholders.
On 8 September 2009, Mr Christoph Mueller was granted a conditional
award in respect of 500,000 shares. The conditional share award will
vest on 1 September 2011, subject to Mr Mueller remaining in the
employment of the Group on that date. Benefits under the
conditional share award will not be pensionable.
Service contracts
The Company has a service contract or letter of appointment
with all Board members.
Executive Directors
All service contracts with executive Directors have notice periods
of 12 months or less and comply with the recommendations in
regard to payments on termination in paragraph B.1.6 of the 2008
FRC Combined Code and paragraph 3.5 of the EU Commission 2009
Guide on Remuneration.
Non-executive Directors
The terms upon which each non-executive Director has been
appointed are set out in letters of appointment which reflect the
form recommended by the 2008 FRC Combined Code. It is the
Company’s policy that each non-executive Director will be appointed
for a fixed period not exceeding three years (with the potential for
a second three year term), subject to satisfactory performance and
re-election at any Annual General Meeting where this is required.
None of the non-executive Directors is a party to any service contract
with the Company that provides for benefits upon termination.
Employee Share Participation
The Group operates a Revenue approved share ownership plan
consisting of a Revenue approved employee share ownership trust
and a Revenue approved profit sharing scheme. See Note 28 to the
financial statements for more details.
Directors’ remuneration
Disclosures regarding Directors’ remuneration have been drawn up
on an individual Director basis in accordance with the requirements
of both the Combined Code and the Irish Stock Exchange.
Directors pension benefits
Information regarding the pension benefits of the Directors are
outlined in Table 2.2. The Company is required to make a
contribution at a rate of 25% of basic salary to pension arrangements
as are agreed with Mr Christoph Mueller. These pension
arrangements have been provided for but not yet implemented.
Directors’ shareholdings
The interests of the Directors in office at 31 December 2009
in the shares of the Group are outlined in Table 2.3.