Aer Lingus 2012 Annual Report Download - page 54

REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION Aer Lingus Group Plc
ANNUAL REPORT 2012
52
Executive Directors
Mr Christoph Mueller (Chief Executive Officer) was an Executive Director
throughout 2012. The remuneration package for Mr Mueller as Executive
Director consists of basic salary, annual performance related bonus, a
pension contribution, premium-priced share options over shares in the
Company agreed as part of his recruitment arrangements in 2009, shares
awarded under the Company’s LTIP, health insurance and a car allowance.
Mr Mueller does not receive any additional fees for serving as a Director of
the Company. While Mr Mueller’s basic salary is subject to annual review,
he has voluntary agreed to freeze it at €475,000. This is the initial basic
salary that was agreed on his appointment in 2009 and itself represented a
voluntary reduction from the applicable market rate.
In 2011, the Board consented to Mr Mueller accepting an appointment
to the Board of Tourism Ireland as a Non-Executive Director. Mr Mueller
retains his fees of €7,965 per annum from this external directorship.
Mr Andrew Macfarlane (Chief Financial Officer) was an Executive Director
throughout 2012. The remuneration package for Mr Macfarlane as
Executive Director consists of basic salary (which is subject to an annual
review but not necessarily increased), annual performance related bonus,
a pension contribution, shares awarded under the Company’s LTIP, health
insurance and a car allowance. Mr Macfarlane does not receive any
additional fees for serving as a Director of the Company. As disclosed in
the remuneration table of last year’s Remuneration Report, Mr Macfarlane
earned a deferred bonus in 2011 under the Transformational Performance
Scheme and this bonus (in the sum of €203,629) was paid in 2012. Mr
Christoph Mueller (Chief Executive Officer) did not participate in the 2011
Transformational Performance Scheme and as such did not receive a bonus
under this scheme.
In last year’s Annual Report, the Remuneration Committee flagged its
intention to introduce revisions to the remuneration arrangements in order
to retain and motivate the Chief Executive Officer to continue to deliver
superior performance. Due to the restrictions of the offer period under
the Irish Takeover Panel Rules which commenced on 19 June 2012 (when
Ryanair announced its offer), the Remuneration Committee has to date
been unable to progress these arrangements to completion. As the Ryanair
offer has recently been prohibited by the EU Competition Commission, the
Committee intends to progress this issue and the new arrangements will be
disclosed in due course.
Further details of the payments and benefits received by the Executive
Directors are set out in Table 2.1.
Basic Salary Reviews
The basic salaries of Executive Directors are reviewed annually with
regard to personal performance, company performance, changes in
responsibilities and market practice. Following the review in 2012, and
consistent with the Group’s desire to exercise pay restraint, no changes
were made to basic salaries.
2012 Performance Related Bonuses
Performance related bonuses are payable to Executive Directors and senior
managers for meeting clearly defined and stretching annual profit targets
and strategic goals set and monitored by the Remuneration Committee. In
setting meaningful targets for the 2012 performance related bonuses, the
Remuneration Committee was mindful of the need to maintain profitability
while also recognising the importance of motivating and retaining
management to drive sustainable performance.
In 2012 the annual performance related bonuses were subject to a cap of
150% of basic salary for the Chief Executive Officer, 100% of basic salary for
certain senior executives, 75% of salary for certain other senior executives
and 40% and 30%, respectively for the other two categories of senior
management. The 2012 annual performance-related plan was funded with
a 70% weighting on the achievement of a clear financial performance target
and a 30% weighting on the achievement of measurable non-financial
targets related to customers and people. The financial performance criteria
in 2012 comprised stretching operating profit targets to align with the goal
of maintaining profitability. The strategic non-financial performance criteria
set stretching goals in the areas of customer targets and people targets.
Payout was limited to a pool driven by the above performance measures.
Individual payouts for Executive Directors and selected senior managers
were 75% based on the corporate performance and 25% based upon the
achievement of individual targets. Individual payouts for the remainder
of the senior management team were 30% based on the corporate
performance and 70% based upon the achievement of individual targets.
This emphasis on individual targets allowed the Company to take account
of the subtlety and complexity of the work undertaken at this level and to
focus participants on the right financial and strategic outcomes. The Group
was successful in achieving its targets for the 2012 financial year at the
upper end of the range between the target and maximum levels set by the
plan. The bonus payments to the Chief Executive Officer and to the Chief
Financial Officer are €646,667 and €398,599 respectively (136% and
121% of basic salary respectively). Executive Directors are not required to
defer their annual bonuses or convert them into shares. Performance versus
the corporate targets in 2012 is illustrated in the table below:
Targets Funding Potential
at Maximum Outcome 2012
Financial Targets 70% Maximum
Strategic Non-Financial
Targets 30% Target-Maximum
Total 100% 93.93%
Report of the Remuneration Committee on Directors’ Remuneration
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