Air New Zealand 2009 Annual Report Download - page 68

LONG TERM INCENTIVE
Rob Fyfe has access to two long term incentives schemes;
 • the Air New Zealand Long Term Incentive Plan (LTIP) and
 • the CEO Long Term Incentive Plan (CLTIP).
LTIP
The LTIP is a share and option based incentive scheme and is designed to align the interests of senior executives with those of our shareholders by
incentivising participants in the plan to enhance long term shareholder value.
There are two main elements to the plan.
1. Mandatory Shareholding
Participants are required to commit to investing a specified amount to purchase shares in the Company. The value of this commitment for the CEO
is 66% of his fixed cash amount. For the 2009 financial year the value is $792,000. This holding value must be maintained to enable the CEO to
exercise any options.
Rob Fyfe owns or has a beneficial interest in 1,084,198 shares of which 766,350 are held as part of the mandatory shareholding.
2. Options
The CEO must achieve a performance rating of on target or better against individual STI targets to be eligible to receive a grant of options. Any
grant of options is at the discretion of the Performance, Development and Remuneration Sub Committee (PDRC) of the Board of Directors but, in
the normal course of events, is expected to equate to a value of two and a half times the STI earned on the CEO’s individual targets. The number
of options to be allocated will be determined by an independent valuation of the option value at the time of issue.
The exercise price of the options is set three years from issue date, and is based on the price of the Company’s shares at the date of issue increased or
decreased by the movement in an index over the three years, and decreased by any distributions made by Air New Zealand over the same period.
The index comprises the Total Shareholder Return (TSR) for the NZSX All Gross Index and the TSR for the Dow Jones World Airline Total Return Index
in equal proportions.
The share price at the date of issue is measured as the average daily closing price of ordinary shares over the ten business days starting on the third
business day following the announcement of the Company’s annual results.
Options are exercisable at any time between three and five years from the date of issue assuming certain conditions have been met.
Unless Air New Zealand’s share price outperforms the index as outlined above no value will materialise.
Rob Fyfe earned 3,757,853 options under the LTIP for the 2008 financial year valued at $0.191, for a total value of $717,750.
CLTIP
The CEO Long Term Incentive Scheme is purely an option based scheme and has a five year time horizon. It was established as a further incentive to
retain the services of the current CEO for an extended period.
The CEO option scheme commenced in the 2008 financial year and will cease (issuing options) in the 2012 financial year.
Each year, at the absolute discretion of the Board, options can be issued to the CEO based on 80% of the CEO’s fixed cash remuneration.
Options issued under this scheme are not earned nor do they vest unless the CEO remains employed by Air New Zealand through to September 2012.
If this condition is met the options may be exercised within two years after this date.
The exercise price and valuation methodology of the options under the CLTIP mirror the LTIP scheme. So, unless Air New Zealand’s share price
outperforms the index no value will materialise.
Under the CLTIP, Rob Fyfe received a grant in September 2008 of 4,923,077 options for the 2008 financial year valued at $0.195 each, for a total
value of $960,000.
AIR NEW ZEALAND
EMPLOYEE REMUNERATION (CONTINUED)
66