Qantas 2004 Annual Report Download - page 52

Directors’ Report continued
for the year ended 30 June 2004
2004 EXECUTIVE REMUNERATION PHILOSOPHY AND OBJECTIVES continued
Performance Share Plan continued
Assessment of the performance of individuals against their specific annual goals and a further assessment of the relative contribution
of Executives, results in a differentiated distribution in the number of deferred shares.
Shares issued under this Plan are purchased on-market and are locked for 10 years. Participants may “call” for the shares prior to the
expiration of the holding lock but not before end of the financial year in relation to half of the shares and the end of the following
financial year in relation to the remaining shares. Any shares still under lock are forfeited on termination.
Performance Rights Plan
The aims of the Performance Rights Plan as the long-term incentive component are to:
align the interests of eligible Executives and shareholders;
provide targeted but competitive remuneration and a long-term incentive for the retention of key Executives; and
support a culture of employee share ownership.
As a retention tool, the program is specifically targeted to Senior Executives in key roles or identified as high potential developing Executives.
Rights issued under this Plan are subject to a performance hurdle, being Total Shareholder Return (TSR) in comparison to a basket of global
airline companies and the largest 100 Australian listed public companies. The TSR will be tested three years after the rights are granted,
and re-tested at regular intervals over the subsequent two years.
Incentive Plan Operation
Under all of the Executive Incentive Plans operating within Qantas, the Chief Executive Officer may recommend changes to the Board,
which has discretion to amend the operation of the plan as appropriate given changes in business circumstances. Any such changes would
be disclosed in the relevant Annual Report.
Total Reward Mix
Consistent with market practice, the proportion of Remuneration attributable to each component of the Performance Plan is dependent
on the level of seniority of the Executive. For the Executives detailed in the Directors Remuneration disclosure note, the total reward mix
is as follows:
% of Total Reward Opportunity (at target)
FAR Performance Cash Plan Performance Equity Plan
%%%
Chief Executive Officer 50 30 20
Chief Financial Officer 55 25 20
Executive General Managers 65 20 15
Other Executives depending on level of seniority 70 to 90 5 to 15 5 to 15
For those Executives eligible to participate in the Performance Rights Plan, the Performance Equity Plan at target is split 50:50 between
the Performance Share Plan and the Performance Rights Plan.
Concessionary Travel Entitlements, Service Payments and Retention Arrangements
Travel entitlements are provided to all Executives within Qantas, consistent with practice in the airline industry. Travel at concessionary
prices, is on a sub-load (standby) basis, i.e. subject to considerable restrictions and limits on availability and includes specified direct family
members or parties. There is also a post retirement element of this benefit for all staff who qualify through retirement or redundancy.
In addition to this and consistent with practice in the airline industry, a small number of Senior Executives are entitled to a number of
free trips, for personal purposes and includes specified direct family members or parties. The value of these entitlements is accrued over
the expected service of the individual. Eligibility for new participants is now restricted to members of the Qantas Executive Committee.
The primary elements of retention within Qantas are the provision of appropriate development opportunities for high performing
Executives and the recognition of performance on an ongoing basis through the remuneration programs detailed above. In addition, it is
occasionally appropriate to establish specific milestone reward programs which link agreed performance outcomes to an opportunity for
award either in the form of cash, or by way of special allocations under the Performance Share Plan or Performance Rights Plan.
For Executives appointed to Executive General Manager, fixed term contracts of up to five years are agreed on appointment as a further
element of retention. A limited number of these are eligible for a payment on termination provided they have completed five years service.
Continuous Improvement
Qantas continually reviews all elements of its Executive Remuneration Philosophy and Objectives to ensure that they are appropriate from
the perspectives of governance, disclosure and reward.
50 Qantas Annual Report 2004