Qantas 2005 Annual Report Download - page 53

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2005 EXECUTIVE REMUNERATION PHILOSOPHY AND OBJECTIVES
Qantas’ Philosophy for Executive Remuneration is to ensure that remuneration properly reflects the duties and responsibilities of its
Executives and that remuneration is competitive in attracting, motivating and retaining people of the highest calibre. As part of this,
Executives should be rewarded for performance and challenged to achieve rigorous and continuously improving performance targets.
These objectives are achieved via a reward program that involves a mixture of:
x Fixed Annual Remuneration (FAR);
x the Performance Plan, comprising:
i. the Performance Cash Plan – a short-term cash incentive; and
ii. the Performance Equity Plan – made up of a medium-term incentive (the Performance Share Plan) and a long-term incentive
(the Performance Rights Plan); and
x Concessionary Travel Entitlements, some targeted retention arrangements and other discretionary benefits considered appropriate
from time to time.
The Remuneration Committee (which is a Committee of the Qantas Board) plays a critical role in reviewing and recommending to the
Board on matters of remuneration policy, specific recommendations relating to Senior Executives and all matters concerning equity plans
and awards.
The guiding principles in managing remuneration for Executives are that:
x all elements of remuneration should be set at an appropriate level having regard to market practice for roles of similar scope and skill;
x the Performance Plan should be used to differentiate rewards for high performers and to encourage continuously higher levels of
performance;
x the Performance Plan should be clearly linked to appropriate goals via a robust performance management system; and
x the Performance Equity Plan should be used to align the interests of Executives with shareholders, support a culture of employee
share ownership and act as a retention initiative.
Overall, the mix of the remuneration program is consistent with market practice.
Fixed Annual Remuneration
Salary decisions are based on the concept of FAR, which involves a guaranteed salary level from which superannuation and certain other
benefits, such as a maintained motor vehicle, are able to be deducted at the election of the employee on a salary sacrifice basis.
FAR is set with reference to market data, reflecting the scope of the role, the unique value of the role and the performance of the person
in the role. FAR is reviewed annually and reflects a middle-of-the-market approach, as compared to similar comparative roles within
Australia, having particular reference to large public companies for the most senior roles.
Performance Plan
The alignment of Executive remuneration outcomes with the performance of both Qantas and the individual is a key part of the Qantas
People Plan. Relevant performance hurdles, agreed in advance of the allocation of incentives, are a key element in an appropriately
structured performance plan. Vesting should be over a period that is consistent with the realisation of the short, medium and long-term
strategic objectives approved by the Board.
Fixed Annual Remuneration
Reflects industry and market practice
Other benefits eg concessionary travel,
discretionary and retention programs
Total Shareholder Return Target
allocations to selected Executives
Set with reference to role, market and experience
Group Financial Target
Balanced Scorecard Target
Performance Plan
Performance
Equity Plan
Performance
Share Plan OperationalCustomer People Financial
Medium-
term
Performance
Cash Plan Short- term
Long-
term
Performance
Rights Plan
Qantas Annual Report 2005
~Directors’ Report~
for the year ended 30 June 2005