Qantas 2005 Annual Report Download - page 63

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61
DIRECTOR AND EXECUTIVE REMUNERATION DISCLOSURES continued
SUMMARY OF PERFORMANCE CONDITIONS
Link between Remuneration Policy and Qantas’ performance
The graph on the left below shows Qantas’ full-year profit from ordinary activities before income tax and the percentage of target cash
incentives that were paid to Executives over the past five financial years. The graph on the right below shows Qantas’ TSR performance
compared to the S&P/ASX 100 Index and the MSCI World Airline Index over the past five financial years.
Source: Morgan Stanley Capital International (MSCI) World Airline Index
– reproduced with permission.
In line with the Executive Remuneration Philosophy and Objectives, FAR is set with reference to market data and is not related to Qantas’
performance in a specific year. The outcomes for the Performance Cash Plan (short-term incentive plan) are related to Qantas’ financial
results. The Performance Share Plan outcomes are driven by performance against the achievement of a Balanced Scorecard relating to
Customer, Operational, People and Financial performance (medium-term incentive plan). Total Shareholder Return (including dividends,
changes in the Qantas share price and return of capital if applicable) is used for the Performance Rights Plan (long-term incentive plan).
Relationship between cash incentives and Qantas’ performance
As indicated in the graph above, cash incentives were paid in three out of the past five financial years. Cash incentives were not paid for
2000/01, were paid at target for 2001/02, were not paid for 2002/03, were paid at 110% of target for 2003/04 and at 100% of target
for 2004/05 in line with Qantas’ achievement against its financial targets in these years. From July 2001 to June 2003, a profit before tax
target determined the pool of money available for payment and in 2003/04 and 2004/05 the pool of money available was subject to the
achievement of a RoTGA target for members of the Executive Committee and an EBDRIT target for other Executives.
Relationship between employee equity and Qantas’ performance
Allocations under the 2004/05 PSP are dependent on Qantas’ corporate performance against a Balanced Scorecard. For 2003/04,
100% of the target level of performance shares were awarded to Executives following over-achievement on the Balanced Scorecard. For
2004/05, the Board exercised its discretion to award 100% of target to Executives.
Reward outcomes under the 2004/05 PRP are linked to Qantas’ performance because the vesting of these rights is dependent on Qantas’
performance against the S&P/ASX 100 Index and a basket of international airlines. This performance hurdle rewards Qantas’ Executives
for Qantas’ TSR growth in comparison to the TSR growth rates of its two peer groups over the three to five-year performance period.
$200
$400
$600
$800
$1,000
$1,200
$ million
Jun 05Jun 04 Jun 03Jun 02Jun 01Jun 00
Qantas S&P/ASX 100 Index MSCI World Airline Index
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
$0
Jun 05Jun 04Jun 03Jun 02Jun 01
% of target cash incentives paid (RHS)
Profit from ordinary activities before income tax (LHS)
0%
25%
50%
75%
100%
125%
150%
175%
200%
Qantas Annual Report 2005
~Directors’ Report~
for the year ended 30 June 2005