Qantas 2008 Annual Report Download - page 62

60 Qantas Annual Report 2008
Directors’ Report
for the year ended 30 June 2008
In 2003, the Board approved the establishment of the Qantas Executive
Performance Plan (Performance Plan). Each year, the Board reviews
whether the Performance Plan continues to be aligned to Qantas’
business objectives and whether any changes are warranted. The
overriding objective is to attract, retain and appropriately reward
a capable Executive team to meet the unique challenges it faces
as a major international airline based in Australia.
In early 2008, the Board undertook a detailed review of the Performance
Plan and reconfi rmed that it provides an appropriate reward framework
for Qantas. Some changes have been implemented. These include:
the adoption of an earnings per share (EPS) performance hurdle,
in addition to a total shareholder return (TSR) performance
hurdle for the long-term equity program; and
the adoption of aspirational shareholding guidelines for members
of the Executive Committee.
Details of the reward programs that make up the Performance Plan,
are provided below.
Qantas’ philosophy for the remuneration of its Executives continues to
align the earnings of its Executives with their duties and responsibilities
and to pay for performance.
These objectives are achieved via a reward program that involves
a combination of:
Fixed Annual Remuneration (FAR);
the Performance Plan, comprising:
the Performance Cash Plan (PCP) – a short-term cash incentive;
the Performance Equity Plan – a medium-term incentive,
comprising the Performance Share Plan (PSP) and a long-term
incentive, the Performance Rights Plan (PRP); and
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the Retention Plan (RP) – awards of deferred shares or cash
to a small number of selected Executives whose retention is
considered vital to the Qantas Group to provide a stable and
talented executive team; and
concessionary travel entitlements, targeted key milestone bonus
arrangements and other discretionary benefi ts considered
appropriate from time to time.
The Remuneration Committee (a committee of the Board) has the role
of reviewing and making recommendations on the Qantas Executive
Remuneration Policy.
In doing so, the Remuneration Committee seeks advice from a range
of independent external advisors. The guiding principles applied by
the Remuneration Committee in managing remuneration for Executives
are that:
appropriate market benchmarks are reviewed in setting all elements
of reward;
differentiation to recognise performance is involved in all pay
increases, both fi xed and ‘at risk’;
‘at risk’ pay decisions are based on a formal performance
management system; and
longer-term rewards align the interests of Executives with
shareholders and support a culture of employee share ownership.
Overall, the mix of the remuneration program refl ects market practice
but is tailored to the specifi c circumstances of Qantas.
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Reward Framework
Fixed Annual Remuneration Set with reference to role, market and experience
Performance Plan
Performance Cash Plan Short-term Group Financial Target
Performance
Equity Plan
Performance
Share Plan Medium-term
Balanced Scorecard Target
Customer Operational People Financial
Performance
Rights Plan Long-term Total Shareholder Return and Earnings Per Share hurdles
Retention Plan
Targeted incentives and retention arrangements for a small number
of Executives, based on the Board’s assessment of market conditions
and the commercial needs of Qantas
Other benefi ts, such as concessionary travel and salary sacrifi ce arrangements
(e.g. for motor vehicles and superannuation) Refl ect industry and market practice
Remuneration Report (Audited)
2007/08 Executive Remuneration Philosophy and Objectives
For personal use only