Qantas 2010 Annual Report Download - page 36

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THE QANTAS GROUP 34
for the year ended 30 June 2010
3) CEO AND EXECUTIVE COMMITTEE REMUNERATION FRAMEWORK
The Executive Remuneration Framework as it applies to the CEO and the Executive Committee comprises:
—Fixed Annual Remuneration
—The Short Term Incentive Plan
—The Long Term Incentive Plan
Fixed Annual Remuneration (FAR)
What is FAR? FAR is a guaranteed salary level, inclusive of superannuation.
FAR is reviewed annually under normal circumstances – and the opportunity for an annual review is included
in the employment contracts of Executives at Qantas.
Cash FAR, as disclosed in the remuneration tables, excludes salary sacri ce components such as superannuation
(which is disclosed as Post-Employment Bene ts) and includes movements in the value of annual leave balances
during the year.
How is FAR set? FAR is set with reference to external benchmark market data including comparable roles in other listed Australian
companies and international airlines.
An individual’s FAR is not related to Qantas’ performance in a speci c year.
When is FAR reviewed? A general Executive FAR freeze has been in place effective from 1 July 2007 and there were no increases in FAR
for the CEO or KMPs during the year, other than in the appointment of the new CFO.
Short Term Incentive Plan (STIP)
What is the STIP? The STIP is the annual “at risk” incentive plan for senior Executives at Qantas. Each year Executives may receive
an award that is a combination of cash and shares if the plan’s performance conditions are achieved.
How are the STIP
performance conditions
chosen and how is
performance assessed?
At the start of the year the Board sets a “scorecard” of performance conditions for the STIP as follows:
Performance condition Scorecard weighting
Group Underlying Pro t Before Tax (PBT) 65%
Other  nancial and non- nancial measures, tailored for each business segment 35%
Underlying PBT is the key budgetary and  nancial performance measure for the Qantas Group.
Other performance measures are selected to support the strategic agenda of the Qantas Group, either at a Group
or business segment level. These measures vary by business segment, however each Scorecard includes a measure
related to cost or revenue performance.
A threshold, target and maximum level of performance is set each year for each scorecard measure. At the
conclusion of the year, the Board assesses performance against Group and Segment Scorecard targets.
An example Performance Scorecard and a description of how a STIP award is calculated is included on page 41.
How are STIP
awards delivered?
If the performance conditions are achieved and the Qantas Group achieves the Group Underlying PBT threshold
(determined by the Board), two thirds of the STIP reward is paid in cash, with the remaining one third deferred into
Qantas shares. There is then a two year vesting period before ownership of the shares transfers to the Executive.
The Board retains absolute discretion over STIP awards.
For example, circumstances may occur where scorecard measures have been achieved or exceeded, but in the view
of the Board it is inappropriate to make a cash award under the STIP. The Board may determine that either no
award will be made, or that any award will be fully deferred. On the other hand, there may be circumstances where
performance is below an agreed target, however the Board determines that it is appropriate to pay some STIP award.
The cash portion of a STIP award is disclosed in the remuneration tables as a “Cash Incentive” and the deferred
share portion as a “Share-based Payment”.
Remuneration Report (Audited) continued
Directors’ Report continued