Qantas 2012 Annual Report Download - page 52

FOR THE YEAR ENDED 30 JUNE 2012
Directors’ Report continued
6 EXECUTIVE REMUNERATION STRUCTURE
Base Pay
also referred to
as Fixed Annual
Remuneration
or 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.
An individual’s FAR, being a guaranteed salary level, is not related to Qantas’ performance in a specific year.
Cash FAR, as disclosed in the remuneration tables, excludes superannuation (which is disclosed as Post-employment
Benefits) and includes salary sacrifice components such as motor vehicles. Movements in the value of annual
leave balances during the year are disclosed as Annual Leave Accrual with other non-cash benefits.
How is FAR set and what was the outcome of the 2011/2012 FAR review?
In performing a FAR review, the Board makes reference to external benchmark market data including comparable
roles in other listed Australian companies and international airlines. The primary benchmark is a revenue based
peer group of other S&P/ASX companies. The Board believes this is the appropriate benchmark, as it is the
comparator group whose roles best mirror the complexity and challenges in managing Qantas’ businesses
and is also the peer group with whom Qantas competes for Executive talent.
The Board performed a general FAR review effective 1 July 2011. As part of this review, Mr Joyce’s FAR was
increased by three per cent to $2,125,000. Mr Joyce chose not to participate in the 2012 FAR review and his
FAR will remain unchanged for 2012/2013.
The FAR for Mr Joyce and each Executive KMP are outlined on page 57.
Annual Incentive
also referred
to as the Short
Term Incentive
Plan or STIP
What is the STIP?
The STIP is the annual “at risk” incentive plan for Qantas Executive Committee Members. Each year these
Executives may receive an award that is a combination of cash and restricted shares to the extent the plan’s
performance conditions are achieved.
How are the STIP performance conditions chosen and how is performance assessed?
The Board set a “scorecard” of performance conditions for the 2011/12 STIP, explicitly aligning the performance
measures to the Qantas Group strategy. Underlying PBT is the key budgetary and financial performance measure
for the Qantas Group and is therefore the key performance measure in the STIP scorecard.
The Board sets targets for each scorecard measure and at the end of the year the Board assesses performance
against each scorecard measure and determines the overall STIP scorecard outcome.
A detailed description of the STIP scorecard is provided on pages 51 and 52.
The Board retains absolute discretion over all awards made under incentive plans at Qantas, including the STIP.
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 entirely deferred and/or delivered in Qantas shares. 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.
How are STIP awards delivered?
If the performance conditions are achieved, two-thirds of the STIP reward is paid immediately as a cash bonus,
with the remaining one third deferred into Qantas shares. These shares are transferred to the Executive after
a period of up to an additional two years after the end of the performance period.
Board discretion applies to the grant of STIP awards and in the three years the STIP has operated all awards
have been deferred and immediate cash bonuses have not been paid.
Remuneration Report (Audited) continued
QANTAS ANNUAL REPORT 2012050