Qantas 2015 Annual Report Download - page 30

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QANTAS ANNUAL REPORT 2015
INTRODUCTION
OVERVIEW OF THE EXECUTIVE REMUNERATION FRAMEWORK
The objectives of the Executive Remuneration Framework are to attract, motivate, retain and appropriately reward a capable
Executive team. This is achieved by setting pay opportunity at an appropriate level and by linking remuneration outcomes to
QantasGroup performance.
Executive Remuneration for 2014/2015
Qantas is committed to setting remuneration policy to align with the creation of shareholder value. In the four previous years:
–Annual incentive awards were not paid to the CEO in two years (2011/2012 and 2013/2014) and only partial awards were made
intheother two years (2010/2011 and 2012/2013)
–LTIP awards have not vested (and in fact had not vested for five straight years)
Remuneration outcomes for 2014/2015 have reflected the very strong financial performance of the Group, which has seen:
–A return to profitability (with management’s delivery of the Qantas Transformation program the biggest contributing factor to
theturnaround)
–Qantas being the best performing stock of ASX100 companies during 2014/2015
Awards were made under the annual incentive (the 2014/15 STIP), based on achievement against the scorecard of financial and
non-financial measures. Management delivered the Qantas Transformation program while also continuing to invest in the customer
through this period (both via product enhancements and customer service training). As a result, an excellent profit outcome was
delivered while record customer satisfaction scores were achieved in both Qantas International and Qantas Domestic.
Rights vested under the Long Term Incentive Plan (under the 2013–2015 LTIP). A fixed number of Rights were awarded to executives in 2012,
and based on Qantas’ financial performance over the three year performance period, 85 per cent of these Rights vested following testing at
30 June 2015 and converted to Qantas shares. The value of this fixed number of shares awarded to each executive increases or decreases
depending on the share price. Over the three year performance period of the 2013–2015 LTIP, the value of these shares has increased by
194 per cent. In the remuneration outcomes tables, we have disclosed the value of these shares at the start of the performance period and
have also disclosed the increase in the value of these shares that has been driven by the share price growth over the performance period.
The Qantas Executive Remuneration Framework and the remuneration outcomes for 2014/2015 are summarised as follows:
Executive Remuneration Component Delivery Performance Measures
2014/2015 Remuneration and
Performance Outcomes
Base Pay
A guaranteed salary level
inclusive of superannuation.
A more detailed description
is provided on page 35.
Cash, superannuation and
other salary sacrifice benefits
(if elected).
An individual’s Base Pay is a
fixed/guaranteed element of
remuneration.
No increases to the Base Pay of
the CEO and KMP.
Additionally, the CEO opted to
forgo five per cent of his Base
Pay (from 1 January 2014 until
30June 2015).
Annual Incentive
Referred to as the Short Term
Incentive Plan (STIP).
A more detailed description is
provided on pages 35 to 36.
Two-thirds cash, one-third
shares (with a two year
restriction period).
Each year an Executive
may receive an award that
is a combination of a cash
bonus and an award of
restricted shares if the Plan’s
performance conditions
areachieved.
A scorecard of performance
measures.
Underlying PBT is the primary
performance measure (with a
50 per cent weighting).
Other performance measures
are explicitly aligned to the
execution of the Qantas Group
strategy, including delivering
on the transformation agenda.
2014/15 STIP awards paid with
a STIP scorecard outcome of
140per cent.
Underlying PBT measure
exceeded.
Transformation targets
exceeded.
Good performance against
other financial and non-
financial measures.
Long Term Incentive
Referred to as the Long Term
Incentive Plan (LTIP).
The LTIP is described in more
detail on pages 36 to 37.
Rights over Qantas shares.
If performance conditions
over a three year period are
achieved, the Rights vest and
convert to Qantas shares on a
one-for-one basis.
The performance measures
for each of the 2013–2015
LTIP, 2014–2016 LTIP and
2015–2017 LTIP are the relative
Total Shareholder Return
(TSR) performance of Qantas
compared to:
–companies with ordinary
shares included in the
ASX100
–an airline peer group (Global
Listed Airlines)
Partial vesting – 85 per cent.
LTIP awards under the
2013–2015 LTIP were tested
as at 30June 2015 and the
performance measures were
achieved:
–in full against ASX100 peer
group
–in part against the Global
Listed Airlines peer group
Therefore,
–85 per cent of Rights
converted to shares
–15 per cent of Rights lapsed