Qantas 2016 Annual Report Download - page 42

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Directors’ Report continued
For the year ended 30 June 2016
Review of Allocation
Methodology
During 2015/2016, the Remuneration Committee reviewed the approach used to determine the number
of Rights granted to the CEO and each Executive under the LTIP. While the Committee decided to retain
the current allocation methodology (a ‘fair value’ methodology) it also decided to provide additional ‘face
value’ information in both the 2016 Remuneration Report and Notice of Meeting. This will ensure absolute
transparency around the value of Rights awarded under the LTIP.
Allocation
Methodology
At each year’s AGM, Qantas seeks shareholder approval for any award of Rights to the CEO.
Qantas seeks approval for the specific number of Rights to be awarded and discloses the allocation
methodology.
These awards are calculated as follows:
Number of Rights
awarded =Base Pay x ‘At Target’ Opportunity1
=Base Pay x ‘At Target’ Opportunity2
Fair Value of each Right Face Value (Share Price) as at 30 June
1 On a fair value basis
2 On a face value basis
The ‘At Target’ opportunity for the CEO for the 2015 grant was:
–80 per cent of Base Pay on a fair value basis
–141 per cent of Base Pay on a face value basis
That is, the 2015 grant to the CEO of 947,000 Rights was calculated by applying an ‘At Target’ opportunity of
80 per cent of Base Pay on a fair value basis. The award of 947,000 Rights can also be calculated by applying
an ‘At Target’ opportunity of 141 per cent of Base Pay on a face value basis.
The ‘At Target’ LTIP opportunity for the CEO and KMP is provided on both a fair value basis and a face value
basis in the Summary of Key Contract Terms on page 43.
Change of Control In the event of a change of control, and to the extent that Rights have not already lapsed, the Board
determines whether the LTIP Rights vest or otherwise.
Disclosure The ‘LTIP vesting’ amount shown in the remuneration outcomes tables is equal to the number of Rights
vested multiplied by the Qantas share price at the start of the performance period.
The ‘LTIP share price growth’ amount is equal to the number of Rights vested multiplied by the increase in the
Qantas share price over the three year performance period (rather than amortising the accounting value over
the relevant performance and service period as per the accounting standards).
Other Benefits
Non-cash Benefits Non-cash benefits, as disclosed in the remuneration tables, include travel entitlements while employed
and other minor benefits.
Travel Travel concessions are provided to permanent Qantas employees, consistent with practice in the airline
industry. Travel at concessionary prices is on a sub-load basis, that is, subject to considerable restrictions
and limits on availability. It includes specified direct family members or a nominated travel companion.
In addition to this and consistent with practice in the airline industry, Directors and KMP and their eligible
beneficiaries are entitled to a number of trips for personal purposes at no cost to the individual.
Post-employment travel concessions are also available to all permanent Qantas employees who qualify
through retirement or redundancy. The CEO and KMP and their eligible beneficiaries are also entitled to a
number of free trips for personal purposes after ceasing employment. An estimated present value of these
entitlements is accrued over the service period of the individual and is disclosed as a post-employment
benefit.
Superannuation Superannuation includes statutory and salary sacrifice superannuation contributions and is disclosed as a
post-employment benefit.
Other Long-term
Benefits
The movement in accrual of annual leave and long service leave is included in other long-term benefits. The
accounting value of other long-term benefits may be negative, for example where an Executive’s annual leave
balance decreases as a result of taking more than the 20 days annual leave they accrued during the year.
REMUNERATION REPORT (AUDITED) CONTINUED
40
QANTAS ANNUAL REPORT 2016