Telstra 2001 Annual Report Download - page 39

P.37
Senior managers participate in an annual
performance review process that assesses
the individual’s performance against set key
accountabilities. Performance against these
accountabilities impacts directly on their annual
incentive payments and salary movements.
SSeenniioorr eexxeeccuuttiivvee rreemmuunneerraattiioonn ccoommppoonneennttss
Telstra’s senior manager remuneration consists
of fixed and variable components:
•
• FFiixxeedd rreemmuunneerraattiioonn
Total employment cost accounts for the total cost
of all fixed remuneration items and is made up of
salary, company superannuation contributions
and benefits, including fringe benefits tax.
•
• VVaarriiaabbllee rreemmuunneerraattiioonn
Variable remuneration includes an annual
incentive and a long-term incentive, both
designed to reward managers for performance
against set targets.
•
• SShhoorrtt--tteerrmm iinncceennttiivvee
The management incentive plan rewards
senior managers for meeting or exceeding
specific key business objectives at the
corporate, business unit and individual level.
The incentive for fiscal 2001 was between 12%
and 23% of the total remuneration package,
depending on the senior manager’s role.
Measures and targeted achievement levels
are reviewed each year to reflect changes
in the business.
•
• LLoonngg--tteerrmm iinncceennttiivvee
A long-term incentive plan based on equity
(Telstra Growthshare) was introduced in early
fiscal 2000 to progressively replace the cash
based long-term incentive plan. As a practical
result of the Telstra Corporation Act, we are not
able to issue new shares, and therefore Telstra
Growthshare purchases existing Telstra shares.
Allocations are in the form of restricted shares
and options over existing shares, the right
to exercise both of which vests when
a performance hurdle is achieved. The
performance hurdle is achieved if the 30 day
average of the Telstra accumulation index
exceeds the 30 day average of the All
Industrials Accumulation index between
the third and fifth anniversary of allocation.
Options are then exercisable up to 10 years
after the original date of allocation. The
exercise price is the market price at the time
of grant of the options. Restricted shares
generally may not be traded for five years after
initial allocation of the rights to obtain the shares.
Offers under Telstra Growthshare are made
to managers at the discretion of the board.
For fiscal 2001 and beyond, between 21% and
34% of total senior manager potential reward
was delivered through Telstra Growthshare.
Cumulatively, over a five year period, the total
number of shares and options over shares
delivered through Telstra Growthshare is not
expected to exceed 1% of shares on issue.
The previous cash-based long-term incentive
was progressively phased out, ceasing in fiscal
2001. It was a three-year incentive plan designed
to reward senior managers for sustained
achievement of business improvement. Rewards
were based on the achievement of return on
investment objectives over a three-year period
and are derived from the strategic plan approved
by the board. The plan also includes an annual
payment based on dividends declared in respect
of earnings. For fiscal 2001, the actual payments
for cash-based long-term incentive comprised
16% to 27% of the total remuneration package,
depending on the senior manager’s role.
TTeellssttrraa eemmppllooyyeeee sshhaarree oowwnneerrsshhiipp ppllaannss
All employees, including senior managers of
Telstra, who were classed as ‘eligible employees’
at 20 September 1997 and again on 27 August
1999 were eligible to participate in the Telstra
Employee Share Ownership Plans, TESOP 97
and TESOP 99. The terms and conditions of
participation in these plans for senior managers
were the same as for all other employees.