Telstra 2007 Annual Report Download - page 102

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Telstra Corporation Limited and controlled entities
Remuneration Report
In fiscal 2006, Telstra began this process by linking its remuneration structure to the transformation
objectives. Further refinements have been made to the remuneration structure in fiscal 2007 to encourage
the continued focus on key business outcomes and to ensure that rewards are only received when the
company and the individual achieve the transformational and operational goals set by the Board. Key
enhancements are detailed in Figure 8.
Figure 8: Key enhancements of the remuneration structure
As noted above, the performance measures for both the STI and LTI have been tailored to align “ at risk”
remuneration as closely as possible with delivery of transformation objectives. The achievement of the
relevant performance measures in both fiscal 2006 and fiscal 2007 has demonstrated the essential role the
remuneration structure plays in driving management’s focus on delivering the transformation strategy,
improving the customer experience, and most importantly, driving real and sustained increases in
shareholder value.
Section 3 below sets out further details regarding the correlation between company performance achieved
and remuneration paid to senior executives in recent years.
3. Remuneration vs company performance
The level of “at risk” remuneration paid to senior executives is directly linked to the company’s
performance. In recent years, the achievement of key transformation milestones has been coupled by
an increase in the “at risk” remuneration received by senior executives.
Component Enhancement Rationale
Remuneration Mix • The remunerat ion mix for fiscal 2007 has
incorporated a greater proportion of “ at-risk”
remunerat ion.
• Focus attent ion on driving the key strat egic
outcomes.
STI • Revenue growth has been included in fiscal
2007.
• To strengthen existing revenue streams while
driving the development of new revenue and
overall growth.
• EBITDA maintains the focus on cost
management.
• Senior executives, excluding the COO, are
required to sacrifice a minimum of 25% of
their actual STI opportunity towards the
purchase of Telstra Incent ive Shares until
share ownership targets are met.
• The CEO is required to take 50% of the total
actual value of his STI in the form of Telstra
deferred shares.
• To provide a st rong alignment between
executive reward, company success and
shareholder wealth creat ion.
LTI • An Earnings measure and a Total Shareholder
Return (TSR) gateway measure have been
introduced for fiscal 2007.
• To encourage sustained earnings and
shareholder value t hroughout the execution
of the transformational strat egy.
• Options are to be used for the LTI in 2007. • To leverage reward outcomes where
executives share in the upside of an increase
in share price resulting from the successful
delivery of t he transformat ion strategy.
Share Ownership • Introduction of a minimum shareholding of
Telstra shares through the Executive Share
Ownership Policy.
• To encourage executives to further commit to
the future performance of Telstra by
strengt hening the alignment between
executive reward and company success,
which benefit s all Telstra shareholders.