Telstra 2007 Annual Report Download - page 97

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Telstra Corporation Limited and controlled entities
Remuneration Report
Figure 6: 2007 LTI Performance measures
At the end of each financial year in which performance testing is to occur, the Remuneration Committee will
review the company’s audited financial results and the results of the other performance measures to
determine the percentage (if any) of Options that vest.
Where an Option does not vest, because the performance measures have not been achieved, the Option will
typically lapse and no benefit will accrue to the executive. The only exception to this general rule is that a
proportion of Options that are subject to the absolute TSR and EBITDA hurdles and which have not vested at
30 June 2008 and/or 30 June 2009, may still be earned if the four year targets are achieved.
If a senior executive:
• resigns or retires and their Options are not yet vested, those Options will lapse;
• ceases employment due to death, total and permanent incapacity, contract completion, separation by
mutual agreement or is made redundant, and their Options are not yet vested, the number of unvested
Options is adjusted to reflect the executive’s service period and will vest if the relevant performance
measure is met in accordance with the prescribed schedule;
• ceases employment with Telstra for any other reason and their Options are not yet vested, the Board will
decide whether those Options should lapse or remain available for exercise if the relevant performance
measure is met; or
• is terminated for misconduct, then all vested and unvested Options will lapse.
Options that have vested but are not yet exercisable at the time a senior executive ceases employment,
other than for misconduct, will still become exercisable if the TSR gateway target is achieved at 30 June
2010.
Remuneration
element
Performance
measures
How is it measured? Link to business strategy
LTI
(Opt ions)
Revenue Growth The year over year sales revenue
growth rate.
To strengthen existing revenue streams
while driving the development of new
revenue and overall growth.
IT Transformation
milestones
The time taken to replace and
rationalise the Business Support
and Operational Support Systems
across the company.
To reduce complexity and cost and
provide an enhanced customer experience
by rationalising and improving Telstra’s IT
systems.
Network
Transformation
milestones
The time taken to achieve
network simplification and build
new platform.
To simplify the network to reduce
complexity and cost, while providing the
capability for new revenue growth.
Return on
Investment (ROI)
over 3 years
EBIT over Average Investment
(Average of Net Debt plus
Shareholder Funds).
To measure the return gained from the
financial investment in the
transformat ional goals.
Total Shareholder
Return (TSR)
Growth
Compound Annual Growth Rate
(CAGR) in TSR of between 18% and
20.5%.
To measure the value derived from
execution of the business strategy while
reinforcing the importance of shareholder
ret urn.
An absolute TSR hurdle has been
established to deliver real value to
shareholders whilst implementing a
major transformation.
Sustained earnings CAGR in EBITDA to meet or exceed
stretch targets over 2 or more
consecutive years.
To encourage sustained year-on-year
stretch EBITDA performance.
Total Shareholder
Return Gateway
Gateway TSR CAGR hurdle of
11.5% per annum tested at 30
June 2010.
To ensure focus on sustained shareholder
value throughout the execution of the
transformat ional strategy.