Telstra 2009 Annual Report Download - page 80

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Telstra Corporation Limited and controlled entities
Remuneration Report
These performance measures were selected for the STI plan as
they are seen as a critical link between achieving outcomes of
the business strategy and increasing shareholder value. The
graph below demonstrates the link between STI payments and
Total Revenue. In this example STI payments as a percentage
of maximum align to the direction of Telstra's total revenue
percentage growth over the previous four fiscal years.
Depending on the role they perform, each Senior Executive has
a maximum STI opportunity ranging from 120 per cent to 160
per cent of their fixed remuneration where stretch targets are
met. However if threshold performance is not met the STI
payment could be zero.
At the end of each fiscal year, the Board reviews the company's
audited financial results and the results of the other
performance measures, and assesses performance against
each measure to determine the percentage of STI that is
payable.
Historically, Senior Executives have been required to take 25
percent of their STI payment in the form of incentive shares
and 75 per cent as cash. As a result of proposed changes to tax
laws governing employee share schemes recently announced
by the Federal Government, there is currently uncertainty in
relation to the future tax treatment of shares and rights
acquired under employee share schemes. In light of this, the
Board has determined that the incentive shares requirement
will not apply to STI payments for fiscal 2009 with all STI
payments to be provided as cash. Telstra is considering the
future structure of its STI plan for Senior Executives and will
confirm its position once the proposed Federal legislation in
relation to equity plans is finalised. Senior Executives are still
required to meet their future obligations under Telstra's
Executive Share Ownership Policy as detailed in Section 3.7.
STI payment results for fiscal 2009, compared to fiscal 2008, as
a percentage of the maximum award were as follows:
The table below details the fiscal 2009 results and payout for
the STI plan.
(1) Free Cashflow is free cashflow excluding certain items such as Investment CAPEX;
proceeds from Land and Building disposals; and Telstra Super contribution payments
(2) EBITDA Margin is EBITDA divided by Sales Revenue
(3) Total Income is total Telstra Income excluding profit/loss on Land and Building disposals
(4) Mobile Services Retail Revenue including Wireless Broadband but excluding Handsets,
Interconnection and Mobile Services Wholesale revenue
(5) PSTN Revenue is total Telstra PSTN Products Revenue
(6) Sensis External Income - applies to the Sensis CEO only
(7) Sensis EBITDA is Sensis External Income less Sensis External Expenses - applies to the
Sensis CEO only
(8) Wholesale External Income less Wholesale External Expenses - applies to the GMD -
Telstra Wholesale only
3.4 Long Term Incentive (LTI) Plan
3.4.1 Fiscal 2009 LTI Plan
The Remuneration Committee sought feedback from
shareholders and engaged Guerdon Associates - an external,
independent remuneration consulting firm - as part of the
design process for the fiscal 2009 LTI Plan. Feedback from
shareholders indicated that they prefer Relative Total
Shareholder Return (RTSR) to absolute total shareholder return
and this was introduced into the fiscal 2009 LTI plan. Return on
Investment (ROI) was maintained as a performance measure
for Telstra's LTI Plan as it rewards executives for successfully
generating value for shareholders from the Company's
investments.
Telstra's Senior Executives (and other invited senior
management employees) participate in the fiscal 2009 LTI
Plan. The equity instruments under the Plan are offered to
these executives at no cost however an exercise price does
apply with respect to those options that may vest.
Comparison of Total Revenue
Growth to % of STI Maximum Paid
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2005/06 2006/07 2007/08 2008/09
Fiscal Year
Total Revenue Growth) (%)
0.0%
20.0%
40.0%
60.0%
80.0%
% STI of Maximum
Total Revenue % Growth % STI of Maximum
Name Fiscal 2009 Fiscal 2008
David Thodey 49.6% 78.5%
Bruce Akhurst 48.6% 89.0%
Nerida Caesar 54.9% n/a
Kate McKenzie 60.6% 68.8%
Justin Milne 47.9% n/a
David Moffatt 44.9% 78.5%
Michael Rocca 50.0% n/a
Deena Shiff 44.9% 78.5%
John Stanhope 47.9% 78.5%
Solomon Trujillo 50.0% 86.0%
Gregory Winn 60.0% 81.0%
Measure Result Outcome
(% of
Maximum)
Free Cashflow (1) Above Target 89.5%
EBITDA Margin (2) Stretch achieved 100.0%
Total Income (3) Gateway missed 0.0%
Mobile Services Retail Revenue (4) Gateway missed 0.0%
PSTN Revenue (5) Gateway missed 0.0%
Sensis Revenue (6) Above Target 55.0%
Sensis EBITDA (7) Above Target 71.0%
Wholesale EBIT Contribution (8) Stretch achieved 100.0%