Telstra 2012 Annual Report Download - page 86

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Telstra Corporation Limited and controlled entities
Remuneration Report
2.2.1 Short Term Incentive (STI)
For all Senior Executives, the FY 2012 performance measures
of the STI Plan were Free Cashflow, EBITDA, Total Income,
Customer Satisfaction and Individual performance measures.
These performance measures were selected for the STI Plan as
they are seen as a critical link between achieving the outcomes
of the business strategy and increasing shareholder value. The
performance measures of the STI plan operate independently of
each other:
• Financial measures for FY 2012 were set in
accordance with Telstra's financial plan and strategy.
• The inclusion of a Customer Satisfaction measure
supports Telstra's strategy of improving customer
service and the goal of delivering outstanding customer
satisfaction. It helps drive a company wide focus on
Telstra's customer strategy of improving customer
satisfaction.
• Individual performance measures are set at the
beginning of the fiscal year and are based on individual
contribution to the achievement of Telstra strategy.
Depending on the role they perform, each Senior Executive has
a maximum STI opportunity ranging from 150% to 200% of their
fixed remuneration where stretch targets are met. However, if
threshold performance for a measure is not met, the payment
relative to that component is nil.
2.2.2 STI Deferral
Twenty five per cent of Senior Executives actual STI payment is
deferred into Telstra shares.
During the deferral period, Senior Executives earn dividends on
their deferred shares, because they have satisfied the
performance hurdles of the STI plan, however they cannot sell
or trade the deferred shares during the deferral period.
If a Senior Executive leaves Telstra for any reason, other than a
Permitted Reason, prior to the end of the deferral period, the
deferred shares are forfeited. A Permitted Reason is defined as
death, total and permanent disablement, redundancy or
retirement (if notice of retirement is given more than six months
after the effective date of allocation).
Deferred shares may be forfeited if a clawback event occurs. A
clawback event includes circumstances where a Senior
Executive has engaged in fraud or gross misconduct, or where
the financial results that led to the STI being earned or awarded
are subsequently shown to be materially misstated. No
clawback event occurred in FY 2012.
2.2.3 FY 2012 LTI Plan
Participation
All Senior Executives participated in the FY 2012 LTI plan with
the exception of the Chief Customer Officer and the GMD
Telstra Wholesale.
As previously disclosed in the FY 2011 Remuneration Report,
the Chief Customer Officer is on a fixed term contract however
his cash LTI plan is aligned to the FY 2011 LTI plan. Refer to
Table 5.1 for further information.
The Structural Separation Undertaking (SSU) given by Telstra
as part of the NBN Transaction requires the GMD Telstra
Wholesale to participate only in plans that relate to Wholesale
and non-retail objectives and performance. Alternative equity
arrangements that are compliant with the SSU will be granted in
the FY 2013 year for the GMD Wholesale and be disclosed in
the 2013 Remuneration Report.
For all other Senior Executives, Restricted Shares form the
basis of the reward. Senior Executives are not required to pay
for the Restricted Shares. However, for any Restricted Shares
to vest, threshold performance against the relevant measure
must be satisfied. Section 5 provides further details of the
Restricted Shares granted to Senior Executives in FY 2012.
Plan Structure
Plan Component Detail
Performance Measure
Weighting
50% to RTSR
50% to FCF ROI
(These operate independently of each
other)
Performance Period 1 July 2011 to
30 June 2014
Restriction Period 4 years after 19th August 2011 (19th
August 2015)
Minimum Threshold for RTSR
Vesting
50th percentile of peer group
RTSR Vesting Schedule 25% vests at 50th percentile, straight
line vesting to 75th percentile where
100% vests
Minimum Threshold for FCF
ROI Vesting
17.1%
FCF ROI Vesting Schedule 50% vests at target of 17.1%, straight
line vesting to stretch of 18.7% where
100% vests
Retesting No