1. LETTER FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE
We have maintained our core remuneration principles of fairness, securing a strong link between reward and performance, and encouraging share ownership by our employees and directors.
We made one change to our remuneration structure, as I foreshadowed in my address at the 2013 Annual General Meeting (AGM). I discuss that change and the reasons for it below. I also comment on key changes to the Executive team in the context of disclosures in this Remuneration Report.
ONE CHANGE TO OUR REMUNERATION FRAMEWORK
Under the original design of the Combined Incentive, Group NPAT had to pass a ‘gate opener’ of 90% of budget for the Executives to receive any payment. Non‑KMP participants have less line‑of‑sight to the Group NPAT result, so their gate opener is the budget EBIT for the business unit most relevant to their role. (Global roles and all of the Group Leadership Team remain subject to Group NPAT).
In FY2013, that resulted in the Executives receiving no incentive. As I mentioned at last year’s AGM, the Board felt that was inappropriate, as did a number of shareholders. The Board considers it important that, even in difficult markets, our plan participants see the remuneration framework as offering some prospect of an incentive.
Accordingly, balancing accountability, market factors and performance with the need to retain, attract and reward Executives, the Board changed the gate opener element of our Combined Incentive Plan, to take effect from FY2014.
There are now two gate openers, which for Executives continue to be both related to Group NPAT. For financial KPIs, the gate opener remains unchanged at 90% of budget. But for non‑financial KPIs, the gate opener is set at 75% of budget. Executive’s non‑financial KPIs comprise up to 50% of their Combined Incentive. Non-KMP participants open the gate at 50% of budget for non‑financial KPIs. Non‑financial goals are aligned to long term Company results via strategic imperatives. The plan remains rigorous and measurable.
Having not met 75% of our budget NPAT, we again see zero incentive payments to our incumbent Executives. However, we have paid incentives to others in the Company, particularly where the business unit has performed well (including new Executives as the “non‑KMP” rules applied to them for most of FY2014).
The Board has again agreed a freeze in fees for Non-Executive Directors for FY2015.
Andrew Wood announced a reorganization effective from 1 May 2014.
There are two new Executives, Christopher Parker and Ian Wilkinson, and their pay has been set appropriately for their new roles. Simon Holt’s pay increased from 1 July 2014 reflecting an increase in his responsibilities. The remuneration of other continuing Executives has not increased (Andrew Wood, Randy Karren and David Steele).
Iain Ross stepped down from the Executive Committee and has subsequently taken up the leadership of our Digital Enterprise new venture. He is no longer an Executive.
Stuart Bradie resigned and ceased employment effective 30 May 2014. No termination payment was payable.
Barry Bloch left the Company on 30 June 2014. He was paid standard severance, his contractual six-month notice period and his statutory leave entitlements. I would personally like to thank Mr Bloch for his contribution to the work of the Remuneration Committee.
As the Chairman notes in his Report, Mr JB McNeil resigned from the Board as a Non‑Executive Director effective 3 April 2014. No termination payment was paid to Mr McNeil. The Chairman has thanked Mr McNeil for his contribution to the Board, and I would like to add my thanks for his work on the Remuneration Committee.
JOHN M GREEN
Chairman, Remuneration Committee