annual report - Harvey Norman Company Reports & Announcements

DIRECTOR‟S REPORT (CONTINUED)
Remuneration Report (Audited) (continued)
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually
against fees paid to NEDs of comparable companies. The board considers published material from external sources and
makes its own enquiries when undertaking the annual review process.
The Company‟s constitution and the ASX listing rules specify that the NED fee pool shall be determined from time to time by
a general meeting. The latest determination was at the 2006 annual general meeting (AGM) held on 21 November 2006
when shareholders approved an aggregate NED pool of $1,000,000 per year.
The board will not seek any increase for the NED pool at the 2012 AGM.
Structure
The remuneration of NEDs consists of directors‟ fees. NEDs do not receive retirement benefits, nor do they participate in any
incentive programs. Each NED receives a fee for being a director of the Company. The structure of NED remuneration is
separate and distinct from executive remuneration. The remuneration of NEDs for the year ended 30 June 2012 and 30
June 2011 are disclosed in table 1 on page 28 of this report.
Executive Remuneration Arrangements
Remuneration Levels and Mix
The consolidated entity aims to reward executives with a level and mix of remuneration commensurate with their position
and responsibilities within the consolidated entity and to align operations with strategy.
The policy of the consolidated entity is to position total employment cost (TEC) so as to ensure a competitive offering. Total
reward opportunities are between the 50 th and 100 th percentile of the comparator group. The Company and the
consolidated entity undertakes an annual remuneration review to determine the total remuneration of executives having
regard to the circumstances of the consolidated entity.
The CEO‟s target remuneration mix comprises approximately 75% fixed remuneration and 25% target STI opportunity. The
CEO did not have any target LTI during the year. Target remuneration mix of executive directors ranges from 50% to 55%
fixed remuneration, 15% to 25% target STI opportunity and 0% to 30% LTI.
Structure
In the 2012 financial year, the executive remuneration framework consisted of the following components:
Fixed remuneration
Variable remuneration
The table below illustrates the structure of the executive remuneration arrangements of the consolidated entity:
Remuneration
component
Fixed
remuneration
STI
component
LTI
component
Method Purpose Link to performance
Represented by
total employment
cost (TEC).
Comprises base
salary,
superannuation
contributions and
other benefits.
Set with reference to role, market and
experience.
Executives are given the opportunity to
receive their fixed remuneration in a
variety of forms including cash and
fringe benefits such as motor vehicles.
It is intended that the manner of
payment chosen will be optimal for the
recipient without creating undue cost
for the consolidated entity.
Paid in cash, as PCI. Rewards executives for their
contribution to the achievement of
consolidated entity and business unit
outcomes, as well as individual key
performance indicators (KPIs).
Awards are made in
the form of options
pursuant to the 2010
Share Option Plan.
Rewards executive directors (except
for Chairman, Mr. G. Harvey and CEO,
Ms. K.L. Page) for their contribution to
the creation of shareholder value over
the longer term.
No link to company
performance.
Linked to internal financial
and non-financial
performance measures
including achievement of
internal budgets, operating
priorities, franchising
operations, property priorities
and risk management,
including execution of Omni
Channel strategic initiatives.
Vesting of awards is
dependent on satisfaction of
terms and conditions of the
2010 Share Option Plan.
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