Annual Report and Accounts 2009 - BG Group

TSR performance for the Performance Share Awards is measured over
a three-year performance period commencing on the first day of
the calendar month in which the award is made. There is no retest
provision. The level of Performance Share Awards vesting is related to
the Company’s TSR performance over this period relative to a weighted
index of a selection of industry peers. The constituents of the Index for
the September 2009 awards were:
• Anadarko Petroleum • ENI S.p.A.
• Royal Dutch Shell plc
Corporation
• EOG Resources, Inc. • StatoilHydro ASA
• Apache Corporation
• Exxon Mobil
• Suncor Energy Inc.
• BP plc
Corporation
• Talisman Energy Inc.
• Chevron Corporation • Hess Corporation
• ConocoPhillips
• Devon Energy
Corporation
• Marathon Oil
Corporation
• Repsol YPF S.A.
• Total S.A.
• Woodside
Petroleum Ltd.
Of these companies, nine are headquartered in the USA, one in the UK,
two in Canada, one in Australia and five elsewhere in Europe.
The constituents of the Index for the September 2008 awards were
identical to those listed above, except that Suncor Energy Inc. was not
an Index constituent and Petro-Canada was included in the Index up
to the date of the completion of its acquisition by Suncor Energy Inc.
in August 2009.
The vesting of the Performance Share Awards is illustrated below:
Performance Share Award – TSR performance (%)
100
Vesting Level %
25
Index
Index
x107% p.a.
If BG Group’s TSR performance is less than the Index TSR performance
over the performance period, the Performance Share Award will lapse.
If BG Group’s TSR performance meets the Index TSR performance over
the performance period, 25% of the Performance Share Award will vest.
If BG Group’s TSR performance exceeds the Index TSR performance over
the performance period by 7% p.a. or more, 100% of the Performance
Share Award will vest.
Between these two points the percentage vesting will be on a linear
sliding scale basis.
The TSR outperformance calculation is multiplicative, that is, if the
Index grows from 100% to 110%, then BG Group is required to move
from 100% to 134.75% (i.e. 110% x 107% 3 ) over three years to achieve
maximum vesting.
In the event of a change of control, vesting of Performance Share
Awards under the LTIP is not automatic and would depend on the
extent to which performance conditions had been met at that time.
Time pro-rating will apply if the Committee considers it appropriate
given the circumstances of the change of control.
Group Share Awards
Awards of Group Share Awards are made to certain employees below
GEC level. Eligibility to be considered for an award varies by jurisdiction.
Group Share Awards will normally vest three years after the date of
grant subject to:
• continued employment; and
• the individual employee’s performance not having fallen significantly
below that expected since the date of grant.
In the event of a change of control, the level of vesting of Group Share
Awards under the LTIP may be subject to time pro-rating if the
Committee considers it appropriate given the circumstances of the
change of control.
Prior to 2008, the Executive Directors and other employees participated
in the Long Term Incentive Scheme (LTIS) and Company Share Option
Scheme (CSOS). No further awards will be made under these plans.
No Market Value Options were awarded in 2009.
Long Term Incentive Scheme (LTIS)
Vesting of LTIS awards is conditional on the Company’s TSR performance
relative to a comparator group of industry peers over a three-year period
which runs from the date of grant. The proportion of the LTIS award that
vests is dependent on BG Group’s position in this comparator group.
There is no retest provision.
In the event of a change of control, vesting of shares under the LTIS
is not automatic and would depend upon the extent to which the
performance conditions had been met at that time. Time pro-rating
will apply if the Committee considers that this is appropriate given
the circumstances of the change of control.
The following performance conditions apply for awards made under
the LTIS:
BG Group’s TSR position in comparator group % of allocated shares transferred
First 100
Upper quartile 75
Median 30
Below median All allocated shares are forfeited
Where performance is between upper quartile and first or between
median and upper quartile, the percentage of shares to be transferred
is determined on a proportionate basis.
The performance period for the 2006 allocation ended on
3 September 2009. BG Group’s final TSR for this period relative to
the TSR of companies in the relevant comparator group was measured
by the independent TSR monitoring service of Alithos Limited and
reviewed by Kepler Associates. This analysis placed BG Group in first
position. The Committee therefore decided, in accordance with the
performance condition for the 2006 allocation, that 100% of the
original award of shares had vested and, accordingly, these shares
were transferred to the participating employees on 7 September 2009.
For the 2006 allocation, the comparator group comprised BG Group
and the following 16 companies:
Amerada Hess Corporation; Anadarko Petroleum Corporation; BP plc;
Chevron Corporation; ConocoPhillips; Duke Energy Corporation;
El Paso Corporation; ENI S.p.A.; Exxon Mobil Corporation; Marathon Oil
Corporation; Norsk Hydro ASA; Occidental Petroleum Corporation;
Repsol YPF S.A.; Royal Dutch Shell plc; Statoil ASA and Total S.A.
For the 2007 allocation, the group was reduced by one, following the
merger of Statoil ASA and Norsk Hydro ASA’s petroleum activities.
BG Group Annual Report and Accounts 2009
53
Directors’ Report
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Directors’ Report
Corporate Governance
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Shareholder
Information