annual report 2011

IOOF | annual report 2011
Hedging of unvested securities
The IOOF Securities and Insider Trading Policy contains a
restriction on executives and other employees entering into a
hedging transaction to remove the ‘at risk’ aspect of securities
that have been granted to them as part of their remuneration
package and which have not vested subject to performance
conditions and/or which are still subject to forfeiture
conditions. Employees are provided with a copy of this policy
and are required to provide annual certification that they have
complied with the policy. Failure to comply with the policy
could result in disciplinary action, including forfeiture of the
securities, suspension or termination of employment.
4. Managing director’s remuneration
Terms of appointment
Mr Kelaher is employed under an unlimited duration service
agreement. Under that agreement, Mr Kelaher receives fixed
remuneration, a short term incentive component, and an
equity-based long term incentive component, as discussed
below. The fixed and short term incentive components of Mr
Kelaher’s remuneration are subject to annual review by the
Board. There are various performance and vesting conditions
attached to the remuneration provided to Mr Kelaher under
the terms of his agreement.
Mr Kelaher can terminate his employment by giving IOOF
three (3) months written notice. The Board can waive
the requirement for him to serve out part or all of the
notice period, although he would be entitled to the fixed
remuneration for that portion of the notice period not served
out. Any unvested incentives at the date of termination would
lapse.
The Company can terminate Mr Kelaher’s employment at
any time by giving twelve (12) months’ written notice, or the
Company can elect to make payment of fixed remuneration in
lieu of part or all of the notice period that he is not required to
serve out. The proportion (if any) of the short-term incentive
and any unvested long-term incentives to which Mr Kelaher
will be entitled in this event is at the discretion of the Board.
In the event Mr Kelaher’s employment is terminated (except
in the circumstances of misconduct), he will be paid an
entitlement equal to twelve (12) months’ fixed remuneration
plus unpaid leave entitlements, and an amount to reflect a
pro-rated entitlement to STI for the period.
Remuneration
The remuneration of Mr Kelaher is set by the Board and
is based on a market review of the level of remuneration
required to attract and retain a high calibre individual suitable
for the role. During the financial year ended 30 June 2011, Mr
Kelaher received a remuneration package comprising fixed
remuneration of $990,000 including $60,000 Director’s fees
paid directly by DKN Financial Group Limited. Mr Kelaher
was entitled to a total STI opportunity of up to a maximum
of $680,000 based on achievement of superior performance
against set targets determined by the Remuneration and
Nominations Committee. In July 2011 the Remuneration and
Nominations Committee assessed Mr Kelaher’s performance
against those targets and determined an STI amount of
$612,000.
In terms of his remuneration arrangements, the STI
opportunity was settled two thirds by cash and a third in
the form of deferred shares. The number of deferred shares
granted to Mr Kelaher was determined on the basis of the STI
deferral amount divided by the five day Volume Weighted
Average Price up to and including 30 June 2011, which
was $6.4366. The number of deferred shares to be issued
accordingly is 31,694 (capped at 75,000 annually) and there is
no consideration payable for the grant of the deferred shares.
The deferred shares are to vest in July 2012 subject to a Board
‘look back’ arrangement.
The Board has determined that the portion of STI that will be
deferred will be subject to Board ‘look back’ arrangements.
This means the Board will conduct a review of Group
performance in June 2012 and assess whether any significant
unexpected or unintended consequences have occurred
that were not foreseen by the Remuneration & Nominations
Committee when it made its decision in July 2011, and whether
it is still appropriate to award the deferred shares.
During June 2011, the Remuneration & Nominations
Committee performed a ‘look back’ review in regards to the
24,119 deferred shares issued in July 2010. The Committee
determined that all of the deferred shares were to vest in
accordance with the terms of the arrangement. The 24,119
shares have since been transferred to Mr Kelaher.
Performance rights and share options
As approved at the Annual General Meeting (AGM) of
shareholders on 23 November 2010, Mr Kelaher is entitled
to participate in an LTI program offering a maximum reward
opportunity of 150,000 performance rights and 300,000
options in respect of the 2010/11 and 2011/12 financial years.
Following shareholder approval, 150,000 performance rights
and 300,000 share options were granted to Mr Kelaher on
23 November 2010 in relation to the 2010/11 financial year.
An additional 150,000 performance rights and 300,000 share
options were granted to Mr Kelaher on 1 July 2011.
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