AWB Limited - 2004 Annual Report

REMUNERATION REPORT
Remuneration Committee
The role of the Remuneration Committee is documented in a charter
which is approved by the board. Its principal functions are to review and
recommend to the board, where appropriate:
the remuneration policy, including the executive incentive policy,
employee share plans and superannuation;
recruitment, retention and termination policies and procedures for
senior management;
the performance appraisal policy; and
the managing director’s performance goals and remuneration.
It also reviews prior to implementation:
the remuneration and contract terms, including termination
provisions, of executives reporting to the managing director;
the design of new or amendments to current executive incentive plans
and the total proposed payments from each incentive plan;
the continuing appropriateness of the performance hurdles in each
executive incentive program;
the design of other executive benefit programs; and
succession planning.
The Remuneration Committee also provides advice to the board on the
remuneration of non–executive directors and the approval of awards
under the Employee Share Plan, Staff Ownership Plan, Equity Share
Plan and Performance Rights Plan.
The Remuneration Committee charter requires that four non–executive
directors should be members, including the chairman, and at least three
of whom must be independent.
The members of the Remuneration Committee are Mr Brendan Stewart
(Chairman), Mr Peter Polson, Mr John Simpson and Mr John Thame.
(Refer to pages 46 and 47 for details of the qualifications and experience
of committee members.)
The Remuneration Committee met five times during the financial year.
Refer to page 58 for details of the attendance by committee members at
those meetings.
A summary of the Remuneration Committee Charter is available on the
Corporate Governance section of AWB’s website.
Advisers
The Managing Director, the General Manager Corporate and the Head
of Human Resources attend committee meetings by invitation and have
assisted the Remuneration Committee in its deliberations during the
year, except where matters associated with their own remuneration were
considered.
In November 2002 the board appointed Mercer Human Resource
Consulting as an independent external advisor on matters pertaining to
the Managing Director’s remuneration. Advice was also sought during
the year from Godfrey Remuneration Consulting on both short and
long-term incentive plan design and measures as well as executive
remuneration advice.
Any information received by Human Resources, which is relevant to
matters being considered by the Remuneration Committee, is made
available to the committee’s members.
Remuneration policy
The Remuneration Committee recognises the complex nature of the
AWB Group’s business operations and that its performance depends on
the quality of its people. To be successful, the group must be able to
attract, motivate and retain highly skilled executives in a competitive
market.
The key principles of the group’s remuneration policy are designed to:
support AWB’s organisational and people objectives – that is, to
attract, motivate and retain employees;
provide market competitive fixed pay, and variable performance based
pay outcomes;
provide appropriate annual incentives for performance that reward
executives using financial and non-financial measures of performance;
provide a strong emphasis on long-term incentives so that the total
package can deliver superior reward for exceptional performance and
link rewards to executives to the creation of value for shareholders;
ensure remuneration arrangements between executives are equitable
and fair, supporting the appropriate deployment of resources and in
particular talent across the business; and
limit severance payments on termination to pre-established
contractual arrangements which do not commit the group to making
unjustified payments in the event of non-performance.
Remuneration for executives is divided into two components. The first
is the fixed component, referred to as “total cost”, which is made up of
base salary and benefits, including superannuation benefits. The second
component is the “at risk” component which includes the short-term
incentives that take the form of cash, and long-term incentives provided
via an equity plan. The amount of at risk remuneration, if any, that is
earned by an executive is wholly dependent upon the performance of the
individual, the team and the businesses against pre–determined Key
Performance Indicators (KPIs) and performance hurdles approved by the
board.
The cost and value of all of the components are considered as a whole.
AWB’s remuneration policy is to pay at the median level of
remuneration for target performance and to provide the opportunity for
upper decile rewards for distinctive (upper decile) performance.
Details of each element of remuneration are set out below:
Fixed remuneration
Total cost is quantified by reference to the scope and nature of the
individual’s role and their performance coupled with experience. Market
data is used to benchmark salary levels on a national basis, adjusted for
regional variance (within Australia) and against cost of living data for
local conditions in the instance of expatriates.
The executive may elect to have a combination of benefits, including
superannuation and the provision of a motor vehicle, provided out of
the fixed annual remuneration. The value of any of the non–cash
benefits provided to the executive includes the costs of any fringe
benefits tax payable by the company as a result of providing the benefit.
Benefits are not provided in addition to total cost, unless required as a
tool of trade (e.g. a motor vehicle). All benefits received by the specified
executives and non–executive directors are included in the following
table.
Superannuation benefits
A range of superannuation, retirement and death in service benefits
operate with AWB. These reflect the different statutory entitlements in
the jurisdictions in which the AWB Group operates and local market
practice.
53