AWB Limited - 2004 Annual Report

DIRECTORS' REPORT (continued)
REMUNERATION REPORT (continued)
Remuneration policy (continued)
At risk remuneration
At risk remuneration is delivered as short and long-term incentives
under AWB’s remuneration policies.
The short-term incentive (STI) is cash based and applies to eligible
employees across the business, including the group’s executive
management team. The STI is calculated for each eligible employee by
assessing performance in relation to KPIs. KPIs are based on group,
individual business/revenue stream and personal measures with three
levels of performance against each KPI: threshold (the minimum
necessary to qualify for any reward); target (where the performance
requirements have been met); and stretch (where performance
requirements are exceeded). Eligible employees are those who have been
employed by the AWB Group for a minimum of six months during the
year ended 30 September 2004.
The maximum STI payment is between 10% and 100% of an
employee's total cost. Senior employees and those with revenue
generating accountability generally have the highest STI potential. The
AWB Group measure under the STI is based on profit before tax and
amortisation. Performance against this measure has a weighting in the
range of 30% to 50% of the overall STI for an AWB Group employee.
The Managing Director is also assessed against specific health, safety and
environmental targets as group measures.
Long term incentive (LTI) is provided for the Managing Director via a
cash based plan, the executive management team and selected senior
executives via the Performance Rights Plan, and for all other employees
via the Employee Share Plan and the Staff Ownership Plan. The plans
involve a long-term incentive generally in the form of shares and are
designed to foster long-term alignment of performance with shareholder
expectations and to provide reasonable reward for that performance.
Descriptions of the operation and conditions of these plans are included
below. AWB’s equity based remuneration plans have been approved by
shareholders and offers and payments made under the plans comply
with thresholds set in the plans.
Staff Ownership Plan
Under the Staff Ownership Plan, eligible employees are given the
opportunity to purchase B class shares in AWB with an interest free
loan. The number of shares that can be purchased through the plan
depends on pay level and the share price of B class shares at the time of
allocation. Employees can borrow up to a maximum of 10% of their
total employment cost to acquire B class shares. The maximum amount
in aggregate that can be outstanding at any time on loans under all
AWB employee share plans cannot exceed 50% of the employee's total
employment cost. The loans are interest free for a period of 10 years.
Any dividends paid on shares are used in full to pay off the loan.
Employee Share Plan
Under the Employee Share Plan, eligible employees are given the
opportunity to be issued with B class shares in AWB Limited. The
shares are issued for nil consideration. Each eligible employee who
participates receives shares to the value of $1,000 (based on the share
price of B class shares at issue date).
Performance review and succession planning
The Managing Director has established an annual process for the formal
review of individual performance and succession plans. Each specified
executive meets with the Managing Director to discuss performance
against the previous year’s key performance indicators, establish key
performance indicators for the following year and consider any
development action. Succession plans for key executive positions are also
discussed at the formal review.
Remuneration structure
It is AWB’s policy that service contracts for senior executives be
unlimited in term but capable of termination on not more than 12
months notice and that AWB retains the right to terminate the contract
immediately, by making a payment equal to not more than 12 months
pay in lieu of notice.
The Managing Director and Chief Financial Officer have fixed term
contracts which will expire on 30 September 2008 unless terminated
earlier or extensions of the contracts are negotiated. AWB retains the
right to terminate these contracts earlier with the provision of 12
months notice or payment in lieu of notice.
The Remuneration Committee has determined that it will limit notice
periods to 12 months in all future contracts for executives, unless
exceptional circumstances exist.
The service contracts typically outline the components of remuneration
paid to executives but do not prescribe how remuneration levels are to
be modified from year to year. Remuneration levels are reviewed
annually, to take account market relativities, individual performance and
the businesses’ capacity to pay, thereby ensuring alignment with the
principles of the remuneration policy are maintained.
Remuneration of non–executive directors
The AWB Limited constitution requires that the remuneration of
directors for their services as directors be by fixed sum and not a
commission on or a percentage of profits or operating revenue. At the
2004 Annual General Meeting, shareholders determined that the
maximum aggregate remuneration for all non–executive directors of
AWB Limited is $1,200,000 per annum.
All non–executive directors are paid a fixed fee in cash. The fixed fee
amounts are determined by the board, with the assistance of the
Remuneration Committee and external advisers.
The following principles are applied in determining the amount of
remuneration for non–executive directors:
the amount of time required for directors to consider AWB and board
matters including preparation time;
acknowledgement of the personal risk borne as a company director;
a comparison with professional market rates of remuneration and
those offered by comparative companies and external independent
advice as to appropriate levels to remain competitive with the market,
having regard to companies of similar size and complexity; and
the desire to attract directors of a high calibre, with appropriate levels
of expertise and experience.
The non–executive directors do not receive equity based remuneration
or performance based remuneration. Other than statutory
superannuation, there are no schemes for retirement benefits for
non–executive directors.
The non–executive directors are currently paid a fixed fee of $90,000
per annum (from 11 March 2004). The chairman receives 2.5 times this
amount. An additional amount of $25,000 per annum is paid to the
chair of the Audit Committee and an additional amount of $20,000 per
annum is paid to the Chair of the Group Corporate Risk Committee.
(These amounts include statutory superannuation.)
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