AWB Limited - 2004 Annual Report

23. NOTES TO THE STATEMENT OF CASH FLOWS (continued)
Consolidated
AWB Limited
2004 2003 2004 2003
$'000 $'000 $'000 $'000
(b) Reconciliation of cash
Cash balance comprises:
– cash at bank and on hand 44,023 25,066 87,890 2,328
– cash on deposit 4,202 29,719 – –
Closing cash balance 48,225 54,785 87,890 2,328
24. DIRECTOR AND EXECUTIVE DISCLOSURES
(a) Remuneration of specified directors and specified
executives by the consolidated entity
Remuneration levels are competetively set to attract and retain
appropriately qualified experienced directors and executives.
Remuneration for specified 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 at risk
element of remuneration are set out below.
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 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. A description of the
operation and conditions of these plans is included later in this note and
in Note 30. 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.
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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