Our performance in 2009 - Sappi

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Summary
Compensation report continued
Executive directors and key management personnel
Compensation policy principles
Our compensation policy for executive directors, including key management personnel, is based on the
following core principles:
Reward individuals fairly and equitably in relation to job levels, experience and the employment market;
Achieve competitive compensation levels, which enables the group to attract and retain talented
individuals;
Creating greater alignment of the interests of management with those of the shareholders; and
Implement a globally consistent pay philosophy with regional application to local market practices.
The manner in which management achieves their goals and objectives is underpinned by the group’s
values (excellence, integrity and respect) and the leadership competencies and behaviours (leading
others, strategic thinking, operational delivery, driving change, commercial insight and self-awareness).
When evaluating the performance of an individual not only do the numbers count but also how the
objectives were achieved.
Compensation structures
The compensation of executive directors and key management personnel comprises fixed and variable
components.
Component Objective/policy Performance period Commentary
Base salary (fixed) Market related
Target at median levels for comparable
roles in global companies of similar size
and complexity
Market data used to benchmark
salary levels
Retirement benefit
(fixed)
Provided to new hires under defined
contribution plans
Social security provisions in place in Europe
are considered
Employees in legacy defined benefit plans
continue to accrue benefits in such plans
for both past and future service
Other benefits Non-pensionable
Based on local competitive conditions,
eg medical insurance
Short-term incentive
(variable)
Long-term incentive
(variable)
Paid annually provided threshold is reached
Target cash award ranges from 50% – 85%
of base salary
Awarded annually in the form of
performance plan shares
Consistent with corporate objectives and
long-term nature of our business decisionmaking
Shareholder alignment
Incentivises long-term value creation
Retention tool for executive director and
key management personnel
Reviewed annually Takes into account external benchmarking
data; internal equity; individual performance
and financial parameters.
Not applicable Market competitive
Not applicable Market competitive
One year For 2009, performance targets for awards
was based on:
48% – operating profit
24% – working capital management
8% – capital expenditure management
20% – individual performance
2009 financial performance resulted in no
bonus awards
Motivates short-term performance linked to
the business plan and strategy
Four-year performance
period
Performance hurdle measures Sappi’s Total
Shareholder Return (TSR) and Cash Flow
Return On Net Assets (CFRONA) relative to
a peer group of 14 other industry related
companies
Payment is subject to the performance
shares vesting and to the extent vesting
payment is made in shares