Our performance in 2009 - Sappi

86 Compensation report continued
The chief executive officer and chief financial officer may earn a bonus of up to 115% of annual
base salary, and other key management personnel may earn a bonus of up to between 40% and
95% of their annual base salary, depending upon local market practices in the locations in which
they are based.
The key business performance criteria for the 2009 financial year were operating income, working
capital and capital expenditure.
The bonuses reflected in this annual report for Mr Boëttger and Mr Thompson are based on
performance in the 2008 fiscal year, but were only paid out in December 2008 which falls into
fiscal year 2009.
The committee has the right to exercise discretion in authorising adjustments, on both financial
and individual performance, which it deems appropriate when evaluating performance against
targets at the financial year end.
Management incentive awards for executive directors in December 2008 relating to the year
ended September 2008:
Mr Boëttger – 74% of the targeted bonus award
Mr Thompson – 72% of the targeted bonus award
Other key management personnel in Southern Africa and North America received bonus awards
which ranged from 68% to 112% of the target awards depending on the performance of the
region in which they were located.
Key management personnel in the European region were paid a discretionary bonus as they had
not achieved their financial performance threshold despite the strenuous effort and work that
went into addressing the issues in their business.
No bonus awards will be paid under the management incentive scheme in December 2009 as
the group did not meet its financial performance threshold in the year ended September 2009.
Long-term incentives
The group operates two long-term incentive programmes: The Sappi Share Incentive Scheme
and the Performance Share Incentive Plan.
For 2009, approximately 40 key management personnel (including executive directors) were
granted conditional award allocations under the Performance Share Incentive Plan. This award
recognises the contribution they make to shareholder value and is designed to retain and
incentivise sustainable long-term performance.
When the plan was introduced in 2004, awards made under this plan were subject solely to TSR
performance conditions applied after four years from date of grant and relative to a peer group.
In 2006, the plan was amended, and since then 50% of performance share awards to executive
directors and other key management personnel have been subject to a TSR performance condition
and 50% to cash flow return on net assets performance condition relative to a peer group.
The companies comprising the comparator group for all the performance share awards under
the Performance Share Plan which vested in December 2008 are listed below:
AbitibiBowater* MeadWestvaco Oji Paper
Aracuz Cellulose M-real Stora Enso
Domtar Nippon Paper UPM-Kymmene
Holmen
International Paper
Norske-Skog Weyerhaeuser
* Abitibi and Bowater merged in 2007.
Kepler and Associates undertook the assessment of the company’s TSR performance relative
to the comparator group. Sappi’s performance relative to the comparator group for 2004 – 2008
performance share plan awards were ranked in seventh place out of 15 companies and resulted
in 75% of the shares vesting.