BROADENING OUR HORIZONS - Arrium

Remuneration ReportB. NON-EXECUTIVE DIRECTORREMUNERATIONThe Board, in conjunction with the HumanResources Committee, seeks to establishNon-Executive Director remuneration at alevel that enables OneSteel to attract andretain Directors of the highest calibre ata cost that is responsible and acceptableto shareholders.The remuneration arrangementsbeing applied are in line with industrypractices and affirm the commitmentof the Group to the principles of goodcorporate governance.Detailed below are the key principles thatunderpin the Board’s approach to Non-Executive Director remuneration.Board fees are approved by shareholdersThe limit on the current aggregate feepool for Non-Executive Directors of $2million was approved at the 2006 AnnualGeneral Meeting as required by Article 9.8of the Constitution of the Company andas approved by shareholders under ASXListing Rule 10.17.Remuneration is designed to preserveindependenceThe structure of OneSteel’s Non-ExecutiveDirector remuneration is separate anddistinct from that applicable to the LeadTeam. Non-Executive Directors have notbeen granted shares under the Group’s LTIShare Plan and do not receive any bonus orother performance-based remuneration.No retirement benefitsNo additional benefits (other than theirexisting superannuation entitlements) arepaid to Non-Executive Directors upon theirretirement from the Board.Retirement benefit scheme – discontinuedThe retirement benefit scheme in existenceuntil 17 November 2003 was approvedby shareholders during OneSteel’s publiclisting in 2000. This retirement benefit wasan additional and separate arrangement tothe payment of Directors’ fees.The retirement benefit scheme wasdiscontinued from 17 November 2003and the amount of the retirement benefitaccrued by each Non-Executive Directorwas fixed by reference to the length ofservice up to this date.Remuneration quantum and structureDirectors’ fees per annum, effective 1 January 2011, are:• $495,000 for the Board Chairman, and• $165,000 for other Non-Executive Directors.Additional fees are paid to Non-Executive Directors for serving on Board committees.Committee Member fees are set at $5,000 per annum. Committee Chair fees are set at$15,000 per annum with the exception of the Audit & Compliance Committee Chair whoreceives $20,000 per annum. The Chairman does not receive any Board committee fees.Suspension of Non-Executive Director Share PlanThe ability of Non-Executive Directors to acquire shares under the Non-Executive DirectorShare Plan has been suspended since 2010 as a result of taxation changes affectingthe operation of the Plan. Arrangements have now been put in place for Non-ExecutiveDirectors to receive fees as cash and superannuation in lieu of the long-term sharecomponent that was previously in place. Market practice will continue to be monitored overthe coming period regarding the use of equity-based plans for Non-Executive Directors.Review of the Non-Executive Director remunerationFees for Non-Executive Directors were held constant between September 2007 andJanuary 2011. In 2009, a review of the Non-Executive Director fee amount was conductedby an independent and specialist external adviser, Godfrey Remuneration Group. In lightof market conditions and the challenges facing the Group at that time, the Board decidedthat a recommendation to both increase fee amounts in the order of 14% and introducecommittee fees would not be applied. This review was revisited in December 2010 andan increase in fees and the introduction of committee fees were confirmed by GodfreyRemuneration Group as still valid and appropriate. Accordingly, a fee increase of 14% wasapplied to all Non-Executive Director fees and the additional fees relating to serving onBoard committees as set out above were implemented.C. OVERVIEW OF EXECUTIVE REMUNERATION STRATEGYAND STRUCTUREThe objective of OneSteel’s executive remuneration framework is to pay marketcompetitive remuneration recognising skills and experience and to reward forperformance and the achievement of strategic objectives leading to the creation ofshareholder value.OneSteel seeks to provide competitive remuneration that will attract, motivate andretain executives.OneSteel’s remuneration strategy is to target fixed annual reward levels around themedian of executives’ local salary markets. Executives can be paid above or below themedian consistent with their capability and demonstrated value to the business. It is alsoOneSteel’s policy to position variable or at-risk remuneration such that total remunerationcan be positioned above, at or below the relevant market median dependent on the levelof the Company’s and the executive’s performance.Remuneration structureDepicted below is the structure of OneSteel’s executive remuneration arrangements:Long-Term Incentive (EQUITY)Short-Term Incentive (CASH)Variable or at-risk remuneration51For Directors who held office on 17November 2003, a cash benefit under thediscontinued scheme is payable upon theretirement of the Director from the Board.Remuneration reviewsThe structure of Non-Executive Directorremuneration, the amount and the mannerin which it is apportioned is reviewedperiodically by the Human ResourcesCommittee and the Board. The Boardconsiders advice from independentexternal consultants and reviews fees paidto Non-Executive Directors from a crosssectionof comparable companies.BENEFITSBASE SALARYFixed annual reward