TDC Group Annual Report 2011(6,4MB) - TDC Annual Report 2011

individual employee and usually varies within a range of
10%-33% of basic salary. The on-target bonus percentage
is somewhat lower for the Managers' Compensation
Programme. The bonus percentage achieved can be
maximum 200% of the on-target bonus.
The short-term bonus programme for the members of the
Corporate Management Team is based on the same
principles as those for other managers.
For the Corporate Management Team and approximately 50
other executives reporting directly to the Corporate
Management Team, a deferral element applies. The
Corporate Management Team members are obliged to
defer 50% of their short-term bonus for three years with an
option to defer an additional 50% of their bonus for three
years. The other eligible executives have the opportunity to
defer up to 50% of their bonus for three years. Deferred
bonus will immediately be converted into deferred share
units in TDC with a corresponding value. Deferred share
units will vest and be converted into shares in TDC after
three years, provided that TDC’s Equity Free Cash Flow
(EFCF) per share, excluding income tax paid, lives up to the
base case in TDC’s business plan. Participants will receive
the following shares:
EFCF 1 compared
with base case
business plan
Deferred
share
units
Matching
share units 2
Total
Share
Units 3
2.5% higher 100% 100% 200%
Equal to 100% 75% 175%
2.5% lower 100% 62.5% 162.5%
5% lower 100% 50% 150%
5.01-15% lower 100% 0% 100%
15.01% lower 0% 0% 0%
1 Per share excluding income tax paid.
2 Linear calculation of matching share units between 75%-100% and 50%-75%.
3 Dividends paid out on shares in the deferral period will result in corresponding
increases of each participant’s number of share units. A participant who terminates
employment during the vesting period for reasons of voluntary resignation or
misconduct will receive no matching shares. Participants who terminate employment
for other reasons will receive matching shares as if their employment had continued
throughout the vesting period.
Performance Share Programme
With effect from 1 January 2011, a new Performance Share
Programme to reward long-term performance was
implemented. Approximately 300 TDC managers, including
the Corporate Management Team, participate in the
Performance Share Programme.
TDC Group Annual Report 2011
All eligible participants will annually be granted
performance share units. Vested performance share units
will be converted into shares in TDC. The value of
performance share units granted will be calculated as a
percentage of participants’ base salary depending on tier
level and individual performance. The number of
performance share units granted will have a value,
determined as the fair market value on the basis of a Monte
Carlo simulation. For the Corporate Management Team this
will correspond to 30% of base salary and, for other TDC
managers, up to 30% of their base salary.
Ownership of shares will only pass to participants provided
the performance share units vest. Performance share units
vest three years from the date of grant subject to TDC’s
performance as measured by Total Shareholder Return
(calculated as share price movements plus dividends
received over a stated period divided by share price at the
beginning of such period) (TSR) relative to a peer group of
14 telecommunications companies (excluding TDC):
TSR performance
relative to peer group
Vesting
share units 1
No. 1-2 150%
No. 3-4 100%
No. 5-10 20-85%
No. 11-15 0%
1 Dividends paid out on shares in the vesting period will result in annual corresponding
increases of each participant’s number of performance share units. A participant who
terminates employment during the vesting period for reasons of voluntary
resignation or misconduct will not vest any performance share units. Participants
who terminate employment for other reasons will vest performance share units as if
their employment had continued throughout the vesting period.
For the Corporate Management Team a mandatory
perpetual share ownership representing a value equivalent
to two years' annual base salary, net of taxes, was
implemented with effect from 1 January 2011. The required
share ownership will be set as a fixed number of shares
based on the individual Corporate Management Team
member’s base salary and the share price at the time of
implementation and for new Corporate Management Team
members at the time of hire/promotion. The number of
shares required to be owned by Corporate Management
Team members can be changed by a Board decision if the
share value or salary level changes significantly. For both
new and existing Corporate Management Team members,
the ownership can be built up over a maximum of three
years.
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