Annual Report 2010 in PDF - BBA Aviation

Directors’
Remuneration
Report
continued
80 — Directors’ Report
The EPS performance condition in respect of the award of conditional
shares made in 2010 and any award of conditional shares to be made
under the LTIP in 2011 is measured over a three-year performance
period:
EPS growth per annum
At or above RPI increase plus
Percentage of award vesting
8% per annum 100%
Between RPI plus 4% and Pro rata between
8% per annum 33% and 100%
At RPI increase plus 4% per annum
Less than RPI increase plus
33%
4% per annum Nil
In setting this EPS performance condition the Committee took into
account both the growth prospects in the current market conditions
and the wider economic environment including inf ation trends.
The details of the exact numbers of the awards to be made in
2011 are not known at the date of this report, as they are calculated
based on the share price at the time of the award, which is expected to
be in March 2011.
There is no retesting of performance conditions.
All unvested share scheme awards made since 2010 to Executive
Management Committee members are subject to provisions
concerning cancellation and reduction in the event of material f nancial
mis-statement.
In line with the method used to test the satisfaction of
performance conditions under previous awards, the Remuneration
Committee has chosen to have the beneft of the expertise of
an independent remuneration consulting frm, Towers Watson, to
calculate TSR and the external auditors will perform certain agreed
procedures on the EPS calculation. The EPS growth is calculated on a
constant exchange rate basis.
At present, awards made under either the LTIP or ESOP or the
Deferred Bonus Plan lapse (subject to the rules of the relevant share
scheme) when an employee leaves the Company, except when the
Remuneration Committee exercises its discretion to permit awards (in
part or whole) to be retained and tested at the end of the performance
period. The exercise of such discretion is guided by the principles
(including reduction by a service factor) set out in a leaver matrix
approved by the Remuneration Committee outlining proposed
treatment of awards when an employee dies, is made redundant or
leaves due to injury, disability, retirement or their employing company
ceasing to be a part of the Group and is always subject to the rules of
the relevant share scheme. It is intended that this practice will continue
to apply to awards made (under the LTIP, the ESOP and also the
Deferred Bonus Plan) in 2011 and beyond.
BBA Group longer-term incentive plans prior to 2005
The BBA Group 2004 Long-Term Incentive Plan (the 2004 Plan)
provided for awards of options, conditional shares and matching
shares. Some options granted under the 2004 Plan remain exercisable
as do some executive options awarded by the Company prior to 2005
which were made under the BBA Group 1994 Executive Share Option
Scheme which expired in April 2004. Prior to March 2002 the BBA
Group 1995 Executive Share Appreciation Rights Plan was used to
facilitate the grant of options to US executives on the same basis as the
1994 Executive Share Option Scheme.
BBA Group 2004 Savings-Related Share Option Scheme
Executive directors may be eligible to participate in the BBA Group
2004 Savings-Related Share Option Scheme, which is open to all
eligible UK employees. Options are granted under three or fve-year
SAYE contracts at a 20% discount to the stock market price at the of er
date. The maximum overall employee contribution is £250 per month.
Share ownership requirements
As part of its strategy to align shareholders’ and directors’ interests, the
Remuneration Committee expects all executive directors to build and
maintain from shares vesting under the long-term incentive plans a
holding of shares with a value at least equal to their base salary.
In recognition of the forfeiture of potential bonus and other
incentive awards from his previous employer, on Simon Pryce’s joining
BBA Aviation plc he was made an award of 213,700 shares on 18 June
2007. This award which was neither pensionable nor transferable was
made in accordance with the provisions of the Financial Services
Authority’s Listing Rule 9.4.2 which permits a company to enter into a
bespoke long-term incentive plan arrangement without requiring
formal shareholder approval in order to facilitate the recruitment of an
individual in unusual circumstances. The shares subject to this award
were released in tranches to Simon Pryce, with the f nal tranche being
released on 11 June 2010 and these shares are included in the fgures
in table 3 on page 82.
Performance Charts
The charts on page 81 show the Company’s total shareholder return
over the last fve fnancial years compared with the equivalent
information for the FTSE 350 Industrial Transportation sector which the
Committee considers, for the purposes of the regulatory requirement
to include such charts in the report, to be a suitable broad-based equity
market index of which the Company is a constituent. The graph on the
left shows the annual change in total shareholder return for the
Company and the index, while the graph on the right shows the
cumulative change in total shareholder return from January 2006.