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How the executive directors were paid in the 2008 financial year

The table below summarises the plans used to reward the executive directors in the 2008 financial year. Details on performance measures, the link to strategy and grant policy are also included.

  2007/08 performance measure(s) Purpose – link to strategy Grant policy
Base salary
2007/08
  • Not applicable
  • Reflects competitive market level, role and individual contribution
  • Set annually at 1 July
Annual bonus
2007/08 Group Short Term Incentive Plan (“GSTIP”)(1)
  • Adjusted operating profit (30%)
  • Free cash flow (20%)
  • Service revenue (25%)
  • Total communications revenue (10%)
  • Customer delight (15%)
  • One year’s KPIs against budget and linked to performance targets – delivered in either cash or deferred into shares (see DSB below)
  • Three key measures: Adjusted operating profit, service revenue and free cash flow – cover the key financial elements of the strategy (revenue stimulation, cost control and overall growth in EMAPA)
  • Total communications revenue continues to focus attention on this important element of the strategy
  • Customer delight – satisfied customers directly impact our key financial metrics
  • Target bonus is 100% of salary earned over the financial year, with 200% maximum available for exceptional performance
  • The Remuneration Committee reviews and sets the GSTIP performance targets on an annual basis
Bonus deferral arrangement
2007 Deferred Share Bonus (“DSB”)
  • Two year cumulative adjusted free cash flow
  • The target for the June 2007 award was a hurdle of 85% of the Long Range Plan target over the 2008 and 2009 financial years
  • If executive directors choose to defer their annual bonus into shares, then they will be eligible for an award of matching shares under the DSB arrangement equal to 50% of the value of the deferred bonus conditionally awarded in shares
  • The matching award is earned by achievement of the performance target over the following two years
  • Incentivises the purchase of shares to meet share ownership guidelines. This acts as a key part of alignment with shareholders’ interests
  • The entire bonus must be deferred into shares to participate in the DSB
  • 50% of the value of the deferred bonus conditionally awarded in shares
Long term incentives
2007 Global Long Term Incentive Plan (“GLTI”) share options
  • Three year cumulative growth in adjusted EPS
  • For the July 2007 grants, the performance range was 5% – 8% p.a.
  • As in previous years, 25% vests at threshold (5% p.a.) with a straight line up to 100% vesting at maximum (8% p.a.)
  • In setting this target, the Remuneration Committee took the internal Long Range Plan, market expectations and market practice into account
  • GLTI share options have a ten year term and will vest after three years, subject to performance achievement. To the extent that the performance target is not met, the options will lapse (re-testing is not permitted)
  • The share options incentivise underlying business growth through earnings and only deliver value if the share price increases. The price at which shares can be acquired on option exercise will be no lower than the market value of the shares on the day prior to the date of grant of the options
  • Annual grants are made in July
  • The number of shares granted are based on expected values
  • For the Chief Executive, the expected value is 75% of base salary
  • For the other executive directors the expected value is 60% of base salary
2007 GLTI performance shares
  • Relative Total Shareholder Return (“TSR”) against the top 50% of companies in the FTSE Global Telecommunications Index by market capitalisation
  • 25% vests for achieving median performance in the comparator group with a straight line up to 100% vesting for achieving upper quintile performance relative to the comparator group
  • Awards will vest to the extent that the performance condition has been satisfied at the end of the three-year performance period. To the extent that the performance target is not met, the awards will be forfeited
  • The performance shares focus on shareholder alignment through the TSR performance condition and through the delivery of the award in shares
  • Annual grants are made in July
  • The number of shares granted are based on expected values
  • For the Chief Executive, the expected value is 175% of base salary
  • For the other executive directors expected value is 140% of base salary
Note:
(1) GSTIP targets are not disclosed as they are commercially sensitive.
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