Remuneration report
How variable remuneration is structured
Short Term Incentive (STI)—how does it work?
Description
Eligible permanent employees, including the CEO and other Executive KMP, participate in the annual STI plan, which puts a proportion of remuneration ‘at risk’ subject to meeting specific pre-determined Group and individual performance measures linked to Group objectives.
Performance period
The performance period is the financial year preceding the payment date.
Opportunity
For ‘at-target’ performance, the CEO has the opportunity to receive an STI payment of 100% of TEC and all other Executive KMP have the opportunity to receive 67% of TEC. The minimum STI outcome is 0% (if targets are not met) and the maximum is capped at 150% of the ‘at-target’ STI opportunity, which is only awarded for exceptional performance. STI awards for the CEO and other Executive KMP are delivered 50% in cash and 50% is deferred into Transurban stapled securities for two years following the performance year. The deferred securities are subject to service conditions except in certain circumstances (refer to Cessation of Employment section below) and participate in dividends and/or distributions paid during the deferral period. The number of deferred securities allocated is determined by dividing the amount to be deferred by a 10- day Volume Weighted Average Price (VWAP) of Transurban securities over the 10 business days immediately preceding the STI deferred plan offer. The Board determines the total STI pool to be distributed. The total pool will not exceed 125% of the aggregate STI target opportunity for all participants. The pool is allocated to individuals based on individual and Group performance in accordance with the following formula: (Individual STI outcome % x Group outcome %). This approach is designed such that higher performing employees receive a greater portion of the Group STI outcome than those who do not perform as well and aligns individual performance with overall Group performance. Individual measures (KPIs) are unique to the individual’s area of accountability. Individuals have a clear line of sight to KPIs and are able to directly affect outcomes through their own actions. These measures are aligned to security holder returns and value creation. Executive KPIs consist of similar categories to those of the CEO (as disclosed on page 98 of this report). Group measures comprise the following categories: • Financials (55%), consisting of: – Proportional EBITDA 1 (40%): is one of the primary measures the Board uses to assess the operating performance of the Group. It reflects the contribution from individual assets to the Group’s operating performance and focuses on elements of the result that management can influence to drive improvements in short term earnings. This measure provides a better reflection of the performance of the Group’s assets than statutory EBITDA. – Proportional Net Costs 2 (15%): reflects management’s ability to influence the expenditure of the business. Strong cost management throughout the business drives an increase in proportional EBITDA and FCF and ultimately security holder value. – For STI purposes, both Proportional EBITDA and Proportional Net Costs, exclude significant events, specific major development and legal project spend, transaction and integration costs and the impact of unbudgeted new assets or divestments. • HSE (15%): measures focus on improving the Group’s HSE culture and reducing workplace injuries for employees and contractors, as well as customer safety. The HSE measure is a combination of lead indicators and lag indicators. – The ‘Lead’ HSE KPI focuses on enhancing HSE culture, behaviours and accountability at Transurban. – The ‘Lag’ KPIs focus on recordable incidents, planning and tracking, including injury and crash rates. • Customer and Delivery (15%): measures focus on customer outcomes and major project delivery. • Sustainability, Reputation and Leadership (15%): measures focus on our commitment to climate change action, Transurban’s reputation and people leadership and engagement. The Board assesses Group performance against Group Performance Scorecard. The Board confirms final outcomes for individual and Group performance and has discretion to adjust the performance conditions and outcomes. These methods for assessing performance are used because they provide the Board with discretion as to assessment of conditions and outcomes, with the use of an independent overlay where considered appropriate. If employment ceases before performance is assessed, generally there is no entitlement to receive any STI award. If employment ceases due to resignation or for cause before the end of the two-year restriction period, any unvested deferred securities will be forfeited, unless the plan rules provide otherwise, or the Board otherwise resolves. If employment ceases in other circumstances (`good leaver’), unless the Board determines otherwise, unvested deferred securities will remain on foot and subject to the original terms and the deferred securities may vest at the end of the deferral period. Grants prior to FY21: Fraudulent or dishonest behaviour will result in the forfeiture or clawback of any unvested awards. Further, at the discretion of the Board, awards are subject to forfeiture or clawback where there is a financial misstatement circumstance or the allocation of awards was made in error, on the basis of a misrepresentation or an omission, or on the basis of facts or circumstances that were later proven to be untrue or inaccurate (applicable to both STI and LTI plans). FY21 and future grants: In December 2019 Transurban adopted new Equity Incentive Plan Rules. Under the new Equity Plan Rules, in addition to the above, the Board has discretion to clawback vested securities or require the participant repay cash proceeds from the sale of vested securities. Circumstances for clawback have also been expanded to include: breach of duties or obligation to the Group, acts which have a negative impact on Transurban’s reputation, in circumstances where vesting is not justified or supportable and the possibility of an employee who departed as a ‘good leaver’ but then behaves inappropriately.
Payment and deferral
Annual pool
Performance measures
Vesting
Cessation of employment
Clawback
Footnotes on page 103
101
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