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Financial targets are set at three levels: a threshold level, which must be met before any STI is paid, a target level and a maximum level, above which the STI paid will remain constant. For FY18 the financial threshold is set at achieving 90% of target, with the exception of the Group EBIT threshold, which was set at 94% of target. The maximum financial level is set at 110% of target for the chief executive officer, executives and corporate senior management and 120% of target for operating senior management. Achievement of maximum performance against the financial targets can result in a payment of 150% of the relevant financial component of the STI. Personal targets Personal targets for the executives and senior management include people engagement, safety and customer net promotor score. In consideration of the refocus of the business in FY18, the chief executive officer’s objectives included people engagement, safety and business strategy and were approved directly by the chairman. Achievement of maximum performance against the personal targets can result in a payment of 150% of the relevant personal component of the STI, with the exception of the safety lead indicator targets which can result in a maximum payment of 100%. If the threshold financial (EBIT) target is not met, no personal component of the STI is payable. Target levels of STI opportunity range from 25% to 100% of base salary depending on the role. For the chief executive officer the target STI opportunity is set at 100% of base salary. In the event of a fatality or serious injury, the board has the discretion to adjust any or all of the STI payment. The board also has the discretion to require repayment of an employee’s STI for a period of up to three years where the Company’s financial statements were incorrectly reported, there is misconduct that causes a financial trading loss that has not been taken into account in the STI calculations or an error or misstatement has resulted in a material overpayment. Long-Term Share Scheme Long-term performance incentives are designed to align employee remuneration with financial outcomes for shareholders over the longer term. The Company has an employee long-term share scheme (ELSS), targeted at the employees most able to influence these financial outcomes. The scheme is a share-based scheme except in circumstances where, due to regulatory requirements, employees cannot participate fully or at all by way of shares. In such circumstances, the employee receives an equivalent economic entitlement which is paid partially or fully by way of a cash bonus entitlement. Participation in any year is by annual invitation at the discretion of the Company. Under the ELSS, participants purchase shares in the Company at the offer price with an interest-free loan. The offer price is established at market value at the commencement of the three year restrictive period. The shares are held by a trustee on behalf of participants until the end of that three year restrictive period. Where the performance criteria includes a relative total shareholder return (TSR) measure, the restrictive period is extended by twelve months when the criteria is not met at the end of the initial three year restrictive period. Provided certain performance criteria are met and participants remain employed with the Company throughout the restrictive period, a cash bonus is paid to meet the repayment of the interest-free loan and legal title in the shares is then transferred to the participants. To the extent that the performance criteria are not met or the participant ceases to be employed by the Company, the shares are forfeited and the proceeds used to repay the interest-free loan. Performance criteria The sole performance criteria for the 2017 ELSS grant is relative TSR. TSR performance is determined by benchmarking, by way of percentile ranking, the TSR performance of the group against the TSR performance for the same period of a comparator group. The comparator group used for the 2017 offer comprises Adelaide Brighton, Amcor, BlueScope, Boral, Brickworks, CSR, Downer EDI, GWA International, James Hardie, CIMIC, Reece, Sims Group, Spark and Steel & Tube. The TSR performance and resulting vesting entitlements are set out below: TSR percentile Percentage vesting entitlement < 50 Nil 50 50 50 – 75 50 – 100 linear pro-rata > 75 100 The board has the discretion to determine the extent to which any shares held in the ELSS should be transferred in any takeover, merger or corporate reconstruction.
107 Fletcher Building Limited Annual Report 2018
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