III. Remuneration components in detail
a. FIXED REMUNERATION
IAG provides market competitive fixed remuneration given the roles’ experience, skills, the internal relativities of IAG’s Executive team
and market pay levels for external comparator roles. Fixed remuneration is reviewed regularly using independent remuneration
benchmarking data. The appropriate market benchmark is determined considering organisation size, industry and geographic
location. For Australian-based Executives, positioning is determined by reference to a number of peer groups, including financial
services companies in the S&P/ASX 50 Index and companies that are of similar size to IAG. Relevant local market peer groups are
referenced for overseas based Executives.
The average fixed remuneration increase for the Executive team for the year ended 30 June 2015 was 1.5% effective September
2014. In August 2015, the Board endorsed management’s recommendation not to increase the annual fixed remuneration for the
Executive team for the 2016 financial year.
b. AT-RISK REMUNERATION
The Board strongly believes that the fundamental driver for executive remuneration should be long term financial performance that
generates value for IAG shareholders. The Board further recognises that executive remuneration is guided by regulation and market
forces and it benchmarks IAG’s executive remuneration to ensure IAG uses at-risk remuneration components to achieve its
remuneration and performance objectives.
i. Cash and deferred STI
Key details of the STI plan are shown below:
TABLE 3 - STI PLAN
Description
STI refers to the at-risk remuneration designed to motivate and reward for performance in a set
financial year.
Potential maximum STI
amount
The Group CEO can earn up to 150% of his annual fixed remuneration and members of the Executive
team can earn up to 120% of their annual fixed remuneration.
Performance measures
and rationale
Performance is measured against a balanced scorecard that uses goals set against financial and non-
financial measures (the balanced scorecard is discussed in more detail in table 5).
Financial measures make up 50% of the balanced scorecard objectives, with the remaining 50% based
on non-financial measures. This provides a balance between rewarding the achievement of financial
targets and non-financial objectives that drive the execution of IAG’s strategy.
The following table details the weighting of financial and non-financial performance measures for the
STI of the Group CEO and the Executive team in the year ended 30 June 2015.
ROLE
FINANCIAL MEASURES
NON-FINANCIAL
MEASURES
Group financial
targets
Division or business
financial targets
Group CEO
50%
N/A
50%
Divisional Executives
10%
40%
50%
Corporate Office Executives
40%
10%
50%
Testing of performance
measures
The Group CEO’s STI is recommended by the PARC based on his balanced scorecard performance and
is approved by the Board.
The amount of STI paid to members of the Executive team is recommended by the Group CEO to the
PARC based on the Executive team members' balanced scorecard performance and recommended by
the PARC for approval by the Board. The Board may apply discretion in determining the STI outcomes
to ensure they are appropriate.
Instrument
Two-thirds of the STI is paid as cash, with the remaining one-third deferred in the form of DAR that vest
over two years.
Key terms of the deferred
STI
Deferred STI is issued in the form of DAR, which are rights over IAG ordinary shares which are held by a
trustee. They are issued to Executives during the financial year at no cost, to the value of their deferred
STI amount. The number of DAR issued uses the face value of IAG ordinary shares at 30 June before
the grant date. Executives who participate in this plan become eligible to receive one IAG ordinary
share per DAR by paying an exercise price of $1 per tranche of DAR exercised, subject to their
continuing employment with the Group for a period determined by the Board. No dividend is paid or
payable for any unvested or vested and unexercised DAR. Dividends are retained by the trustee and
reinvested in the trust.
Forfeiture conditions
The Board retains the discretion to adjust the unvested portion of any awards. DAR will be forfeited if
the Executive resigns before the vesting date. When an Executive ceases employment in special
circumstances, such as redundancy, any unvested rights may be retained on cessation of employment,
subject to Board discretion.
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