Vodafone 2002 Annual Report Download - page 61

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Board’s Report to Shareholders on Directors’ Remuneration Vodafone Group Plc 59Annual Report & Accounts and Form 20-F
The Company’s TSR performance will be compared to that of other companies in
the FTSE Global Telecommunications index over a three-year performance
period. Measuring The Company’s performance against the companies in this
index recognises the importance for shareholders that the Company outperforms
its sector.
Shares will vest only if the Company ranks in the top half of the table with
maximum vesting only if the Company is in the top 20%. Vesting will also be
conditional on the Remuneration Committee being satisfied that there has been
improvement in the underlying performance of the Company. Awards will lapse to
the extent that the performance condition has not been satisfied at the end of
the three-year performance period. The following graph illustrates the basis on
which the performance shares will vest:
The current constituents of the FTSE Global Telecommunications index,
(applicable to 2002 awards), excluding the Company, are:
Alltel Orange
AT&T Qwest Communications International
AT&T Wireless Services SBC Communications
BCE Singapore Telecommunications
BellSouth Sprint Corp-FON Group
BT Group Sprint Corp-PCS Group
China Mobile (Hong Kong) Swisscom
China Unicom Telecom Italia
Deutsche Telekom Telecom Italia Mobile
France Telecom Telefonica
Japan Telecom Telia
KDDI Telstra Corp
Nippon Telegraph & Telephone Verizon Communications
NTT Docomo WorldCom Inc-WorldCom Group
Olivetti
Share Options
Share options will be granted each year to executive directors. The Vodafone
Group Plc 1999 Long Term Stock Incentive Plan will be the vehicle for the
provision of these incentive awards. The price at which shares can be acquired
on option exercise will equal the market value of the shares on the day prior
to the date of grant of the options. Therefore the share price has to rise above
the price at which the option was granted before option exercise is of value to
the executive.
Exercise of the options will be subject to the achievement of a performance
condition. To focus executive directors on generating real cash flow and earnings
growth, EPS must grow by amounts in excess of the growth in the UK retail
prices index (“RPI”). EPS is defined as adjusted EPS before goodwill amortisation
and exceptional items. One quarter of the option award will vest for achievement
of EPS growth of RPI + 5% p.a. rising to full vesting for achievement of EPS
growth of RPI + 15% p.a. The Remuneration Committee’s advisers have
confirmed that these EPS targets are amongst the most demanding of those set
by large UK based companies. Options will have a ten-year term and vesting will
be after three years with the opportunity to measure performance again after
years four and five from a fixed base year. To the extent that the performance
condition has not been satisfied at the end of the five-year performance period,
the options will lapse. The following graph illustrates the basis on which share
options vest:
100%
80%
60%
40%
20%
0% 0% 20% 40% 60% 80% 100%
Performance Share Vesting Schedule
% of award vesting
Relative TSR Percentile vs FTSE Global Telecoms
100%
80%
60%
40%
20%
0% 0% 5% 10% 15% 20%
Share Option Vesting Schedule
% of options vesting
Annualised EPS Growth in excess of RPI