Vodafone 2002 Annual Report Download - page 63

Board’s Report to Shareholders on Directors’ Remuneration Vodafone Group Plc 61Annual Report & Accounts and Form 20-F
target performance for awards granted in June 2001 to executive directors is
28% of salary and the maximum is 75% of salary.
The LTIP awards granted in 1998 vested in full during the year. Details are given
in the table on page 65.
The previously disclosed special bonus awards of restricted shares that were
awarded in 2000 to Sir Christopher Gent, Julian Horn-Smith and Ken Hydon vest
by reference to the achievement of EBITDA growth targets over the two years
1 April 2000 to 31 March 2002. These targets have been achieved and the
awards have vested in full. The initial value of these awards were £5 million for
Sir Christopher Gent and £2 million for Julian Horn-Smith and Ken Hydon. Based
on the share price as at 24 May 2002, the pre-tax value of these awards are
now £1.8 million and £0.7 million, respectively.
Executive share options
Executive directors were eligible to receive a grant of executive options if they
held unexercised executive share options worth in aggregate less than four times
salary at grant. The normal annual grant was up to one times salary. Options
were granted at market value under the Vodafone Group 1999 Long Term Stock
Incentive Plan. Options are exercisable subject to achievement of a performance
target. The performance target for options granted in the year to 31 March 2002
requires adjusted earnings per share over a three year performance period to be
at least 3 percentage points above the growth in the UK Retail Prices Index per
annum for the same period.
Global market-related remuneration (“GMR”)
GMR was a core element of the previous remuneration policy through which
additional share options were granted under the Vodafone Group 1999 Long
Term Stock Incentive Plan to executive directors to take their total remuneration
up to globally competitive levels.
The size of the GMR option grant was determined by a calculation that is
based upon:
(i) the three year historical TSR performance of the Company relative to global
peer group companies;
(ii) the remuneration of the chief executive officer of those companies;
(iii) the sum of the local market-related remuneration which is made up of basic
salary, STIP, LTIP award and the executive share option scheme allocation; and
(iv) the Black-Scholes formula.
The Company’s three year TSR performance relative to the global peer group
companies gives a relative performance ranking for the Company. This ranking is
applied to the list of remuneration levels for all peer group company chief
executive officers, which gives the stretch target remuneration for the Chief
Executive. The stretch target GMR level for the Chief Operating Officer is 65%,
and for other executive directors is 50%, of the Chief Executive’s stretch target
GMR level. The sum of the local market-related remuneration package is
deducted from this GMR level and the difference is adjusted by the Black-
Scholes formula to give the face value of shares to be placed under option.
This value is divided by the market share price to determine the size of the GMR
option grant. The market price on the day prior to grant is the option price.
Details of the GMR option awards are given in the table on page 66.
Global peer group
The global peer group for the 2001 GMR awards comprises UK and non-UK
telecommunications and high technology companies selected primarily on the
basis of comparable sales and profits results and for which remuneration data
is available. The original group comprised: Alltel, America Online, Applied
Materials, AT&T, BellSouth, British Telecom, Cable & Wireless, Cisco Systems,
EMC, Hewlett Packard, IBM, Intel, Lucent, SBC Communications, Sun
Microsystems and Verizon Communications. The group will be adjusted on a
consistent basis over the performance period to reflect corporate events such as
takeovers of peer group companies.
GMR performance targets
For options granted in July 2001 there is a dual performance target. Up to 50%
of the option is exercisable for achievement of EBITDA targets and up to 50% is
exercisable dependent on TSR performance relative to companies comprised in
the global peer group. Performance is measured over three, four and five
financial years from grant. For options to be exercisable in full, compound
EBITDA growth of at least 30% per annum and TSR equal to or better than the
top 10% of companies in the peer group will have to be achieved. No part of the
option is exercisable if compound EBITDA growth is less than 14% per annum
and if TSR performance is in the bottom half of the peer group.
Pensions
Sir Christopher Gent, Julian Horn-Smith, Ken Hydon and Peter Bamford are
contributing members of the Vodafone Group Pension Scheme, which is a
scheme approved by the Inland Revenue.
Peter Bamford, whose benefits under the scheme are restricted by Inland
Revenue earnings limits, also participates in the defined contribution Vodafone
Group Funded Unapproved Retirement Benefits Scheme to enable pension
benefits to be provided on his basic salary above the Inland Revenue earnings
cap. Thomas Geitner participates in the Essener Verband Retirement Scheme.
Further details of the pension benefits earned by the directors in the year to
31 March 2002 can be found on page 64.
Other remuneration matters
Share ownership guidelines
Sir Christopher Gent, Julian Horn-Smith and Ken Hydon each committed in July
2000 to acquire and maintain substantial minimum levels of shareholding in the
Company for the next three years, subject to them remaining directors for that
time. Sir Christopher Gent undertook to acquire and maintain a shareholding of
2 million shares within twelve months. Julian Horn-Smith and Ken Hydon each
undertook to maintain a holding of not less than 500,000 shares. The directors
have complied with these undertakings.
All-employee share incentive schemes
GEM Options
In July 2001 share options were granted to all employees of subsidiary companies
in all countries other than the UK, US and Sweden. A key objective of the grant was
to promote the Vodafone brand, vision and values across the enlarged group by