Page 111 - Annual Report 2014

Corporate governance
Under the plan, one-third of the accumulated EVA-based
bonus, comprising the EVA declared for the financial year and
the balance of such bonus brought forward from preceding
financial years (which comprises multiple years of incentive
dollars retained in the EVA bank), is paid out in cash each
financial year. The remaining two-thirds are carried forward in
the individual executive’s EVA bank. Amounts in the EVA bank
are at risk because negative EVA will result in a clawback of
EVA accumulated in previous financial years. This mechanism
encourages the CEO and key management personnel to work
for sustainable EVA generation and to adopt strategies that are
aligned with the long-term interests of the Group.
Based on the ERCC’s assessment that the actual performance
of the Group in financial year 2014 had partially met the
pre-determined targets, the resulting annual payout under EVA
was adjusted accordingly to reflect the performance
level achieved.
C. Share-based Compensation:
Performance Share Plan (PSP)
The PSP serves as a long-term incentive to motivate the
key management personnel to strive for superior performance
and to align their interests with that of shareholders.
Pursuant to the PSP, the ERCC has decided to grant contingent
awards on an annual basis, conditional on meeting targets
set for a three-year performance period. The performance
measures used in PSP grants during the financial year ended
31 December 2014 are:
• Relative TSR against the MSCI Asia Pacific
Telecommunications Index (including Japan); and
• Absolute Total Shareholder Return (TSR) against Cost
of Equity hurdles (i.e. measure of Wealth Added).
A minimum threshold performance is required for any
performance shares to be released to the recipient at
the end of the performance period. The actual number
of performance shares released will depend on the
achievement of set targets over the performance period.
For the performance measure of Absolute TSR, the
achievement factor ranges from 0 to 2.0 times of target.
For the performance measure of Relative TSR, the
achievement factor ranges from 0 to 1.5 times of target.
The final PSP award is conditional on the vesting of the
shares under the Restricted Stock Plan (RSP) which have
the same performance end period.
The Group has attained an achievement factor which
is reflective of meeting the pre-determined target
performance level for PSP awards granted based on the
performance period from financial years 2012 to 2014.
Restricted Stock Plan (RSP)
The RSP is established with the objective of motivating
managers and key talent to strive for sustained long-term
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growth and superior performance in the Group. It also aims
to foster a share ownership culture among employees within
the Group and to better align employees’ incentives with
shareholders’ interest.
Pursuant to the RSP, the ERCC has decided to grant
contingent awards on an annual basis, conditional on targets
set for a two-year performance period. The performance
measures, set based on the Group corporate objectives, are:
• Return on Invested Capital (ROIC); and
• Earnings before Interest, Taxes, Depreciation and
Amortisation (EBITDA)
A minimum threshold performance is required for any
restricted shares to be released to the recipient at the end
of the performance period. The actual number of shares
released will depend on the achievement of set targets over
the performance period, and will be determined by the ERCC
at the end of the performance period, capped at 150% of
the conditional award. The shares will be released in equal
tranches over two consecutive years.
The Group has attained an achievement factor which is
reflective of meeting the pre-determined target performance
level for RSP awards granted based on the performance
period from financial year 2013 to 2014.
D. Market-related Benefits:
The benefits provided are comparable with local market practices.
The details of the top five key management personnel
remuneration in bands of $250,000 and percentage terms for
the services rendered by them to the Group for the financial
year ended 31 December 2014, are set out in Table 3.
If the executive Director or any key management personnel of
StarHub is involved in fraud or misconduct, which results in
re-statement of StarHub’s financial results or financial loss to
StarHub, the Board may reclaim the unvested components of
remuneration from such executive Director or key management
personnel from all incentive plans for the relevant period, to
the extent such incentive has been earned but not yet released
or disbursed. The Board, taking into account the ERCC’s
recommendation, may decide whether and to what extent, such
recoupment of the incentive is appropriate, based on the specific
facts and circumstances of the case.
3. ACCOUNTABILITY AND AUDIT
Accountability
The Board provides a balanced and informed assessment of the
Group’s performance, position and prospects to shareholders in
the Group’s quarterly and full-year operating performance and
financial results which are released via SGXNET.
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