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CORPORATE
GOVERNANCE
CEO/Executive Director and Key Management
Personnel Remuneration
The ERCC seeks to ensure that the level and mix of remuneration
of the CEO and key management personnel are competitive and
relevant, aligned with shareholders’ interest and promote
long-term success of the Group.
Remuneration for the CEO1 and key management personnel
comprises a fixed component, variable cash component,
share-based component and market-related benefits:
A. Fixed Component:
The fixed component comprises the base salary, Annual
Wage Supplement and fixed allowances.
B. Variable Cash Component:
The variable cash component includes the Annual Variable
Bonus and Economic Value Added (EVA) Incentive Plan.
Annual Variable Bonus (AVB)
The AVB is a cash-based incentive for CEO and key
management personnel, which is linked to the achievement
of annual performance targets.
Individual performance objectives are set at the beginning of
each financial year. The objectives are aligned to the overall
strategic, financial and operational goals of the Group, and
are cascaded down to a select group of key management
personnel using scorecards, creating alignment between the
performance of the Group, the Company and the individual.
While the performance objectives are different for each
executive, they are assessed on the same principles across
the following four broad categories of targets:
• Business
• Customer
• Process
• People
The target AVB for the CEO and key management personnel
is pre-set at a fixed percentage of their annual base salary,
and is adjusted based on the Group performance and the
achievement of individual performance targets at the end
of performance year. The final AVB payout can range from
0 to 1.5 times of the target payout.
EVA Incentive Plan (EIP)
The EIP rewards employees for sustainable shareholder
value creation over the medium term achieved by growing
profits, deploying capital efficiently and managing the risk
profile and risk time horizon of the business. A portion of the
annual performance-related bonus of the key management
personnel is tied to the EVA achieved by the Group in the
financial year.
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
1. As executive Director, the CEO is remunerated as a key management personnel of StarHub. He does not receive Directors’ fees for his Board directorship
with StarHub.
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 FY2015 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 FY2015 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 65% of the conditional
award. For the performance measure of Relative TSR, the
achievement factor ranges from 0 to 1.5 times of 35% of the
conditional award.
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 2013 to 2015.
Restricted Stock Plan (RSP)
The RSP is established with the objective of motivating
managers and key talent to strive for sustained long-term
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.