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REMUNERATION REPORT (CONT.)
• performance linkage and alignment of executive
compensation;
• transparency; and
• acceptability to shareholders.
Alignment to shareholders’ interests:
• has economic profit as a core component of plan design;
• focuses on sustained growth in shareholder wealth,
consisting of dividends and growth in share price, and
delivering constant return on assets as well as focusing executive has a target STI opportunity depending on the
the executive on key non-financial drivers of value; and accountabilities of the role, impact on the organisation
• attracts and retains high calibre executives.
Alignment to executives’ interests:
• rewards capability and experience;
• reflects competitive reward for contribution to growth
in shareholder wealth;
• provides a clear structure for earning rewards; and
• provides recognition for contribution.
The framework provides a mix of fixed and variable
compensation, and a blend of short and long term
incentives. As executives gain seniority within the
consolidated entity, the balance of this mix shifts to a
higher proportion of ‘’at risk’’ rewards.
The executive remuneration and reward framework has
four components:
• base pay and benefits;
• short term performance incentives;
• long term incentives through participation in the
Specialty Fashion Group Limited Employee Long Term
Incentive Plan; and
• other remuneration such as superannuation and long
service leave.
The combination of these comprises the executive’s total
remuneration.
Base pay and benefits
Executives receive their base pay and benefits structured
as a total employment cost (‘TEC’) package which may be
delivered as a combination of cash and prescribed non-
financial benefits at the executives’ discretion. Executives
are offered a competitive base pay that comprises the
fixed component of pay and rewards. Base pay for
executives is reviewed annually to ensure the executive’s
pay is competitive with the market. An executive’s pay is
also reviewed on promotion.
Executives receive benefits including car allowances.
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Short term incentives
Should the Group achieve pre-determined targets set
by the Nomination and Remuneration Committee, then
short term incentives (‘STI’) are available for executives
and employees. Cash incentives (bonuses) are payable
following finalisation and announcement of the full year
audited results. Using value creation targets ensures
variable awards are only available when value has been
created for shareholders and when profit is consistent
with the business plan. The incentives are leveraged for
performance above the threshold to provide an incentive
for executive and employee out-performance. Each
or business unit performance. The annual STI target
payment is reviewed annually.
The Board considers the appropriate targets and key
performance indicators (‘KPIs’) to link the STI plan and
the level of payout if targets are met. This includes setting
any maximum payout under the STI plan, and minimum
levels of performance to trigger payment of STI.
For the year ended 30 June 2015, the KPIs linked to
short term incentive plans were based on group and/
or individual personal objectives, where appropriate to
the executive’s role and their impact on the consolidated
entity’s performance. The KPI’s required performance
in maximising sales and margins, reducing operating
costs and achieving specific targets in relation to return
on assets, as well as other key, strategic non-financial
measures linked to drivers of performance in future
reporting periods.
The short term incentive payments are adjusted in line
with the degree of achievement against the target
performance levels.
Long term incentives
Information on Specialty Fashion Group Limited’s Employee
Long Term Incentive Plan is set out later in this note.
Use of remuneration consultants
In October 2011, Specialty Fashion Group Limited’s
Nomination and Remuneration Committee engaged
Mercer (Australia) Pty Ltd (‘Mercer’) to review its existing
remuneration policies and provide recommendations in
respect of both short term and long term incentive plan
design. Under the terms of the engagement, Mercer
provided remuneration recommendations as defined in
section 9B of the Corporations Act 2001 and was paid
$38,850 for these services. Remuneration consultants
were not engaged during the year ended 30 June 2015.
Voting and comments made at the Company’s
2014 Annual General Meeting (‘AGM’)
At the 2014 AGM, 95.8% of the votes received
supported the adoption of the remuneration report for