annual report 2009 - Aer Lingus

Remuneration Committee Report Aer Lingus Group Plc – Annual Report 200939Performance related bonusesPerformance related bonuses are payable to executive Directorsfor meeting clearly defined and stretching annual profit targets andstrategic goals set and monitored by the Remuneration Committee.No bonuses were awarded in 2009. In previous years, deferral periodshave not been required in respect of any performance related bonuseswhich have been paid.Long-Term Incentive Plan (“LTIP”)Conditional awards of shares are granted to executive Directorsunder the Company’s LTIP. The LTIP is a share-based performanceaward scheme which provides for the vesting of shares subject tothe achievement of minimum performance objectives, as specifiedby the Remuneration Committee. In order to promote the long-termsustainability of the Company, the performance conditions are measuredover a three-year period and include both a financial criteria and anon-financial criteria which is linked to the Company’s long-term valuecreation. The performance objectives for the awards granted in 2007,2008 and 2009 consist of both Total Shareholder Return (TSR) andCompound Growth in EBITDAR. TSR measures the change in valuefor shareholders arising from changes in the Company’s share priceplus the returns that would arise for shareholders if dividends werereinvested in the Company’s shares on the relevant ex-dividend date,net of corporation tax and but before income tax. For 2007, 2008 and2009 the TSR element is assessed over a three year period against apeer group of European airlines. For 2007, 2008 and 2009 the EBITDARelement is assessed over a three year period by reference to the EBITDARfigures in the Company’s Consolidated Financial Statements. The maximumaward under the LTIP is 150% of base salary. The maximum numberof shares that can vest is set at 125% of the maximum salary multiple.Awards under the LTIP can be made on an annual basis at the discretionof the Remuneration Committee. There is no requirement in the LTIPfor shares to be held for a period following vesting.Share Option Grant and Conditional Share Awardin respect of Mr MuellerAs announced on 9 September 2009, Mr Christoph Mueller wasgranted share options in respect of 1,500,000 shares in the Companyand a conditional award of 500,000 shares in the Company. The shareoptions will vest and become exercisable provided the closing priceof the Company’s shares remain above certain fixed prices (detailedbelow) for at least 25 of the 40 days prior to certain specific dates andfurther details relating to the options are set out in Table 2.4 below.The Remuneration Committee selected performance criteria which itbelieves are sufficiently stretching to reasonably incentivise Mr Muellerto deliver value for Aer Lingus shareholders.On 8 September 2009, Mr Christoph Mueller was granted a conditionalaward in respect of 500,000 shares. The conditional share award willvest on 1 September 2011, subject to Mr Mueller remaining in theemployment of the Group on that date. Benefits under theconditional share award will not be pensionable.Service contractsThe Company has a service contract or letter of appointmentwith all Board members.Executive DirectorsAll service contracts with executive Directors have notice periodsof 12 months or less and comply with the recommendations inregard to payments on termination in paragraph B.1.6 of the 2008FRC Combined Code and paragraph 3.5 of the EU Commission 2009Guide on Remuneration.Non-executive DirectorsThe terms upon which each non-executive Director has beenappointed are set out in letters of appointment which reflect theform recommended by the 2008 FRC Combined Code. It is theCompany’s policy that each non-executive Director will be appointedfor a fixed period not exceeding three years (with the potential fora second three year term), subject to satisfactory performance andre-election at any Annual General Meeting where this is required.None of the non-executive Directors is a party to any service contractwith the Company that provides for benefits upon termination.Employee Share ParticipationThe Group operates a Revenue approved share ownership planconsisting of a Revenue approved employee share ownership trustand a Revenue approved profit sharing scheme. See Note 28 to thefinancial statements for more details.Directors’ remunerationDisclosures regarding Directors’ remuneration have been drawn upon an individual Director basis in accordance with the requirementsof both the Combined Code and the Irish Stock Exchange.Directors pension benefitsInformation regarding the pension benefits of the Directors areoutlined in Table 2.2. The Company is required to make acontribution at a rate of 25% of basic salary to pension arrangementsas are agreed with Mr Christoph Mueller. These pensionarrangements have been provided for but not yet implemented.Directors’ shareholdingsThe interests of the Directors in office at 31 December 2009in the shares of the Group are outlined in Table 2.3.