Directors’ report (continued)
Remuneration report (continued)
Service agreements
Managing Director’s contract
In September 2005, Wattyl agreed with Dr John Nolan that it would extend the
term of his employment and vary his remuneration upon
receiving advice from an external remuneration consultant and the Board determining
financial and non financial targets for Dr Nolan's
variable remuneration arrangements for FY2006.
The terms of Dr Nolan's employment were formally confirmed in January 2006.
The term of Dr Nolan's employment as Managing Director
has now been increased from 12 months to three years ending in May 2008. However,
the Board retains the right to terminate Dr Nolan's
employment at any time by giving one month's notice in writing, and there is
no entitlement to severance or redundancy payments on
termination.
Dr Nolan's fixed remuneration for the FY2007 was increased by 4% effective
October 1, 2007, following a market review of
competitiveness and as part of the annual review process. While Dr Nolan's
employment with Wattyl continues, his fixed remuneration is
subject to annual review in accordance with Wattyl's annual review process.
Dr Nolan is eligible for an incentive scheme of up to 150% of his fixed remuneration
for each financial year in which he is employed by
Wattyl. The incentive scheme has two components: a short term incentive opportunity
of up to 75% of his fixed remuneration which is
payable on the completion of each financial year; and a deferred incentive
award valued up to a further 75% of his fixed remuneration.
Owing to the short term nature of Dr Nolan’s contract, Long Term Incentives
under the WESOP plan cannot be included. However, under
the deferred annual incentive award, Dr Nolan can be rewarded for improvement
in the Company’s performance and shareholder value as
reflected in the share price over the three year period of the contract. The
deferred incentive award is in the form of notional shares which
will accumulate during Dr Nolan’s employment and will be converted to
a cash payment upon termination of employment.
Dr Nolan is not entitled to any payment if he elects to resign or if his employment is terminated without notice.
During Dr Nolan’s employment, the amount of any cash payment or the
award of notional shares made under the incentive arrangement
is linked to performance against financial and non financial targets determined
by the Board.
For the FY2007, the financial targets were based on EBIT performance and a
reduction in working capital and the non financial targets
were based on cost reduction, delivery in full on time (DIFOT) performance,
safety, development of a brand, marketing and manufacturing
strategy and core business values.
Key Management Personnel
The service contracts outline the components of remuneration paid to the Key
Management Personnel.
Each Key Management Personnel has an open ended contract with remuneration
and other terms of employment formalised in a
service agreement. The agreements include a notice period of 12 months for
the Finance Director, and three months for the other key
management personnel.
The terms of the Service Agreements allow for payment of termination benefits
on early termination by the employer, other than for gross
misconduct, equating to base salary inclusive of superannuation for the remainder of the notice period. In addition, the Finance Director
is entitled to a pro-rata share of the annual bonus, subject to the objectives
having been met.
For LTIs, participants may be entitled to exercise their Rights when their
employment ceases before the Exercise Date only in the following
circumstances:
– From the date on which employment ceases due to death or incapacity;
– From the exercise date when employment ceases due to redundancy or
retirement;
– In other circumstances, only if and to the extent permitted by the
Board and subject to such conditions as the Board may determine.
In all cases, the required performance hurdle will be applied and the number
of Rights which a participant will be able to exercise under the
hurdle in these circumstances will be reduced pro-rata to reflect the proportion
of the performance period actually served.
Share-based compensation
Non-executive directors are paid a fee for their services as per the table on page 31 and receive no other benefits including performance
rights or options.
Options over unissued ordinary shares of the company and performance rights
granted to any of the executive directors or the key
management personnel of the Group as remuneration were as follows:
Number of options or
Number of performance rights performance rights vested
Name granted during the year during the year
2007 2006 2007 2006
Directors of Wattyl Limited
U.B. Meyerhans
Other key management personnel of the Group
J. Foyle
M. Robb
R. Roberts
P. Breeze
Other executives
J. Waldegrave
J. Neumann
81,932
41,895
38,728
34,642
–
39,083
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The performance rights were granted under the Wattyl Executive Stock Ownership Plan on 23 November 2006.
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