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CIMIC Group Limited Annual Report 2016 |
Remuneration Report
REMUNERATION – Executive Chairman
POLICY AND APPROACH
The Board approves the Executive Chairman’s remuneration arrangements following consideration by the Remuneration and Nomination
Committee.
The Board considered Mr Fernández Verdes’ role as both CEO and Executive Chairman
1
of CIMIC and CEO of HOCHTIEF AG and structured
his remuneration arrangements differently from other Senior Executives, but consistent with the Group’s remuneration framework and
focused on achieving long-term financial returns.
COMPONENTS
The key components of Mr Fernández Verdes’ remuneration are:
•
an annual allowance as a contribution to his living expenses. In accordance with the terms of his Executive Service Agreement (ESA),
effective 1 January 2017, the gross allowance payable increased from $522,132 to $528,920, representing an increase in line with the
Consumer Price Index (CPI) of 1.3%;
•
a one-off award of Share Appreciation Rights (SARs) in 2014; and
•
the payment of a discretionary bonus at any time during the course of employment following the variation to his ESA by the Board on
3 December 2016.
Mr Fernández Verdes receives remuneration from HOCHTIEF AG in consideration for his employment as HOCHTIEF AG CEO. Details of this
remuneration is available in the HOCHTIEF AG Annual Report at
.
Summary of one-off award to Mr Fernández Verdes
Mr Fernández Verdes was granted a one-off award of 1,200,000 SARs in 2014 in accordance with the terms of his ESA. As the SARs form
part of his remuneration, they are granted at no cost to him. The SARs do not carry any rights to dividends or voting.
The SARs entitle Mr Fernández Verdes to receive a cash payment reflecting the increase in value of the share price of CIMIC from a base
price of $17.71 (being the VWAP of fully paid ordinary shares in CIMIC traded on the ASX over the 30-day period before Mr Fernández
Verdes’ appointment as CEO
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on 13 March 2014) to the price at close of trading on the last trading day before the SAR is exercised, with a
maximum payment per SAR of $32.29.
The SARs vested in full on 13 March 2016 and are exercisable for 3 years from the date of vesting. No more than 40% of the SARs can be
exercised each year for the first 2 years after vesting, and any remaining SARs can be exercised in the final year of the exercise period. No
vested SARs have been exercised as at 31 December 2016.
The SARs will lapse on 13 March 2019 unless they have been exercised or forfeited before that date.
Mr Fernández Verdes would have forfeited any unvested or vested but unexercised SARs if he had ceased to be the CEO of CIMIC before
31 December 2014. Further, Mr Fernández Verdes will forfeit any unvested or vested but unexercised rights if he does not remain a
member of either the Executive Board or the Supervisory Board of HOCHTIEF AG for the period from appointment to 13 March 2017 or if
his employment is summarily terminated. If Mr Fernández Verdes had ceased employment with CIMIC prior to vesting but after 31
December 2014 in any other circumstance (ie, he was not summarily terminated) but remained a member of either the Executive Board
or the Supervisory Board of HOCHTIEF AG, any unvested SARs would have remained on foot and vested and become exercisable in the
ordinary course.
Details of the one-off award of SARs granted to Mr Fernández Verdes in the 2014 Financial Year are set out in the following table.
Grant date
Granted
(number)
30-day
VWAP at
start of
vesting
period (A$)
Test date
(vesting date)
Vested
(%)
Forfeited
(%)
Fair
value
per
SAR
1
(A$)
Maximum
potential
value of grant
as at 31 Dec
2016
2
(A$)
Total
maximum
potential
value of
grant
3
(A$)
10 June 2014
1,200,000
17.71
13 March 2016
100
-
16.76
8,270,400
38,748,000
1.
The fair value of the SARs is determined at the date of grant (in accordance with
AASB 2 Share-based payment
) and was re-evaluated on 31
December 2016. The amount included as remuneration expense in accordance with
AASB 2
is not related to, or indicative of, the benefit (if any) that
Senior Executives may ultimately realise should the equity instruments vest.
2.
The maximum potential value of the grant as at 31 December 2016 is calculated by deducting the exercise price ($17.71) from the closing share price
on 31 December 2016 ($34.94) and multiplying this by the proportion of SARs that were available to exercise at that date (40%).
3.
The maximum potential value is calculated as the number of rights multiplied by the maximum payment per SAR ($32.29).
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On 18 October 2016, Mr Valderas was appointed as CEO in place of Mr Fernández Verdes. Mr Fernández Verdes continues in his capacity as Executive
Chairman.
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