Directors’ Report continued
The number of shares to be issued to the Sales
Director is determined by multiplying the percentage
amount calculated in accordance with the above by
the maximum amount of 25,000 shares.
3.2
Explanation as to Why the Performance
Condition was Chosen
3.2.1
Rationale for STI Payment Performance Conditions
Actual NPAT performance relative to budget was
selected as the key performance condition as it is
simple, readily identifiable and measurable and is a key
driver of shareholder returns.
It also ensures that the incentive payment is
aligned with the business strategy and objectives
of the Company. The budget is approved on an
annual basis by the Board and targets are set by the
Board at levels designed to enhance the performance
of the Company and have regard to the Company’s
business plans and market conditions. Individual
performance was selected as a secondary
performance condition to ensure that Senior
Executives have clear objectives and performance
indicators that are linked to the business’ performance,
with the opportunity for excellence to be rewarded
and vice versa.
3.2.2 Rationale for LTI and SLTI Plan
Performance Conditions
In determining the performance conditions for the
Company’s LTI plan, the Board has been mindful that
EPS growth is the key driver of shareholder value,
influencing both share price and the capacity to pay
increased dividends. Growth in EPS is simple to
calculate and readily identifiable. Allocating shares to
Senior Executives based on EPS growth ensures that
they are striving to continually improve the Company’s
financial performance and as they increase their
shareholding in the Company through the LTI and
SLTI plan, their personal financial interests become
even more directly aligned with those
of the Company’s shareholders in general.
3.3
Summary of the Methods Used in Assessing
Whether the Performance Conditions are
Satisfied and an Explanation as to Why Those
Methods Were Chosen
3.3.1 Short Term Incentive Payments
(a)
Actual NPAT is calculated by the Company at
the end of the relevant year and verified with
reference to the Company’s audited financial
statements before any payment is made. This
method was chosen to ensure transparency.
(b)
In terms of individual performance, the person to
whom the Senior Executive reports assesses that
executive’s contribution by reviewing his or her
individual objectives, key tasks and performance
indicators and the extent to which they have
been achieved.
These individual objectives are set at the start
of each financial year and formally reviewed
every six months. The Board also overviews
performance assessments for each of the
members of the Company’s Executive
Committee (these individuals appear on
pages 22 and 23 of the Company’s Annual
Report). This method was chosen to provide
an objective assessment of the Senior
Executive’s individual performance.
3.3.2 Long Term Incentive Plans and Special
Long Term Incentive Plans
Growth in earnings per share is calculated by the
Company at the end of the relevant period and
verified with reference to the Company’s audited
financial statements before any award is made. This
method was chosen as it is an objective test, is easy to
calculate and ensures transparency.
4.
Other Remuneration Related Items
During the financial year ended 30 June 2006, the
Company established a Staff Share Acquisition Plan.
The plan is open to all employees including Senior
Executives and enables them to purchase up to
$1,000 of Blackmores’ shares tax free each year with
money that would have otherwise been paid as Profit
Share (refer to Section 3.1.1(b) of this Directors’ Report).
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