As the new Chairman of the Remuneration Committee, I am pleased to present the WorleyParsons Remuneration Report for the financial year ended 30 June 2016.
I would like to reaffirm that the Remuneration Committee is guided by the Company beliefs which aim to pay our executives competitively and based upon their contribution to the success of the business. This is explained further on page 34.
To provide shareholders with a clearer picture of our approach to remuneration and an improved reading experience, we have made a number of changes to our Remuneration Report this year, including the introduction of a new section in the report which contains key shareholder questions and answers, on pages 32-33.
KEY MANAGEMENT PERSONNEL CHANGES IN FY2016
Challenging conditions during FY2016 resulted in a decision being made to make no payment of short term incentives through the cash portion of the Combined Incentive to Executives. A grant of Share Price Performance Rights (SPPRs) was made during the year following the introduction of changes to the equity portion of the Combined Incentive Plan. The SPPRs provide Executives with a clear goal to increase the Company’s share price, increase motivation and retention of Executives and ensure we remain competitive in our remuneration practices. The outcome of the performance hurdles for the Long Term Incentive (LTI) Plan once again resulted in nil vesting as neither of the two equally-weighted hurdles achieved the minimum performance requirements.
REMUNERATION FOR FY2017
A review of Executive pay was completed, with particular attention given to the at risk component within the pay mix and alignment with our external peers. We have made no increases in Executives' Fixed Pay for FY2017. The Chief Executive Officer (CEO) has opted to retain his lower Fixed Pay following his request to reduce this by 10% from 1 July 2015.
For the fifth year, no changes were made to Non-Executive Directors' fees for FY2017. The Chairman has agreed to forgo his fee for FY2017.
The LTI Plan has not achieved the required performance hurdles for the last four years, this demonstrates the alignment of our Executive remuneration outcomes with shareholder returns. During FY2017, we will review the LTI Plan for FY2018 to ensure that it will motivate our Executives to deliver value to our shareholders over the long term. For FY2017, the LTI Plan will retain the relative Total Shareholder Return (TSR) hurdle as 50% of the FY2017 grant with a revision to the comparator group to reflect the Company’s current global competitors (see page 39). Given the importance of delivery of the Company's Realize our future strategy and the role that Executives will play in leading its implementation, the remaining 50% of the FY2017 grant will be subject to strategic performance hurdles. These performance hurdles will be subject to the achievement of cost reduction and net debt to EBITDA targets measured at the end of FY2018, both of which are key to the delivery of the strategy. A further two year restriction period will apply on the shares following the measurement of the targets. Details of performance against the targets will be disclosed retrospectively due to the commercially sensitive nature of the targets.
Lastly, I would like to highlight the change in composition of the Remuneration Committee from August 2016, so that it comprises myself, John Grill and Christopher Haynes. My thanks to Ron McNeilly for his contribution as Remuneration Committee member and John Green for his leadership as Chairman of the Remuneration Committee.
We hope that you will find the new format of the Remuneration Report useful, and welcome the views of shareholders on any of the items discussed within the report.
Chairman, Remuneration Committee