Annual incentive plan The annual incentive plan is designed to incentivise year

Annual incentive plan the annual incentive plan is

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Annual incentive plan The annual incentive plan is designed to incentivise year on year delivery of short term performance goals that are determined by pre-set stretching targets and measures agreed by the remuneration committee with reference to the annual operating plan. The remuneration committee determines the level of performance achieved based on Diageo’s overall financial performance at the financial year end. The business results for the year ended 30 June 2010 are described in the Business review. The targets for the year ended 30 June 2010 were a combination of measures including net sales, profit before exceptional items and tax and free cash flow. These measures focus on key drivers of Diageo’s growth strategy while supporting sustainability and the underlying financial health of the company. For the first time, the executive directors were also measured against a set of individual business objectives (IBO) that were relevant to their specific area of accountability. These were determined with reference to a set of collective business priorities that support the long term growth and sustainability of the business. Profit and sales targets were exceeded and free cash flow targets were significantly exceeded. The committee evaluated the performance of the chief executive and chief financial officer against their specific IBOs and concluded that the objectives were exceeded. The overall level of performance achieved resulted in an annual incentive plan award equating to 171% of 107
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Directors’ remuneration report (continued) base salary for the chief executive and 173% for the chief financial officer. The actual awards received by the executive directors are shown in this report in the table ‘Directors’ remuneration for the year ended 30 June 2010’. Long term incentive plans (LTIPS) Current long term incentives are a combination of share options under the SESOP and performance share awards under the PSP and are designed to incentivise executive directors and senior managers to strive for long term sustainable performance. These awards are made on an annual basis with the level of award considered each year in light of individual and business performance. Awards made under both sets of plans are subject to performance conditions normally measured over a three-year period. The regular review of the performance measures and the vesting schedule used in each plan are designed to ensure that the LTIPs continue to support the business objectives and are in line with current best practice. All of Diageo’s share plans operate within the Association of British Insurers’ dilution guidelines for share-based remuneration. Senior executive share option plan 2008 (SESOP 2008) Options granted under the SESOP 2008 are subject to a performance condition based on compound annual growth in adjusted EPS over a three-year period, with growth targets set by the company’s remuneration committee for each grant.
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