Oil Search has a Remuneration Policy based upon “Reward for Performance”, where each individual employee’s remunerationis differentiated based on various measures of corporate, team, and individual performance.
The objectives of the Oil Search remuneration policy are to:
Remuneration for non-executive directors is established using advice from external independent consultants and takesinto account:
The Remuneration and Nominations Committee (the Committee) of the Board provides advice and recommendations to the Boardregarding remuneration matters. The Committee’s responsibilities for remuneration include:
The Committee must comprise at least three non-executive directors.
Oil Search’s remuneration structure comprises four elements:
The mix of remuneration elements for individual employees is dependent on their level and role within Oil Search, with the proportion of “at risk” remuneration (STI and LTI elements) increasing with greater seniority.
The ranges of TFR payable for all Company positions in the organisation, including those for key management personnel are80% – 120% of competitive benchmarks. An independent external remuneration consultant engaged by the Committee providescompetitive benchmarks for key management personnel.
For other roles in the organisation, remuneration information is derived from annual job matching surveys conducted byindependent third parties.
An annual TFR review budget, agreed by the Board each year, is used to adjust TFRs paid to individuals to ensure that their fixed remuneration remains competitive for their specific skills, competence, and value to the Company.
Each employee has the opportunity to earn an annual STI which is based on a percentage of his or her TFR. The STI percentage increases with seniority to ensure a higher proportion of remuneration is “at risk” for our senior employees. The actual STI earned by an employee will be based on a mix of achievement against specific company performance hurdles and his or her individual performance.
At the start of each year, the Board determines the hurdles and target levels of performance required to earn an annual STI. The hurdles are derived presently from:
The size of any STI is thus directly related to corporate performance through a range of key measures that affect Shareholder Value.
Provided that they have demonstrated an acceptable level of personal performance, each employee also has the opportunity to participate in the Oil Search Long Term Incentive Plan (LTIP). Following changes to Australian taxation legislation with respect to employee share plans, the existing Oil Search LTI programs were reviewed in 2010. As a result of the review, the existing Employee Share Option Plan (ESOP), Performance Rights Plan (PRP) and Restricted Share Plan (RSP) were combined under the Oil Search Long Term Incentive Plan (LTIP).
The Oil Search LTIP allows the Board the flexibility to grant employees:
For full details of Oil Search's Remuneration Report, the role of the Committee, incentive plans and the remuneration of directors and key management personnel, please refer to the Company's current Annual Report.