The aim of the RC is to motivate and retain Directors and key executives without being excessive, and ensure that
the Company is able to attract and retain the best talent in the market to drive the Group’s businesses forward in
order to maximise long-term shareholders’ value.
According to its terms of reference, the responsibilities of the RC include:
•
recommending to the Board a framework of remuneration for the Board and key executives, such
recommendations to cover aspects of remuneration including but not limited to Directors’ fees, salaries,
allowances, bonuses, options and benefits in kind;
•
determining performance-related elements of remuneration to align interests of executive Directors and key
executives with those of shareholders and link rewards to corporate and individual performance; and
•
considering whether Directors should be eligible for benefits under long-term incentive schemes.
While none of the members specialise in the field of executive compensation, the members of the RC do possess
broad knowledge in this area and have access to external professional advice. The RC is competent in reviewing
and recommending to the Board the appropriate remuneration framework for the Board and key executives in
accordance with the terms of reference duly adopted by the Board.
The RC ensures that both the total remuneration as well as individual pay components, i.e. annual fixed cash, annual
performance incentives and the long-term incentives, are market competitive and are performance-driven.
The annual fixed cash component comprises the annual basic salary plus fixed allowances which the Company
benchmarks with the relevant industry market data, where available. The annual performance incentive variable
bonus is tied to the performance of the Company, business unit and individual employee. Performance conditions to
which entitlement to such annual and short-term incentives are met include benchmarking performance to industry
business operation expectations and performance that exceeds such expectations, as well as measuring performance
based on the Company’s financial performance vis-a-vis industry performance.
The Avi-Tech Employee Share Option Scheme (“
ESOS
”) is a long-term incentive plan. The ESOS mechanism
involves deferring incentive compensation over a time horizon to ensure that the employee focuses on generating
shareholder value over a longer term. Conditions to entitlement to such long-term incentive include assessment
and recognition of potential progressive performance and enhancement to asset value and shareholder value over
time, taking into consideration current and future plans of the Company.
For the financial year under review, the performance conditions for the short and long-term incentives were not
triggered.
The remuneration package of the Company’s only executive Director, the CEO, is based on terms stipulated in his
service contract. His remuneration includes a profit sharing scheme that is performance-related to align his interests
with those of the shareholders. The CEO’s service contract with the Company is for a fixed period.
The non-executive Directors are paid Directors’ fees based on their contributions and responsibilities on the Board
and Board committees. The recommendations made by the RC in respect of the non-executive Directors’ fees are
subject to shareholders’ approval at the AGM.
While the use of contractual provisions to reclaim incentive components of remuneration from executives in
exceptional circumstances of misstatement of financial results or of misconduct resulting in financing loss to the
Company is not a common industry practice, the RC aims to be fair and avoid rewarding poor performance when
setting the remuneration packages of the executive Director and key management personnel.
The RC has recommended to the Board an amount of $135,000 as Directors’ fees for the year ended 30 June 2015.
This recommendation will be tabled for shareholders’ approval at the forthcoming AGM.
27
AVI-TECH ELECTRONICS LIMITED
| ANNUAL REPORT 2015
CORPORATE
GOVERNANCE
