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The remuneration package

The table below summarises the plans used to reward the executive directors in the 2009 financial year.

  Summary Grant policy
Base salary    
  • Set by the Remuneration Committee as part of the overall benchmarking process (see previous page).
  • Benchmark assumed to be the market level for the role.
  • Base salaries set annually on 1 July.
Annual bonus    
Group short term incentive plan (‘GSTIP’)(1) Remuneration Committee reviews performance against targets over the financial year. Actual results measured against the budget set at the start of the year.
Summary of the plan in the 2009 financial year
  • 2009 performance measures:
    • Three key financial measures: operating profit (25%), service revenue (25%) and free cash flow (25%);
    • Total communications revenue (10%) – this measure has been used to promote the new business area set out in the May 2006 strategy; and
    • Customer delight (15%) – customer satisfaction is a key component in the Group’s success.
Changes for the 2010 financial year
  • Performance measures for the 2010 financial year:
    • Total communications’ now embedded in the Group’s strategy and no longer requires particular promotion, therefore it has been removed;
    • Free cash flow continues to be a key measure for the business and has an increased weighting;
    • Split of measures for the 2010 financial year: operating profit (25%), service revenue (25%), free cash flow (35%) and customer delight (15%); and
    • These measures relate to the business strategy of capital discipline, cost control and pursuing growth opportunities.
  • Bonus levels reviewed annually. Mix of performance measures and the performance targets also reviewed.
  • Annual bonus paid in cash in June each year for performance over the previous financial year.
  • Target bonus is 100% of base salary earned over the financial year.
  • Maximum bonus is 200% of base salary earned and is only paid out for exceptional performance.
Long term incentives (see here for details)    
Global long term incentive plan (‘GLTI’) base awards    
  • Long term incentive all delivered in performance shares.
  • No share option awards or deferred bonus awards made in the 2009 financial year and the Remuneration Committee does not foresee using these arrangements in the immediate future.
  • Base award has vesting period of three years, subject to a matrix of two performance measures over this period:
    • Firstly, an operational performance measure (free cash flow); and
    • Secondly, an equity performance multiplier (relative TSR).
  • Performance details set out here.
  • Base award set annually and made in June/July.
  • The Chief Executive’s base award will have a target face value of 137.5% of base salary (maximum 550%) in July 2009.
  • The Chief Financial Officer’s base award will have a target face value of 110% of base salary (maximum 440%) in July 2009.
Co-investment matching awards    
  • Individuals may purchase Vodafone shares and hold them in trust for three years in order to receive additional performance shares in the form of a GLTI matching award.
  • Matching awards made under the GLTI plan have the same performance measures as the base award.
  • Matching award used to encourage increased share ownership and supports the share ownership requirements set out below.
  • Matching award made annually in June in line with the investment made.
  • Executive directors can co-invest up to two times net base salary.
  • Matching award will have a face value equal to 50% of the equivalent multiple of gross basic salary invested.
Share ownership requirements    
  • Option to co-invest into the GLTI plan designed to encourage executives to meet their share ownership requirements.
  • Ownership against the requirements must be met after five years.
  • Progress towards this requirement reviewed by the Remuneration Committee before granting long term awards.
  • The Chief Executive is required to hold four times base salary.
  • Other executive directors are required to hold three times base salary.
Other remuneration    
Defined benefit pension
  • The Chief Financial Officer is a member of the UK defined benefit scheme for pensionable salary up to the scheme cap of £110,000. Details of this are set out in the pensions table on page 63. He receives the cash allowance set out below on pensionable salary over the scheme cap.
  • Plan closed to new entrants.
  • The Chief Financial Officer is the only executive director to receive this benefit.
Defined contribution pension/cash allowance    
  • The pension contribution or cash allowance is available for the executives to make provisions for their retirement.
  • 30% of basic salary taken either as a cash payment or a pension contribution.
  • Company car or cash allowance worth £19,200 per annum.
  • Private medical insurance.
  • Chauffeur services, where appropriate, to assist with their role.
  • Benefits reviewed from time to time.


GSTIP targets are not disclosed as they are commercially sensitive.

Details of the GLTI performance shares

The number of shares vesting depends on the performance of two measures: free cash flow and relative TSR. This section sets out how the performance of each of the two measures is calculated.

Underlying operational performance – adjusted free cash flow

The free cash flow performance is based on a three year cumulative adjusted free cash flow figure. The definition of adjusted free cash flow is reported free cash flow excluding:

  • Verizon Wireless additional distributions;
  • Spectrum (licence) costs;
  • Foreign exchange movements over the performance period; and
  • Material one-off tax settlements.

The cumulative adjusted free cash flow target and range for awards in the 2009 and 2010 financial years are set out in the table below:

  2009   2010
Threshold 15.5 50%   15.50 50%
Target 17.5 100%   18.00 100%
Superior 18.5 150%   19.25 150%
Maximum 19.5 200%   20.50 200%

The target free cash flow level is set by reference to the Company’s three year plan and market expectations. The Remuneration Committee consider the 2009 and 2010 targets to be stretching ones.

TSR out-performance of a peer group median

Vodafone has a limited number of appropriate peers and this makes the measurement of a relative ranking system volatile. As such, the out-performance of the median of a peer group is felt to be the most appropriate TSR measure. The peer group for the performance condition is as follows:

2009 financial year 2010 financial year
BT Group BT Group
Deutsche Telekom Deutsche Telekom
France Telecom France Telecom
Telecom Italia Telecom Italia
Telefonica Telefonica
Emerging market composite(1) Emerging market composite(1)


Consists of the average TSR performance of three companies: Bharti, MTN and Turkcell.

The relative TSR position will determine the performance multiplier. This will be applied to the free cash flow vesting percentage. There will be no multiplier until TSR performance exceeds median. Above median the following table will apply (with linear interpolation between points):

  2009   2010

of peer
group median

of peer
group median

Median 0.0% p.a. No increase   0.0% p.a. No increase
65th percentile 4.5% p.a. 1.5 times   4.5% p.a. 1.5 times
80th percentile (upper quintile) 9.0% p.a. 2.0 times   9.0% p.a. 2.0 times

The performance measure has been calibrated using statistical techniques.

Combined vesting matrix

The combination of the two performance measures gives a combined vesting matrix as follows:

  TSR performance
Free cash flow measure Up to Median 65th 80th
Threshold 50% 75% 100%
Target 100% 150% 200%
Superior 150% 225% 300%
Maximum 200% 300% 400%

The combined vesting percentages are applied to the target number of shares granted.