Annual Report

for the year ended 31 March 2013

Annual Report 2013

Corporate Governance

Remuneration

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The broad principles that guide the ERCC in its administration of fees, benefits, remuneration and incentives for the Board of Directors and Senior Management are set out below.

Directors’ Fees and Incentives

SingTel’s Group CEO is an Executive Director and is therefore remunerated as part of Senior Management. She does not receive Directors’ fees.

For the financial year ended 31 March 2013, the fees for nonexecutive Directors comprised a basic retainer fee, additional fees for appointment to Board Committees, attendance fees for ad hoc Board meetings and a travel allowance for Directors who were required to travel out of their country or city of residence to attend Board meetings and Board Committee meetings which did not coincide with Board meetings. The framework for determining non-executive Directors’ fees was as follows:

Basic Retainer Fee
Board Chairman S$220,000 per annum
Director S$110,000 per annum
Fee for appointment to Audit Committee and Finance and Investment Committee
Committee chairman S$50,000 per annum
Committee member S$35,000 per annum
Fee for appointment to any other Board Committee
Committee chairman S$35,000 per annum
Committee member S$25,000 per annum
Attendance Fee per Ad Hoc Board meetingS$2,000
Travel allowance for Board Meetings and Board Committee Meetings which do not coincide with Board meetings (per day of travel required to attend meeting)S$3,000

The proposed framework for Directors’ fees for the financial year ending 31 March 2014 is the same as that for the financial year ended 31 March 2013 except that the fee for each of the chairmen of the AC and the FIC will be increased from S$50,000 to S$60,000 per annum and the fee for the chairman of the ERCC will be increased from S$35,000 to S$45,000 per annum to align fees with comparable benchmarks. As SingTel has diverse and complex operations and investments internationally and is not just a Singapore-based company, the fees are benchmarked against fees paid by other comparable companies in Singapore and Australia.

Remuneration of Non-Executive Directors

The aggregate compensation paid to SingTel non-executive Directors for services in all capacities for the financial year ended 31 March 2013 is set out in the table below. The aggregate compensation paid to or accrued to the SingTel Executive Director for the financial year ended 31 March 2013 is set out here.

Name of DirectorDirector's Fees(1) (S$)
Simon Israel(2) 378,048
Bobby Chin(3) 154,914
Fang Ai Lian 199,000
David Gonski AC(4) 13,333
Dominic Ho 217,000
Low Check Kian 184,000
Peter Mason AM 212,952
Kaikhushru Nargolwala 227,000
Peter Ong(5) 184,000
Ong Peng Tsin(6) 250,000

Notes:

  1. Directors’ fees are paid on a half-yearly basis in arrears.
  2. In addition to his fees, Mr Simon Israel also received car-related benefits with a taxable value of S$16,430.
  3. Appointed to the Board on 1 May 2012.
  4. Appointed to the Board on 1 March 2013.
  5. Fees for Singapore public sector Director are processed in accordance with the framework of the Singapore Directorship and Consultancy Appointments Council.
  6. Fees included travel allowance for attending Board Committee meetings which did not coincide with Board meetings.

No employee of the Group who is an immediate family member of a Director was paid remuneration that exceeded S$50,000 during the financial year ended 31 March 2013.

Directors’ fees are subject to the approval of shareholders at the AGM. SingTel seeks shareholders’ approval for Directors’ fees for the financial year ending 31 March 2014 so that Directors’ fees can be paid on a half-yearly basis in arrears. No Director decides his own fees.

There are no retirement benefit schemes or share-based compensation schemes in place for non-executive Directors. To align Directors with shareholders’ interests, Directors are encouraged to acquire SingTel shares each year from the open market to the extent of one-third of their fees until they hold the equivalent of one year’s fees in shares, and to continue to hold the equivalent of one year’s fees in shares while they remain on the Board.

Remuneration of Executive Director and Senior Management

The remuneration framework and policy is designed to support the implementation of the Group’s strategy and enhance shareholder value. The ERCC adopts the following guiding principles when determining the remuneration arrangements for Senior Management:

Alignment with shareholders’ interest

  • Align interest between management and shareholders
  • Select appropriate performance metrics for annual and longterm incentive plans to support business strategies and on-going enhancement of shareholder value
  • Ensure targets are appropriately set for threshold, target and stretch performance levels
  • Establish sound and structured funding to ensure affordability

Competitive remuneration

  • Offer competitive packages to attract and retain highly experienced and talented individuals
  • Link a significant proportion of remuneration to performance, both on an annual and long-term basis

Pay-for-Performance

  • Measure performance based on a holistic balanced scorecard approach, comprising both financial and non-financial metrics
  • Structure a significant but appropriate proportion of remuneration to be at risk, taking into account risk policies of the Group
  • Build flexibility into remuneration package to allow for clawback if long-term performance targets are not met

Effective implementation

  • Meet rigorous corporate governance requirements

The ERCC recognises that the Group operates in a multinational and multifaceted environment and reviews remuneration through a process that considers Group, business unit and individual performance as well as relevant comparative remuneration in the market. The performance evaluations for Senior Management have been conducted for the financial year in accordance with the above considerations.

In 2012/2013, the ERCC engaged Aon Hewitt Singapore Pte Ltd (Aon Hewitt) to provide valuation and vesting computation for grants awarded under the SingTel Performance Share Plan and Carrots Consulting Pte Ltd (Carrots) to design the total remuneration framework. Both Aon Hewitt and Carrots and their respective consultants are independent and not related to SingTel or any of its Directors.

In line with market practice, SingTel may, under special circumstances, compensate Senior Management for their past contributions when their services are no longer needed; for example, due to redundancies arising from reorganisation or restructuring of the Group.

The ERCC has the discretion not to award incentives in any year if an executive is involved in misconduct or fraud resulting in financial loss to the company.

Remuneration Components

The remuneration structure for Senior Management comprises five components – fixed remuneration, variable bonus, provident/ superannuation fund, benefits and long-term incentives. The structure is designed such that the percentage of the variable component of Senior Management’s remuneration increases as they move up the organisation. On an annual basis, the ERCC proposes the compensation for the Group CEO, CEO Group Consumer, CEO Group Digital L!fe, CEO Group Enterprise and Group CFO (collectively defined as “Key Management”) for the Board’s approval and approves compensation for the other Senior Management.

  • Fixed Remuneration

    The fixed remuneration comprises base salary and reflects the market worth of the job but may vary with responsibilities, performance, qualifications and the experience that the individual brings to the role.

    In Australia, consistent with local market practice, executives may opt for a portion of their salaries to be received in tax-effective benefits-in-kind, such as superannuation contributions and motor vehicles, while maintaining the same overall cost to the company.

  • Variable Bonus

    Variable bonus comprises the Performance Bonus and the Value Sharing Bonus. In determining the final variable bonus payments, the ERCC considers the overall Group, business unit and individual performance as well as relevant market remuneration benchmarks.

    Performance Bonus

    Performance bonus is designed to support the Group’s business strategy and the on-going enhancement of shareholder value through the delivery of annual financial strategy and operational objectives. On an individual level, the performance bonus will vary according to the actual achievement against Group, business unit and individual performance objectives. While these objectives are different for each executive, they are assessed on the same principles across two broad categories of targets: Business and People. Business targets comprise financials, strategy, customer and business processes. People targets comprise leadership competencies, core values, people development and staff engagement. In addition, the executives are assessed on teamwork and collaboration across the Group.

    Value Sharing Bonus (VSB)

    A portion of Senior Management’s annual remuneration is tied to the Economic Profit (EP) performance of the Group in the form of the Value Sharing Bonus (VSB) which is also extended to top management executives. VSB is used to defer their bonuses over a time horizon to ensure alignment with sustainable value creation for the shareholders over the longer term. A ‘VSB bank’ is created for each executive to hold the VSB allocated to him or her in any year. One-third of the ‘bank’ balance would be paid out in cash provided it is positive. The remaining balance will be carried forward and at risk as it is subject to clawback and could be reduced in the event of EP underperformance in the future years.

  • Provident/Superannuation Fund

    This is made up of SingTel’s contributions towards the Singapore Central Provident Fund or the Optus Superannuation Fund or any other chosen fund, as applicable.

  • Benefits

    SingTel provides benefits consistent with local market practice, such as an in-company medical scheme, club membership, employee discounts and other benefits that may incur Australian Fringe Benefits Tax, where applicable. Participation in such benefits is dependent on the country in which the executive is located. For expatriates located away from home, additional benefits such as accommodation, children’s education and tax equalisation may be provided.

  • Long-Term Incentives

    Long-term incentives, with a focus on encouraging the delivery of long-term growth and shareholder value, are delivered through equity plans, to drive an ownership culture and retain key talents. These are provisionally granted to Senior Management based on performance for the year ended 31 March 2013.

    From 1 April 2012, SingTel ceased to grant General Awards (GA) and Senior Management Awards (SMA) under the SingTel Performance Share Plan (see description of GA and SMA in previous annual reports). The SingTel Performance Share Plan was terminated in July 2012 with the adoption of the SingTel Performance Share Plan 2012. The termination of the SingTel Performance Share Plan is without prejudice to the rights of holders of awards outstanding under the SingTel Performance Share Plan as at the date of termination of the plan.

    Two new types of award were introduced in 2012 – the Performance Share Award (PSA) and the Restricted Share Award (RSA) – with grants made at the discretion of the ERCC. The PSA is granted to top management while a broader group of executives are eligible for the RSA. The number of performance shares awarded is determined using the valuation of the shares based on a Monte-Carlo simulation.

    The share awards are conditional upon the achievement of predetermined performance targets over the performance period. These performance conditions and targets are approved by the ERCC at the beginning of the performance period. The final number of performance shares vested to the recipient will depend on the level of achievement of these targets over the performance period, subject to the approval of the ERCC.

    A significant portion of the remuneration package for our Senior Management is delivered in SingTel shares to ensure that their interests are aligned with shareholders. This is further supported by significant shareholding requirements in which they are required to retain at least the equivalent of their annual base salary in shares.

    The details of the vesting criteria for the two awards are as follows:

Restricted Share Award (RSA)

The Restricted Share Award (RSA) has a two-year performance period from 1 April 2013 to 31 March 2015. Shares are allocated according to the following performance conditions:

  • 50 per cent based on SingTel Group’s Net Profit After Tax (NPAT) – SingTel Group NPAT achieved against predetermined targets; and
  • 50 per cent based on SingTel Group’s Free Cash Flow (FCF) – SingTel Group FCF achieved against predetermined targets.

Details of the RSA vesting schedule are shown in Figure A.

Figure A: Restricted Share Award (RSA) Vesting Schedule

Group NPAT (50%) Group FCF (50%)
Performance Vesting Level ^ Performance Vesting Level ^
Stretch130%Stretch130%
Target100%Target100%
Threshold50%Threshold50%
Below Threshold0%Below Threshold0%
^ For achievement between these performance levels, the percentage of shares under this tranche that will vest would vary accordingly.
Performance Share Award (PSA)

The Performance Share Award (PSA) has a three-year performance period from 1 April 2013 to 31 March 2016. Shares are allocated according to the following performance conditions:

  • 50 per cent based on SingTel Group’s Relative Total Shareholder Return (Relative TSR) – TSR relative to the MSCI Asia Pacific Telecommunications Index; and
  • 50 per cent based on SingTel Group’s Absolute Total Shareholder Return (Absolute TSR) – Absolute TSR achieved against predetermined targets.

Details of the PSA vesting schedule are shown in Figure B.

Figure B: Performance Share Award (PSA) Vesting Schedule

Relative TSR (50%) Absolute TSR (50%)
Performance * Vesting Level ^ Performance Vesting Level ^
--Stretch200%
≥ +7.00%100%Target100%
+2.00%50%Threshold30%
< +2.00%0%Below Threshold0%
* Percentage outperformance against the MSCI Asia Pacific Telecommunications Index.
^ For achievement between these performance levels, the percentage of shares under this tranche that will vest would vary accordingly.

The above performance conditions were chosen as they are key drivers of shareholder value creation and aligned to the Group’s business objectives.

Special provisions for vesting and lapsing of awards apply for events such as the termination of employment, misconduct, retirement and any other events approved by the ERCC. Upon occurrence of any of the events, the ERCC will consider, at its discretion, whether or not to release any award, and will take into account circumstances on a case-by-case basis, including (but not limited to) the contributions made by the employee.

SingTel employees are prohibited from entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under SingTel’s equity-based remuneration schemes.

Remuneration of Key Management and Senior Management

For the financial year ended 31 March 2013, there were no termination, retirement and post-employment benefits granted to Directors and Key Management.

Remuneration of Executive Director

The aggregate compensation paid to or accrued to Group CEO (Chua Sock Koong) for the financial year ended 31 March 2013 is set out in the table below:

Name Fixed Remuneration(1) ($) Variable
Bonus(2)
($)
Provident
Fund(3)
($)
Benefits(4)
($)
Total Cash & Benefits(5)
($)
Restricted
Share
Award (RSA)(6)
(no. of shares)
Performance
Share
Award (PSA)(6)
(no. of shares)
Chua Sock Koong S$1,647,100 S$2,880,000 S$9,850 S$74,045 S$4,610,995 98,060 1,418,169

Performance shares granted, vested and lapsed for Ms Chua as at 31 March 2013 are as follows:

General Award (GA)Senior Management Award (SMA)
Performance Share Awards Vesting Date Granted (‘000) Vested (‘000) Lapsed (‘000) Granted (‘000) Vested (‘000) Lapsed (‘000)
2010 Awards 1-Jun-13 934 526 408 630 558 72
2011 Awards 1-Jun-14 1,013 - - 655 - -
Restricted Share Award (RSA)Performance Share Award (PSA)
Performance Share Awards Vesting Date Granted (‘000) Vested (‘000) Lapsed (‘000) Granted (‘000) Vested (‘000) Lapsed (‘000)
2012 Awards 1-Jun-15 119 - - 1,273 - -

Notes:

  1. Fixed Remuneration refers to base salary and Annual Wage Supplement earned for the year ended 31 March 2013.
  2. Variable Bonus comprises both the Performance Bonus and the Value Sharing Bonus (VSB). Performance bonus varies according to the actual achievement against Group, business unit and individual performance objectives. The VSB is tied to the Economic Profit (EP) performance of the Group to ensure alignment with sustainable value creation for shareholders over the longer term. For more details, please refer here.
  3. Provident Fund in Singapore represents payments in respect of company statutory contributions to the Singapore Central Provident Fund.
  4. Benefits are stated on the basis of direct costs to the company and include car benefits, flexible benefits and other non-cash benefits such as medical cover and club membership.
  5. Total Cash & Benefits is the sum of Fixed Remuneration, Variable Bonus, Provident Fund and Benefits for the year ended 31 March 2013.
  6. Long Term Incentives are awarded in the form of performance shares. Grants of the Restricted Share Award (RSA) and Performance Share Award (PSA) under the SingTel Performance Share Plan were made in June 2013 for performance for the year ended 31 March 2013. The per unit fair values of the RSA and PSA are S$3.246 and S$2.020 respectively. The performance conditions for the awards are detailed here.

Remuneration of Other Key Management and Senior Management

The aggregate compensation paid to or accrued to the other top five Key Management and Senior Management for the financial year ended 31 March 2013 is set out in the table below:

Name Fixed
Remuneration(1)
($)
Variable
Bonus(2)
($)
Provident/
Superannuation
Fund(3)
($)
Benefits(4)
($)
Total Cash
& Benefits(5)
($)
Restricted
Share
Award (RSA)(6)
(no. of shares)
Performance
Share
Award (PSA)(6)
(no. of shares)
The following are in alphabetical order:
Bill Chang
CEO Group
Enterprise
S$760,600 S$950,000 S$13,600 S$57,689 S$1,781,889 29,267 423,268
Allen Lew
CEO Group
Digital L!fe/
Country Chief Officer
Singapore
S$1,152,900 S$2,025,000 S$8,175 S$63,055 S$3,249,130 59,335 858,119
Jeann Low (8)
Group CFO
S$910,000 S$1,125,000 S$10,900 S$55,779 S$2,101,679 30,808 445,545
Paul O’Sullivan(7)(9)
CEO Group
Consumer/ Country
Chief Officer
Australia
A$1,170,023 A$1,133,028 A$211,775 A$181,337 A$2,696,163 84,509 1,221,881
Kevin Russell(7)(9)
CEO Consumer
Australia
A$875,018 A$720,193 A$143,569 A$9,586 A$1,748,366 57,498 369,482
Total S$5,443,811 S$6,474,531 S$487,977 S$421,153 S$12,827,472 261,417 3,318,295

Performance shares granted, vested and lapsed for the above five executives as at 31 March 2013 are as follows:

General Award (GA)Senior Management Award (SMA)
Performance Share Awards Vesting Date Granted (‘000) Vested (‘000) Lapsed (‘000) Granted (‘000) Vested (‘000) Lapsed (‘000)
2010 Awards 1-Jun-13 1,957 1,101 856 1,320 1,169 151
2011 Awards 1-Jun-14 2,167 - - 1,401 - -
Restricted Share Award (RSA)Performance Share Award (PSA)
Performance Share Awards Vesting Date Granted (‘000) Vested (‘000) Lapsed (‘000) Granted (‘000) Vested (‘000) Lapsed (‘000)
2012 Awards 1-Jun-15 276 - - 2,634 - -
16-Jul-15 20 - - 97 - -

Notes:

  1. Fixed Remuneration refers to base salary and Annual Wage Supplement (if applicable) earned for the year ended 31 March 2013.
  2. Variable Bonus comprises both the Performance Bonus and the Value Sharing Bonus (VSB). Performance bonus varies according to the actual achievement against Group, business unit and individual performance objectives. The VSB is tied to the Economic Profit (EP) performance of the Group to ensure alignment with sustainable value creation for shareholders over the longer term. For more details, please refer here.
  3. Provident Fund in Singapore represents payments in respect of company statutory contributions to the Singapore Central Provident Fund. Superannuation Fund in Australia represents payments in respect of the superannuation guarantee levy to the superannuation scheme. Any contributions made by an individual may be salary sacrificed, and are part of fixed remuneration.
  4. Benefits are stated on the basis of direct costs to the company and include overseas assignment benefits, tax equalisation, car benefits, flexible benefits and other non-cash benefits such as medical cover, club membership and Australian Fringe Benefits Tax, where applicable.
  5. Total Cash & Benefits is the sum of Fixed Remuneration, Variable Bonus, Provident/Superannuation Fund and Benefits for the year ended 31 March 2013.
  6. Long-Term Incentives are awarded in the form of performance shares. Grants of the Restricted Share Award (RSA) and Performance Share Award (PSA) under the SingTel Performance Share Plan were made in June 2013 for performance for the year ended 31 March 2013. The per unit fair values of the RSA and PSA S$3.246 (A$2.511) and S$2.020 (A$1.563) respectively. The performance conditions for the awards are detailed here.
  7. With effect from 1 May 2013, Mr Kevin Russell has been appointed Country Chief Officer Australia.
  8. Benefits for Ms Jeann Low include tax equalisation in relation to her past secondment to Optus, Australia.
  9. Mr Paul O’Sullivan and Mr Kevin Russell are based in Australia and remunerated in Australian dollars.