The report explains: "NBN Co introduced a short term incentive (STI) plan for senior executives effective from 1 July 2010'¦[to] reward senior executives who contribute to the company's success during the [2010-2011 financial] year' ['¬and'] '¬provide the company flexibility in the management of aggregate employee costs by linking a portion of total pay to corporate performance'¦
"Funding of the STI pool is fully dependent on the achievement of corporate performance hurdles'¦[and] is allocated to participants based on the outcomes of their functional area and their personal contributions."
It adds: "Setting corporate hurdles was challenging for financial year 2010/11 given the nature of the organisation, a start up without an operational history, subject to significant external events'¦[However] the [people and performance] committee determined that this STI program is consistent with the needs of the business and aids NBN Co's positioning in the labour market."
The committee can reduce STI payments "in the light of unforeseen circumstances or unintended outcomes."
During financial year 2010/11 the STI was made dependent on "the number of premises passed with fibre optic cable; the achievement of specified strategic milestones documented in the Corporate Plan; capital expenditure against selected milestones."
After assessing performance against these targets, the STI pool was reduced by 20 percent from the original target, to $664k.
The annual report notes: "NBN Co slightly exceeded the original target for the number of premises passed. Achievement for most of the other strategic milestones and related capital expenditure was at or near target. Some were not achieved on the original timeline or the objective was changed (eg the approach for both construction and rollout to greenfield premises).
"The overall result for the performance period was lower than the targeted outcomes. The Committee therefore approved an STI pool at 80 percent of target'¦This 20 percent reduction from target was based on weighting each measure and assigning an achievement rating, and it reflects the CEO and Committee's assessment of performance against the plan measures."
Distribution of the pool amongst the participating executive was then made "based on individuals' target opportunity and contribution, as recommended to the Committee by the CEO."
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