ST Engineering Annual Report 2020

CORPORATE GOVERNANCE advice on Board and executive remuneration matters. Aon and its principal consultant are independent and are not related to the Group or any of its Directors. Executive Remuneration Structure Remuneration for the Senior Management Executives comprises a fixed compensation, variable cash-based incentives, share-based incentives and market-related benefits. As part of cost saving measures to mitigate COVID-19 impact, Group President & CEO reduced his base salary by 10%, while the senior management team reduced their salaries between 5% and 10% with effect from 1 May 2020. Base salary reductions were further increased to 20% for Group President & CEO, while Group and Aerospace senior management teams further increased their base salary reductions to between 7% and 20% with effect from 1 November 2020. Overall total remuneration (including fixed compensation, variable cash and share-based incentives and benefits) for Group President & CEO and Key Management Executives decreased by 25% and 13%, respectively, from FY2019 to FY2020. A. Fixed Compensation: The fixed compensation comprises the base salary and compulsory employer’s Central Provident Fund (CPF) contributions. B. Variable Cash-based Incentives: The variable cash-based incentives include the Performance Target Bonus (PTB) and EVA-based Incentive Scheme. Performance Target Bonus The PTB is a cash-based incentive for Senior Management Executives which is linked to the achievement of annual performance targets that will vary depending on their job requirements. Individual performance objectives are set at the beginning of each financial year. The objectives are aligned to the overall strategic, financial and operational goals of the Group and Company. These objectives are cascaded down to a select group of key executives creating alignment between the performance of the Group, Company and the individual. The individual PTB payouts for the Group President & CEO and key management executives are determined by the ERCC based on the Group’s, Company’s and individual performance at the end of the financial year. EVA-based Incentive Scheme The EVA-based Incentive Scheme (EBIS), which is linked to the Company’s economic value-add and financial performance forms part of the short-term incentives for the Senior Management Executives. Under the plan, a portion of EBIS bonus declared for the financial year will be paid out, annually while the remaining portions will be deferred in an EVA bank. Amounts in the EVA bank are at risk because negative EVA will result in a clawback of EVA accumulated in the bank. This mechanism encourages the Senior Management Executives to work for sustained EVA generation and to adopt strategies that are aligned with the long-term interests of the Group. In addition, the Group has a clawback facility with respect to the EVA bank in the event of a restatement of the financial results of the Group subsequent to an earlier misstatement, and provisions for the forfeiture of the remaining EVA bank balance on termination due to misconduct or fraud resulting in any financial loss to the Group. Based on the ERCC’s assessment of the Group performance for the financial year 2020, there was no EBIS declared for the financial year. C. Share-based Incentives: Shareholders approved the adoption of the Singapore Technologies Engineering Performance Share Plan 2020 (“PSP2020”) and the Singapore Technologies Engineering Restricted Share Plan 2020 (“RSP2020” and together with the PSP2020, the “2020 Share Plans”) at the 23 rd AGM held on 15 May 2020. The 2020 Share Plans replaced the Singapore Technologies Engineering PSP 2010 (“PSP2010”) and the Singapore Technologies Engineering RSP 2010 (“RSP2010” and together with the PSP2010, the “2010 Share Plans”), both of which expired on 20 April 2020. The expiry of the 2010 Share Plans did not affect the awards under the 2010 Share Plans which were granted prior to such expiry, whether such awards had been released to participants (whether fully or partially) or not. The 2020 Share Plans have substantially the same terms as the 2010 Share Plans, save for the introduction of / ST ENG I NEER I NG 112