3.2.4 Short Term Incentive (STI) Rewarding performance over an annual period, the STI program is designed to drive business performance and the creation of shareholder value. The KPIs on which Executive KMP are assessed and rewarded are challenging and not just duties expected in the normal course of their role. In 2022, following a review of the STI program, the Board approved the increase of the maximum payout opportunity from 150% of target to 200%. This change ensures a more competitive offering, aligning to our global pharmaceutical/biotechnology peers and also incentivises outperformance, driving a pay for performance culture. Maximum reward will only be earned for truly outstanding performance. The change also addresses attraction and retention issues in key growth markets, including the U.S. In the 2022 financial year, sustainability metrics continued to form part of Executive KMP individual KPIs. When the Board assessed the STI outcomes for Executive KMP they reviewed the sustainability outcomes of the organisation and considered the application of discretion through the ‘Leading and Managing’ modifier to address any underperformance for the organisation – the Board deemed no adjustment was required in 2022. The key features of the STI program for the year ended 30 June 2022 (to be paid in September 2022) are detailed below. Feature Description Performance Period Annual award aligned with the financial year – 1 July 2021 to 30 June 2022 Award Cash Performance Measures Each Executive KMP has a maximum of six KPIs. The KPIs are made up of two financial measures, common to all participants – Net Profit after Tax (NPAT) and Cash Flow fromOperations (CFO), plus up to four individual business building KPIs. Hurdles are set at threshold, target and maximum levels of performance and there is significant difference between under achieve/achieve/over achieve targets and measures, so that a challenging but meaningful incentive is provided for target performance. The performance measures are chosen to ensure Executive KMP are focused on the achievement of the CSL strategy, delivery of business results and CSL’s success and sustainability Financial Individual Financial growth is the foundation of long term sustainability and evidences our competitive advantage, whilst pursuing profitable growth, and aligns employee and shareholder objectives. The financial performance measures are NPAT measured at constant currency and CFOmeasured at the reported rate Individual performance hurdles align with strategic priorities, encourage appropriate decision making, and balance performance in non-financial priorities. The individual performance measures are based on individual responsibilities and categories include divisional performance, achievement of strategic objectives and improvement in operations, risk management, compliance, people, health and safety, ESG and quality Performance Measure Weighting The weighting of the measures for Mr Perreault and Dr McKenzie is NPAT 35%, CFO 25% and Individual 40%. For Ms Linton, the weighting of measures is NPAT 30%, CFO 30% and Individual 40% Executive KMP STI Targets Set as a percentage of FR, target opportunity in 2022 was: • Mr Perreault – 120% • Ms Linton – 85% • Dr McKenzie – 100% Vesting 50% earned on threshold level performance, increasing on a straight line basis with 100% earned at target level performance and 200% on achievement of maximum level performance (capped at 200%). The STI Outcome percentages are then multiplied by the KPI weighting and individual STI opportunity (as disclosed in Table 3 in section 6.2) to determine the payment amount Cessation of Employment A ‘qualified leaver’ (for example someone who retires or is made redundant) may receive a pro-rata payment paid in the ordinary course based on the portion of the Performance Period worked, subject to Performance Measures being met. If the Executive KMP is not a ‘qualified leaver’, no payment will be made unless the Board determines otherwise For the 2023 financial year (2023), a global sustainability measure for which all Executives will be held accountable will be added, in addition to any relevant individual sustainability KPI measures. The weighting in 2023 will be 5%, reflecting CSL’s sustainability roadmap as baseline targets are set for future measurement (section 4 provides more detail on this measure for 2023). Each Executive KMP and Global Leadership Group member will also continue to have sustainability objectives that form part of their workplans and expected role deliverables, in most cases, not rewarded through STI. 3.2.5 Long Term Incentive (LTI) In 2022, two changes were made to the LTI plan, reflecting feedback received from investors and to encourage alignment of executives’ equity interests with shareholders over the longer term. We introduced a second performance measure of Earnings Per Share growth (EPSg) to complement the current Return on Invested Capital (ROIC) measure. This change also responded to investor feedback on our single metric. The EPSg measure is weighted 30% of the LTI and the ROIC measure is weighted 70%. CSL Limited Annual Report 2021/22 77
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