Directors’ Report We also moved from tranche vesting over a four year period to single point vesting following the end of a three year performance period. This approach aligns with the most prevalent approach taken by our global pharmaceutical/biotechnology peers and also responds to investor feedback regarding the previous vesting schedule. When our target performance is achieved, we want our executives’ LTI to vest – we set targets that require excellent outcomes for shareholders both absolutely and relative to the performance of our global peers. The LTI plan also rewards and assists us in retaining our talent. The key features of the program for 2022 LTI awards, granted 1 September 2021, are as follows. 1 Also maximum opportunity. Feature Description Summary A conditional ‘right’ to a CSL share or at the Board’s discretion in exceptional circumstances, a cash equivalent payment. No price is payable by the Executive KMP on grant or vesting of rights. Shares are allocated (or cash paid) on vesting without the need for exercise by an Executive KMP Security Performance Share Unit (PSU) Grant Methodology To determine the number of PSUs issued, a five day volume weighted average share price is used. The LTI opportunity for each Executive KMP is divided by the calculated allocation price to determine the number of securities granted Performance Measure • Tranche 1 – ROIC 70% • Tranche 2 – EPSg 30% ROIC Gateway Performance Measure No vesting will occur in Tranche 1 unless an Investment Hurdle Rate (IHR) is achieved in the year of testing. The IHR is the minimum return CSL requires on its investments to ensure it is making sound investment decisions and appropriately managing risk and covering its cost base Performance Period • Tranche 1 ROIC – Seven year average 1 July 2017 to 30 June 2024 • Tranche 2 EPSg – 1 July 2021 to 30 June 2024 Performance Target • Tranche 1 ROIC – Threshold at 20.0% and Target at 21.4% • Tranche 2 EPSg – Threshold at 5.0% and Target at 8.3% Executive KMP LTI Target Opportunity1 • Mr Perreault – 400% of FR • Ms Linton – 175% of FR • Dr McKenzie – 350% of FR Vesting Schedule 50% earned on threshold level performance, increasing on a straight line basis with 100% earned at target level performance (maximum vesting capped at 100%). The Board has the discretion to adjust vesting outcomes Vesting Date 1 September 2024 Retesting No retest of any tranche Cessation of Employment A ‘qualified leaver’ (for example someone who retires or is made redundant) retains a pro-rated number of PSUs based on time elapsed since grant date. Retained PSUs will remain subject to original terms and conditions including satisfaction of performance conditions at the test date. If an Executive KMP is not a ‘qualified leaver’, all unvested PSUs will lapse unless the Board determines otherwise Change of Control In the event of a change of control, the Board, in its absolute discretion, may determine that some or all of the PSUs vest having regard to the performance of CSL during the performance period to the date of the change of control event. Vesting may occur at the date of the change of control event or an earlier vesting date as determined by the Board Dividends and Voting Rights No dividends or dividend equivalents are paid on unvested PSUs. Executive KMP are only eligible for dividends once shares have been allocated following vesting of any PSUs. PSUs do not carry any voting rights prior to vesting and allocation of shares 3.2.6 Leading and Managing Modifier The Board, taking into consideration recommendations from the CEO for Executive KMP, and the Human Resources and Remuneration Committee (HRRC) for the CEO, has the discretion to apply a ‘Leading and Managing’ modifier to both the STI and LTI opportunity – allowing for recognition of extraordinary contribution in exceptional circumstances or significant leadership failure across sustainability, risk management, culture and diversity. Applied to the overall STI outcome or LTI target opportunity, there can be an increase of up to 20% or a decrease of up to 50% applied. In 2022, the modifier was not applied. In addition to consideration during the determination of KPI outcomes, the modifier is also utilised for the assessment of the appropriate management of risk – both financial and non-financial. In consultation with the Audit and Risk Management Committee (ARMC), the HRRC uses a principles approach to ensure alignment between remuneration outcomes and performance. This enables management to bring awareness to behaviours that encourage unacceptable levels of risk and discourage those behaviours, promotes behaviours that encourage acceptable levels of risk and enables the Board to recognise and appropriately address both acceptable and unacceptable behaviours. In the event of a significant risk management failure, the Board has the discretion to adjust STI and LTI outcomes downwards, including to zero. CSL Limited Annual Report 2021/22 78
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