2.3 CSL’s response to shareholder feedback The Board values and acknowledges the feedback it received from CSL’s shareholders and external stakeholders in 2023. In response to this feedback, the Board and management team conducted a review of CSL’s executive remuneration framework and decision-making processes. Overall, the Board continues to believe that CSL’s executive remuneration framework supports CSL’s strategy, builds economic alignment between executives and shareholders over the long term and enables the attraction and retention of global talent. That said, the following actions have been taken to address the concerns raised. Concerns raised Our response STI Disclosure of STI performance targets and individual KPIs – To enhance transparency, the threshold, target and maximum financial STI performance hurdles for 2024 have been disclosed. Refer to section 5.1 for further details – Disclosures regarding individual KPIs and outcomes for executive KMP have been enhanced. Refer to section 5.1 for further details Use of NPATA as a financial STI KPI – Introduced in 2023, NPATA is used as one of the financial measures in STI. The Board believes NPATA provides shareholders with transparency on the underlying performance of the business and aligns with CSL’s financial guidance approach, thereby holding executives accountable for driving the growth of CSL LTI Level of ‘stretch’ in ROIC hurdles set – The approach for LTI target setting was reviewed to generate targets that continue to be stretching and aligned with CSL’s longer-term performance trajectory – Further details regarding CSL’s approach to target setting and the factors considered by the Board when setting targets are set out section 3.5 – The ROIC and EPS targets for the FY25 LTI award will be disclosed in the 2024 Notice of Annual General Meeting of Shareholders Length of the performance period – To remain competitive with the approach taken by our global pharmaceutical/biotechnology industry peers, the performance period of LTI awards will remain at three years – A one year holding lock period will be introduced, resulting in a four year LTI construct – During the holding lock period, Executive KMP reward will continue to be aligned to the share price Consideration of CSL Vifor performance in the assessment of LTI grants made prior to acquisition – The Board and Management team continue to have confidence in CSL Vifor and, whilst near term growth prospects are more subdued than originally envisaged, CSL has the right plans in place to deliver growth from CSL Vifor over the long term – As disclosed in the 2023 Remuneration Report, the Board determined at the time of the Vifor Pharma acquisition that performance targets for on-foot LTI awards would not be adjusted for the acquisition however, the Board would consider CSL Vifor’s performance when determining LTI vesting outcomes – As a result, the Board has carefully considered CSL Vifor’s performance since the acquisition against a range of factors, including overall contribution to CSL financial outcomes, performance against the acquisition model and shareholder experience. The Board has determined that for five current and former executives, a 20% reduction will be applied to LTI awards vesting in September 2024. This has been done to align executive outcomes with shareholder outcomes and hold executives accountable for decisions made. Refer to section 5.2 for further details 81
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