Section 5 Planned Remuneration Changes for FY23 IGO’s remuneration philosophy is underpinned by competitive and performance-based remuneration commensurate with role complexity and scope, coupled with a strong employment brand and a purpose driven and personalised employee value proposition incorporating flexibility and wellness benefits. The resulting employee value proposition ensures that IGO is able to attract and retain people in an environment where there is significant flux arising from competition for talent in a declining pool, higher inflation and wage pressures, the financial impacts of the COVID-19 pandemic, and the impacts of the impending ‘Great Resignation’. IGO’s successful transformation through the purposeful delivery of strategy, coupled by proactive culturing programs and the development of our people, has created a level of retention risk as a result of IGO people being actively targeted by competitors. To address this risk, the Board gives careful consideration for all Executive KMP and employee remuneration decisions, while also adopting a balanced approach to remuneration and reward to drive the achievement of the strategic plan and retention of key talent across the business. During FY22, the Board engaged PricewaterhouseCoopers (PwC) to complete a global review of CEO and Executive KMP fixed and at-risk remuneration structures to align IGO KMP remuneration to relevant peers. This review considered the current executive remuneration framework against emerging market trends to identify potential gaps in the existing remuneration framework and provide options for consideration for adoption in FY23. The Board have incorporated the PwC research, together with IGO peer group and ASX peer benchmarking, in their decision-making process for changes made to the executive KMP fixed and variable remuneration outlined in the following pages of this report. In addition, the Board regularly engages with our relevant stakeholders to seek their feedback on the alignment of remuneration structures and outcomes. Overall, feedback in FY22 was positive with regard to how IGO structures remuneration and reward for the Board and Executive KMP. We also received positive feedback on the incorporation of decarbonisation and culture metrics into IGO’s LTI performance measures. Overall, the PwC and market research confirmed that IGO’s executive remuneration framework is broadly aligned to market practice among ASX 100 companies, and with IGO’s business strategy, remuneration philosophy and purpose. The benchmarking conducted utilised data from the IGO resources industry peer group and an ASX 100 peer group, which consisted of the companies 15 places above and below IGO on the ASX 100 listing at 23 March 2022. The TFR for IGO KMP Executive roles was consistently observed to be at the low to mid-range of both the ASX comparator group and resources peer group, and consequently a number of changes will be made for FY23. These changes will be reported more fully in the FY23 Remuneration Report but are summarised below: Peter Bradford, Managing Director and CEO The Board recognises the significant transformation of the business over the past two years and the increased complexity of the CEO’s role, as well as the need to continue to incentivise the CEO to ensure both the continued evolution and success of the business and the consolidation of and value realisation from the past two years of transformation. In FY22, the Board made some changes to the CEO’s remuneration to reflect this transformation and increased complexity, but this left TFR, and therefore total remuneration, well short of both the ASX peer group and the resources peer group. With the integration of the lithium joint venture complete and the Western Areas transaction finalised, and to incentivise the CEO for the next stage of delivery, the Board has now made the following changes to the CEO remuneration for FY23: • TFR increased to $1,510,000 (from $1,000,000) to reflect market benchmarking and the increasing complexity of the role • STI target unchanged at 100% of TFR with a maximum opportunity of 150% of TFR; and • LTI target increased to 120% of TFR (from 100%). Why has the Board increased the CEO TFR? The complexity of the CEO role has changed significantly over the past two years, and the TFR change reflects both the increased complexity and relativity to market benchmarks. Matt Dusci, Chief Operating Officer Similarly, the complexity of the Chief Operating Officer (COO) role has changed significantly over the past two years. Recognising this, the Board has adopted a two-year period of transition of the COO remuneration to reflect the greater role complexity and movements in the market benchmarking to both the resources industry and ASX 100 peers. In recognition of the next stage of delivery for the evolving COO role, the Board has made the following changes to the COO remuneration for FY23: • TFR increased to $850,000 (from $700,000) to reflect market benchmarking and the increasing complexity of the role • STI target unchanged at 80% of TFR, with a maximum opportunity of 120% of TFR; and • LTI target unchanged at 80% of TFR. Why has the Board increased the COO TFR? The complexity of the COO role has changed significantly over the past two years, and the remuneration changes reflect both the increased complexity and relativity to market benchmarks. The following table is a summary of the structure of fixed and variable remuneration for FY23: Year 1 Year 2 Year 3 Year 4 TFR Paid throughout year STI Performance Period (12 months) LTI Restriction Restriction Restriction Performance Period (Three Years) 40% Cash 30% Rights 30% Rights 50% Rights 50% Rights Other Executive TeamMembers The FY23 TFR for other executives (previously reported as KMP) will be between $420,000 and $550,000 and are in line with market benchmarking. STI targets will vary between 50% and 60% of TFR, with a maximum opportunity of between 75% and 90% of TFR, and LTI targets will vary between 50% and 80% of TFR. The TFR and executive compensation for the other executives is designed to be, and remains, competitive with the comparator and broader industry groups for roles of similar complexity and breadth. Why is no detail provided on the other executive team members as was done in FY21? Given the changing complexity of the business, several additional roles will be incorporated into the Executive team from FY23. These changes will also include a review of the existing KMP portfolio structure, with an anticipated reorganisation of some roles and responsibilities. Given this program of change, including the recruitment and appointment of additional executives, the final outcomes of KMP remuneration, taking into account internal and external benchmarking for the size and complexity of new or reorganised roles, is expected to be completed in the first half of FY23, and will be reported in more detail in 2023. FY23 STI and LTI Outline FY23 STI There will be no change made to the delivery mechanisms for the STI (awarded in cash and service rights) however the Board have approved a re-weighting of the cash component (50% in FY22 to 40% in FY23) to increase the focus on reward through equity, and alignment to the long-term shareholder experience. FY23 LTI The delivery mechanism for the LTI program in FY23 has been modified to allow participants to elect to take LTIs in a combination of performance rights (up to 100% of total LTI grant) or options (up to 60% of total LTI grant). FY23 Performance Hurdles • Relative TSR – 25% • Absolute TSR – 25% • Return On Capital Employed – 20% • Strategic Delivery – 20% • Decarbonisation Delivery – 10% These performance hurdles reflect a set of measures that will more accurately track the progress made, and value delivered to shareholders, on a range of key strategic initiatives and long-term programs of work. LTI Vesting Period and New Hold Lock A change has been made to the LTI vesting schedule from FY23 by introducing a hold lock on vested LTIs. In FY23, the hold lock will apply to 50% of the vested LTIs for one year and from FY24, the hold lock will apply for one year for 100% of the vested LTIs (refer table below). This change has been made to better align the employee and shareholder experience and act as a further retention tool for senior leaders of the business. IGO ANNUAL REPORT 2022— 75 74 —IGO ANNUAL REPORT 2022
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