Lendlease Annual Report 2022

78 Lendlease Annual Report 2022 Remuneration Report Message from the Board While the global operating environment has remained challenging, Lendlease made demonstrable and meaningful progress in resetting the company for long term success by delivering the first phase of our five year Reset, Create, Thrive roadmap (see Performance and Outlook on page 56. As part of Reset, the Board oversaw the decision to increase the transparency of financial and non-financial metrics, including expected return ranges for the core segments: Investments, Development and Construction. In addition, greater visibility has been provided on the Group’s contribution to environmental sustainability and social value creation. (see Sustainability on page 42. Health and safety remain the organisation’s highest priority. Our people and contractors have the right to return home safely each day. We were deeply saddened by the fatality of a subcontractor on one of our projects in New York in an area under subcontractor management. We extend our condolences to the young man’s family and friends. Executive Reward Strategy As outlined in the 2021 Remuneration Report, significant changes were made to the Executive Reward Strategy. We engaged with securityholders on the proposed changes, and subsequently received strong support at the 2021 AGM. Key changes made to the Executive Reward Strategy: • Removed the restricted securities plan to increase the remuneration portion subject to performance. • Rebalanced the remuneration mix to address securityholder concerns over maximum Long Term Award (LTA) quantum. • Implemented STA deferral to enable greater alignment of STA to securityholder return. • Simplified and reduced the number of KPIs within the Short Term Award (STA) to focus on the measures that are most critical to business success over the long term. • Introduced a threshold and maximum performance range, in addition to target for the STA to enable greater pay for performance alignment. • Increased the financial performance weighting under the STA from 50% to 65% to maintain the weighting to financial performance post the rebalance of the remuneration mix. • Simplified the communication of LTAs at maximum opportunity to enhance peer comparability on quantum. As well as embedding these changes, focus areas for the People & Culture Committee in FY22 included: • Supporting improvements to the broader people agenda. • Focusing on attracting and fostering exceptional talent, equitably and responsibly rewarding employees, and keeping people decisions central to business strategy. • Enhancements to governance on remuneration frameworks via modernising the treatment of LTA awards in circumstances where participating executives cease employment. FY22 outcomes and link to performance Remuneration outcomes relating to the financial year were determined by business performance during Reset, while having regard to the difficult operating conditions. The decisive action we took during the year to reset the business strategy, simplifying the organisation structure, recalibrating the cost base, accelerating Development activity, and growing our investments platform has set the Group up for sustainable long term performance. Although financial performance remains below our Portfolio Management Framework targets, it is consistent with expectations set for FY22. Notwithstanding strong performance against scorecard KPIs and exceeding expectations on roadmap goals, the Board determined that a downward adjustment to STA outcomes should be made given the financial results anticipated in this year of strategic reset. Accordingly, as a result of the application of Board discretion, the STA outcome for the Group CEO was 48% of maximum, and for the other KMP ranged between 55% and 61% of maximum STA. There was no vesting of the 2020 LTA given the relative TSR and ROE performance hurdles were not met. We believe the remuneration outcomes for executives are appropriate, acknowledging the significant progress made on the five year roadmap. Changes to KMP Simon Dixon was appointed Group Chief Financial Officer, bringing more than 25 years’ relevant international industry experience to the organisation. We thank former executives Johannes Dekker and Kylie Rampa for their contributions to the organisation. Additionally, we welcomed Nicholas Collishaw to the Board and the People and Culture Committee. Philip Coffey and Jane Hemstritch rotated off the Committee during the year. Looking ahead As we move into the Create phase of our roadmap, the organisation is well positioned to deliver on targets for development completions and funds under management. We are also well progressed on our sustainability and broader social value targets. The incentive targets for next year will reflect this new stage of our strategic plan. The Committee is focused on investing in our people in order to deliver for securityholders and customers and support the execution of our strategy. We invite you to read the Remuneration Report which details the outcomes for KMP during the year. M J Ullmer, AO Chairman Elizabeth Proust, AO Chairman, People & Culture Committee