REMUNERATION REPORT Continued 2. CHANGES TO REMUNERATION FRAMEWORKS 2.1. RESPONSE TOTHE‘FIRST STRIKE’ In response to receiving a ‘first strike’ against its Remuneration Report at the 2017 AGM, the Human Resources and Remuneration Committee made a number of immediate changes to directors’ remuneration, including agreeingto reduce non-executive directorfees to better reflect market practice for companies with similar market capitalisation. Accordingly, as at 21 March 2018, fees were reduced as follows: • Chairman’s fee, reduced from $350,000 to $300,000, noting thatthefee had been reduced from $400,000 to $350,000 at the beginning of FY2018; • Non-Executive Directors’ fees reduced from $150,000to $120,000; • Chairman of the Audit, Finance and Risk Committeefee reduced from $30,000 to $20,000; and • Chairman of the Human Resources and Remuneration Committeefee reduced from $22,500 to $20,000. In addition, the Board introduced a policy that requires all non-executive directors to target a purchase ofshareholdingsin the Company that is the equivalent to at least one year’s director’s fees,within three years,to better align the interests of Directors and shareholders. Following further consultation with shareholders, the Company made a number ofchanges to the executive reward structure, which is reflected in theremuneration arrangements for the new CEO and changes in the remuneration structure for FY2019. 2.2. NEW CEO REMUNERATION Asdisclosedupon his appointment,Mr King commenced with the Company on 4 June 2018 with a Total Fixed Compensation (TFC)of $1,200,000. Mr King is a respected retailer with global experience, and his package reflectshisexperience, skills and capability, and was set at a level required to becompetitive in the global retail marketplace from which he was recruited. The TFCis consistent with the previous CEO’s, which was set in 2015 andhasremained unchanged since. The structure of Mr King’spackage has been heavily weighted towards equity, through an initial grant of sharerights, participation in the FY2019LTIP, and no participation in the STIplanuntil FY2020. This reward structure immediately aligns the CEO with shareholder interestsand ensures a focus on sustainable performance.The key elements of Mr King’s package are: • Alignment equity: On commencement,MrKing was granted 2,432,432 share rights, worth $900,000 at the time of the announcement of his appointment. These rightsvest onamonthly basis, in 36 equal tranchesand will convert to ordinary Myer shares at the end of thethree yearperiod. These rights create an immediate alignment between Mr King and shareholders; • Short-Term Incentive:Mr King was not eligible to participatein the FY2018 planand will not participatein the FY2019plan; and • Long-Term Incentive: Subject to shareholder approval Mr King will receive a maximumLTIPgrant of $1,400,000 (116.7 percent of TFC) for FY2019. The grant value will revert to 90 percentof TFC for FY2020. The terms of the FY2019 grant are provided in the Notice of Meeting. Mr King is required to hold a minimum of 75 percentof TFC in Myer shares for the term of his employment. The initial grant of$900,000 ofshare rights is included in this calculation and providesan immediate link between his reward and shareholder interests. 2.3. CHANGES IN REMUNERATION STRUCTURE FOR FY2019 Following further consultation with shareholders Myermadea number of changes to the executive remuneration structure. These changes are summarised below and will be disclosed in detail in the FY2019 Remuneration Report. Changes for FY2019 Short Term Incentive Performance The primary financial measurefor the FY2019 STI planwill be EBITDA, and there will be a renewed Measures emphasis on financial performance. Financial measures will have a minimum 80% weighting for all roles, with a minimum 40% weighting of Company EBITDA. The Board believes EBITDA is the most appropriate financialmeasures as it most closely reflectsoperating efficiency, and is a measure that can be used to align the actions of executives and senior managers across the business. Further, the net profit gateway will continue to operate in FY2019, meaning that executives will onlybe rewarded if there is profit growth. Long Term Incentive Equity Instrument Under theFY2019 LTIPexecutives will be granted options. The Board has decided it is appropriate to grant options, as it ensures executivesare only rewardedfor the increase in share price from the grant date, strengthening the alignment between executive remuneration and growth in shareholder value. Performance The following performance hurdles will apply: Measures • 50%of the performance options will be subject to a hurdle based on EPS growth; and • 50% of the performance options will be subject to a hurdle based on relative TSR. The ROFE measure has been removed from the FY19 plan. The ROFE measure was designed to support the ‘New Myer’ capital raising –while efficient use of shareholder funds will continue to be a priority, the Board has determined that a focus on earnings and creating shareholdervalueshould be the clear priority. Relative TSR peer Myer has refined the constituents of the TSR peergroup to better reflect sectors that have similar economic group drivers. Myer Annual Report 2018 27