THE Jefferson Smurfit Group is changing the way bonus payments for its chairman are calculated. The decision could lead to total bonus payments of Pounds 20 million to Dr Michael. Smurfit over four years if certain targets are achieved.
Historically, Dr Smurfit's annual bonus was based on the overall profit performance of the group for the relevant year. This year a new incentive package has been introduced consisting of a maximum annual bonus of Pounds 2.5 million, based on the profit performance of the group, and a long term incentive plan based on total shareholder return.
The long term incentive is based on the increase in the share price plus net dividends paid over the four years from January 1st, 1996. Under the plan, no payment would be made unless total shareholder return over the four year period was at least 11.5 per cent a year compounded annually. The maximum payment would only be made if total shareholder return equalled or exceeded 18 per cent a year.
The group annual report shows that nine executive directors shared salaries, bonuses and other payments of Pounds 12.6 million for 1995, an average of Pounds 14 million each. Some Pounds 9.7 million of the total comprised bonus payments
No breakdown is given of the bonus payments, or of payments to the highest paid director. Pension contributions for executive directors totalled Pounds 900,000.
Included in the annual report is a report from the compensation committee of non executive directors. It points out that the chairman's contract with the group expires in January 2000.
But it adds that Dr Smurfit can terminate the contract, if, as a result of the acquisition of 30 per cent or more of the company, a bid has to be made for the company. In this event, Dr Smurfit would be entitled to a lump sum payment "calculated by reference to 90 per cent of five times his annual remuneration".
Commenting on executive remuneration, the committee says that the group expects "top levels of ability and commitment from all members of management. In return, it aims to provide a high level compensation package, linked to the financial prosperity of the company and its shareholders.
Base salaries reflect job responsibilities and range from median to upper levels in the appropriate market for comparable companies, according to the report.
There is a performance related bonus scheme for executive directors other than the chairman. This is based on the profit performance of the group, of the executive's segment of the business and on other performance targets.
Executive directors can also benefit under the company's share option plan. Half of a director's options can be exercised if earnings per share (EPS) growth over at least three years exceeds growth in the Consumer Price Index over the same period.
The remaining options are exercisable if EPS growth over a period of at least five years places the group in the upper quartile of FTSE 100 companies ranked by EPS growth over the same period. BULA Resources has started drilling a second development well at the Salymskoye field in western Siberia. Bula has a 12.5 per cent stake in the field which has the Potentia to produce 250,000 barrels of oil a day within the next two years, according to chairman Mr Jim Stanley. The first development well to be drilled by the joint venture between Bula and the Russian owners of the field was started in March.
The project is ahead of target and under budget, says Mr Stanley. Bula is concentrating on the Salymskoye project due to the on going difficulties with its other Russian project, where its partner is the Russian Corporation. Bula is seeking to remove two Russian Corporation shareholders who sit on its board at an e.g.m. next week.
