Annual Report 200476
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2004
26. Specified Director and Specified Executive Disclosures (continued)
(c) Remuneration of Specified Directors and Specified Executives (continued)
Senior Executives
Remuneration Objectives and Principles
The objectives of the Company’s remuneration policy are to attract, retain and motivate appropriately qualified and experienced executives
capable of discharging their respective responsibilities to enable the Company to achieve its business strategy.
The principles underlying the remuneration policy are: to realistically reflect the responsibilities of executives and other employees; to be
industry competitive and reasonable; that a significant portion of remuneration be at risk against individual and company performance and
shareholder wealth creation; that performance, not failure, be rewarded so that the Company’s best performers receive more; and to encourage
executives to manage from the perspective of the shareholders by rewarding them for aligning Company and shareholder returns.
Remuneration Structure
The Company’s remuneration structure for its non-award employees is based upon Target Total Remuneration (“TTR”), the components of which
comprise:
• a fixed component called Fixed Annual Remuneration (“FAR”); and
two variable components, called:
• the Short Term Incentive (“STI”) and
• the Long Term Incentive (“LTI”).
FAR comprises salary, superannuation and benefits; is quantified by reference to role and experience; and is industry benchmarked.
STI is represented as a percentage of base remuneration which is “at risk”, consists of an annual cash bonus paid to reward performance based
on a mix of: Company performance and individual performance measured against annual scorecards with target and stretch performance criteria
determined in advance each year.
LTI in relation to executive remuneration includes a long-term performance based component in the form of equity participation through the
Santos Executive Share Option Plan (“SESOP”) and the Santos Employee Share Purchase Plan (“SESPP”). Participation is determined by the Board,
on recommendation of the Remuneration Committee, and only applies to executives who are in a position to affect shareholder returns.
Options and rights to shares issued under these Plans to senior executives are linked to the longer term performance of the Company and are
only exercisable following the satisfaction of performance hurdles that are designed to maximise shareholder wealth.
The amount of the award, and correspondingly the proportion of remuneration at risk, varies between executives according to their respective
levels of seniority and responsibility.
The rules of the SESPP and SESOP were both approved by shareholders in 1997 and again in 2000.
Having regard to contemporary best practice, the LTI program is designed to drive superior executive performance and to reward only superior
Company performance, linked to an appropriate performance benchmark. The benchmark assesses actual Company performance in terms of 
long-term comparative growth of the Company and resulting shareholder value.
Company performance is measured over a three year period based on the Company’s Total Shareholder Return (“TSR”) relative to one or more
comparator groups as determined by the Board at the commencement of the performance period including, without limitation, any combination
of the ASX100, energy companies in ASX100, the ASX Energy Index and international exploration and production companies. If performance is
below the 50th percentile, no award is made. A proportionate award is made for performance between the 50th to 75th percentile and the
maximum award is made for performance at or above the 75th percentile.
In relation to the current financial year, awards may be taken only in the form of shares pursuant to SESPP or, at the election of an executive,