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## REMUNERATION REPORT (AUDITED) 

## 4. EXECUTIVE REMUNERATION CHANGES FOR 2014 

The Board, through the P&CC, undertook a comprehensive review of the Group’s remuneration arrangements during the year in the context of the industry changes and the market in which Fairfax is currently operating. The Board recognises that, at this pivotal point in the Company’s life cycle, the remuneration and incentive framework needs, more than ever, to be generally market competitive (to guard against key people leaving the business) and to drive a performance culture, encouraging and rewarding the achievement of milestones in the transformation strategy. 

The review confirmed that the current remuneration arrangements are not appropriate to motivate executives to achieve the transformation proposed over the coming years, the current performance metrics, in particular, do not support achievement of the transformational objectives. 

The Board, however, is acutely aware of the position of shareholders and the levels of return over recent years. Accordingly, a key objective of the review was to achieve a remuneration framework that rewards performance, but ensures that such reward is aligned with shareholder interests. 

The key considerations and outcomes from the review in respect of remuneration arrangements for the executive KMP are set out in the following table: 

<img src='content_image/215568.jpg'>

The Board is confident that this new remuneration structure better aligns executive rewards with our shareholders over the medium and longer term and provides an appropriate incentive to deliver our strategy. 

