101 Vodafone Group Plc Annual Report 2026
Strategic report
Governance
Financials
Other information
Letter from the Remuneration Committee Chair continued
Policy consultation and proposed changes Over the last year the Committee reviewed our current Policy and developed its proposals to better align our Long-Term Incentive with our strategy. A crucial part of this process has been actively engaging with a variety of shareholders, investor bodies and proxy agencies to discuss their views on the proposals before finalising the Policy which will be submitted for approval at the 2026 AGM. We were pleased that these stakeholders expressed support for the changes outlined and clearly understood the strategic rationale of how the proposals support the broader Company objectives. I would like to thank those we engaged with for their valuable input and thoughtful questions which helped us refine the detail of our proposed Policy. The below table summarises the key changes proposed and the rationale for each item. Only item one below represents a change to the Policy; item two is a matter of policy implementation but the Committee recognise that this is a critical aspect of how remuneration is operated and supports the strategy. Other key aspects of policy are unchanged, such as incentive maximum opportunity levels, the GSTIP structure and share ownership requirements. These are included in our Policy on pages 104 to 106. Summary of proposed changes Item Current design Proposed change Further detail Rationale 1
Introduction of Market Value Share Options (‘MVSO’) in addition to the existing Global Long Term Incentive (‘GLTI’).
The Long-Term Incentive is fully delivered through the GLTI, of which shareholder returns are measured through the Relative TSR measure (30% of award).
To provide a simple, growth‑focused incentive that strengthens alignment between management and shareholders by directly linking the value of awards to absolute share price growth. In addition, share options are expected to support the Group’s ability to attract and retain high‑calibre talent, particularly within the technology sector and in markets beyond the UK, to support the next phase of growth.
– Share options will replace a portion of the GLTI on a neutral fair value basis, with no increase to the overall variable incentive opportunity for Executive Directors. – The MVSO opportunity level will be equivalent to 30% of the Executive Director’s maximum opportunity level. – The options will vest three years after grant and remain exercisable for a further seven years. – The exercise price of the options will be set using the prevailing share price at the time of grant. – The number of options granted will be determined by reference to the Black-Scholes valuation each year prior to grant. – Relative TSR will be removed as a measure. – Weight of Adjusted Free Cash Flow (FCF) rebalanced to 90% (currently 60%). – The remaining 10% will continue to be linked to ESG ambitions.
Adjustment of the GLTI performance measures and weightings.
2
60% Free Cash Flow, 30% Relative TSR, and 10% ESG.
Address existing challenges with Relative TSR measure and relevance of peer group. The size of the TSR peer group has reduced from nine companies in 2022 to six companies for the 2026 award. In addition, the relevance of certain constituents has diminished following the Group’s recent resizing of the portfolio. As the Group has evolved, and as the telecoms sector has continued to consolidate, it has become increasingly difficult to identify additional peers that are both suitable and sufficiently comparable. Against this backdrop, the Committee concluded that it was appropriate to remove the relative TSR metric. This decision was further supported by the strengthened focus on share price growth through the introduction of the MVSO award. Furthermore, the significant weighting on FCF within the GLTI is considered fully appropriate for the business at this point in time. Discussions with shareholders and the Board have consistently highlighted the critical importance of FCF in supporting capital investment in the network and digital services, servicing customers, and funding sustainable returns for shareholders. The Committee is cognisant of the importance of robust target‑setting, particularly given the increasing prominence of free cash flow, to ensure that targets remain appropriately stretching and aligned with the delivery of the Group’s strategic objectives. While FCF operates as a measure in both the annual bonus and the LTIP, the Committee considers this appropriate due to the balance of the varying calibration and time horizons, as well as the desire to incentivise the broader workforce on FCF through the GSTIP.
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