REPORT OF THE COMPENSATION COMMITTEES
Carnival Corporation and Carnival plc are two separate legal entities and,
therefore, each has a separate board of directors, each of which in turn has its own Compensation Committee. As there is a single management team, the
Compensation Committees (which have four identical members), make one set of determinations in relation to both companies.
This report of the Compensation Committees sets out the compensation policies of
the Compensation Committee with respect to the Chief Executive Officer and the four other most highly compensated executive officers for the year ended
November 30, 2004, details of whose compensation is set forth under
“Executive Compensation”
in accordance with U.S. Securities and
Exchange Commission requirements. Further information on our compensation policies as required under applicable UK law is set out in the Carnival plc
Directors’ Remuneration Report, which is attached as Annex E to this proxy statement.
The Compensation Committees are responsible for annually approving the cash
compensation, including annual performance-related bonuses, payable to the executive officers and for the administration of the Carnival Corporation
and Carnival plc equity-based incentive plans.
The Compensation Committee for each of Carnival Corporation and Carnival plc is
currently comprised of Modesto A. Maidique, Richard J. Glasier, John P. McNulty and Sir John Parker, each of whom is independent as defined by the
listing standards of the NYSE and the UK Combined Code.
Compensation Philosophy
The key components of the compensation of the Chief Executive Officer and the other
executive officers are base salary, annual performance-related bonus and equity-based incentives. The overall objective is to position the total
potential compensation at approximately the 75
th
percentile of comparator group of U.S. companies (being companies of similar size in the
entertainment, hospitality and media industries) (the “Comparative Group”), as well as to provide both short-term rewards and long-term
incentives for positive individual and corporate performance.
Carnival Corporation & plc is a global entity with executives working and
living in different parts of the world with a majority of senior employees located in the U.S., and most of the remainder in the UK and Italy. As a
global entity, it is challenging to establish consistent compensation practices across geographic and corporate lines that satisfy the particular
requirements of all jurisdictions. Since the largest presence of executives is in the U.S., U.S. compensation practice shapes our compensation policy.
However, the Compensation Committees seek to incorporate UK compensation principles, including the UK Combined Code, as far as practicable, unless the
application of those principles would be uncompetitive in the U.S. or other markets, would result in substantial inconsistencies within the Carnival
Corporation & plc group, or would restrict the Carnival Corporation & plc group’s ability to transfer executives between brands. The
overall remuneration objective is to pay high rewards for the continued delivery of high performance from a modest base salary.
The various components of executive compensation are discussed below.
Base Salaries
Overall, the base salaries of the executive officers, including the base salary of
the Chief Executive Officer, are set at a level the Compensation Committees believe to be at approximately the 50
th
percentile of the
Comparative Group. The objective is to emphasize the performance-related annual bonus as the most important cash compensation feature of executive
compensation as a reward for contributions made towards achieving Carnival Corporation & plc’s goals, including profitability.
Bonuses
The bonuses for each of the Chief Executive Officer and the Chief Operating Officer
were determined by the Compensation Committees after taking into account the operating income of Carnival Corporation & plc, the individual
performance of such executives and the shareholder return reflected in the Stock Performance Graphs appearing elsewhere in this proxy
statement.
The annual bonuses to the heads of our operating companies are based on the
financial performance of their respective operating units. The annual bonus to Robert H. Dickinson is based on the financial
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performance of Carnival
Cruise Lines and determined pursuant to the terms of the 1994 Carnival Cruise Lines Key Management Incentive Plan (the “CCL Plan”). Beginning
in fiscal 2005, Mr. Dickinson’s annual bonus will be determined in accordance with a new management incentive plan that the Compensation
Committees recently adopted for Carnival Cruise Lines. The annual bonus for A. Kirk Lanterman, the former Chief Executive Officer of HAL was based on
the financial performance of Hal Antillen N.V and HAL. The annual bonus for Peter G. Ratcliffe is based on the financial performance of the brands for
which he was responsible during the fiscal year (for 2004 being Cunard Line, Ocean Village, P&O Cruises, P&O Cruises (Australia), P&O
Travel, Princess Cruises, Princess Tours, Seabourn Cruise Line and Swan Hellenic).
Equity-Based Incentives
The third component of Carnival Corporation & plc’s executive compensation
is comprised of stock-based incentive plans. Whereas the cash bonus payments are intended to reward positive short-term individual and corporate
performance, grants under the equity-based plans are intended to provide executives with longer-term incentives, which appreciate in value with the
continued favorable future performance of Carnival Corporation & plc. The Compensation Committees approved individual compensation agreements that
provide for grants of stock options and/or restricted stock pursuant to the 2002 Stock Plan, the Carnival plc Executive Share Option Plan and the other
equity-based incentive plans described elsewhere in this proxy statement based on the individual performance and responsibilities of the executive
officers, taking into account the following:
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The overall financial performance of Carnival Corporation &
plc in the previous fiscal year; and
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The personal contribution that each executive has made to
the:
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development of a strategy to deliver future growth;
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ongoing
creation of a competitive cost structure; and
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overall corporate success of Carnival Corporation & plc through the spread of best practice.
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Annual grants of stock options or restricted shares pursuant to individual
compensation agreements are subject to a determination of satisfactory performance by the Compensation Committees.
Other Compensation
Carnival Corporation and Carnival plc have entered into various
compensation-related agreements with each of the executive directors and certain individual officers. See
“Executive
Compensation—Executive Long-Term Compensation Agreements”
and
“Executive Compensation—Employment Agreements.”
Such
agreements include stock compensation agreements and employment agreements. The Compensation Committees and the boards of directors will continue to
consider such arrangements in the future in connection with circumstances that warrant an individualized compensation arrangement.
In fiscal 2004, some of Carnival Corporation’s executive officers also
participated in Carnival Corporation’s nonqualified defined benefit pension plan and all were able to participate in Carnival Corporation’s
nonqualified 401(k)/profit sharing plan. In addition, two of Carnival Corporation’s executive officers participated in Carnival Corporation’s
supplemental executive retirement plan and Peter G. Ratcliffe participated in the Carnival plc UK Scheme and Supplemental Plan.
Advisors
The Compensation Committees engaged an outside compensation consultant, Watson,
Wyatt & Company, to conduct a review of executive remuneration within the Carnival Corporation & plc group. The review provided the
Compensation Committees with benchmark data on awards within the Comparative Group on the basis of which the Compensation Committees were able to frame
a more definitive compensation policy.
The Compensation Committee
of Carnival Corporation
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The Compensation Committee
of Carnival plc
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Modesto A.
Maidique, Chairman
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Modesto A. Maidique, Chairman
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Richard J.
Glasier
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Richard J. Glasier
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John P.
McNulty
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John
P. McNulty
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Sir John
Parker
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Sir
John Parker
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