Our remuneration policy has the objective of providing remuneration in a form which will attract, retain and motivate members of the Board of Management as top managers of a major international company, while protecting and promoting the company’s objectives. The aim is to provide remuneration at the median level of the external market.
The total remuneration package of the members of the Board of Management consists of:
- Base salary
- Performance-related short-term incentive (STI), with shareholding requirement related share matching opportunity
- Performance-related long-term incentive (LTI) in the form of shares
- Pensions and similar retirement provisions
- Other benefits
The various elements of the remuneration package are set out in more detail below.
The base salary is determined by the Supervisory Board.
Short-term incentive (annual bonus)
The target STI is 100 percent of the base salary for the CEO and 65 percent of the base salary for the other members. The threshold for pay-out is the achievement of 80 percent of the targeted financial performance criteria. The pay-out is maximized at 150 percent of the base salary for the CEO and at 100 percent of the base salary for the other members. The STI is linked to the company’s EVA and EBITDA and the individual and qualitative targets of the members of the Board of Management. More specifically, 35 percent of the short-term incentive opportunity is linked to EVA, 35 percent is linked to EBITDA and the remaining 30 percent is linked to individual and qualitative targets, including non-financial targets. The specific targets are determined by the Supervisory Board.
The LTI consists of performance-related shares. Under the performance share plan, shares are conditionally granted to the members of the Board of Management. Vesting of these shares is conditional on the achievement of performance targets during a three-year period. Achievement of the performance targets is determined by the Supervisory Board in the first quarter of the year following the three-year performance period. The number of vested shares is adjusted for dividends paid over the three-year performance period. The retention period for the shares expires five years after the conditional grant.
Because sustainability is considered key to our long-term future, 50 percent of the conditional share grant is linked to AkzoNobel’s relative sustainability performance. For the 2011 grant and onwards, the sustainability performance is measured as AkzoNobel’s average score in the SAM ranking during the three-year performance period. The remaining 50 percent of the conditional grant of shares is linked to AkzoNobel’s relative Total Shareholder Return (TSR) performance compared with the companies in a defined peer group. This peer group and the vesting scheme are determined by the Supervisory Board. In each case, the maximum at vesting is 150 percent of the relevant part of the conditional grant.
Shareholding requirements and share matching
As of 2012, the CEO and other members of the Board of Management are required to build up, over a five-year period from the date of appointment, and then hold, at least three times respectively one time their gross base salary in AkzoNobel shares for the duration of their tenure as member of the Board of Management.
Board members who have not yet achieved their minimum shareholding are required to invest one-third of the short-term incentive they receive (net after tax and other deductions) in AkzoNobel shares. As further encouragement to build up the minimum holding requirement, Board members who invest up to a second third of their short-term incentive in shares will have such shares matched by the company, one on one, after three years from the date of purchase of the shares, on the condition that the Board member still holds these shares and showed a sustained performance during the three-year period, as determined by the Supervisory Board.
Board members who continue to invest their short-term incentives in whole, or in part, in shares after the minimum holding requirement has been reached, will have the opportunity to have such shares matched subject to the same conditions, except that such shares will be matched with one share to every two shares thus acquired and that no shares will be matched to the extent that shares were purchased with more than two-thirds of the Board member’s net annual short-term incentive.
Pension and similar retirement provisions
Members of the Board of Management receive a contribution towards pension and similar retirement benefits, as determined by the Supervisory Board.
Other benefits – such as a company car and allowances – are determined by the Supervisory Board.
Claw back and value adjustment
The Supervisory Board may claw back variable pay components paid to members of the Board of Management in the event that such variable pay components were based on financial information which is shown within a certain period of time to be materially incorrect.
Pursuant to the rules of the performance share plan and provision II.2.10 of the Code, the Supervisory Board has the power to adjust the outcomes of the STI or the LTI vesting schedules if, given the circumstances, this would reflect a fairer measure of performance, provided that targets, in the opinion of the Supervisory Board, are not more easy or difficult to be satisfied.
The company does not grant any personal loans to its Board members.