Performance share plan

In line with the remuneration policy, as applicable in previous grant years, vesting of 50 percent of the shares conditionally granted in 2011 under the performance share plan (in respect of which the performance period ended on December 31, 2013) was linked to AkzoNobel’s relative sustainability performance by taking AkzoNobel’s average position in the RobecoSAM ranking.

For all conditional grants made in 2011, the relevant vesting scheme has been determined by the Supervisory Board as follows:

Average position in RobecoSAM ranking during performance period

 

 

 

Rank

 

Vesting (as % of half of conditional grant)

1

 

150%

2

 

125%

3

 

100%

4 – 6

 

75%

7 – 10

 

50%

11 – 15

 

25%

Below 15

 

0%

AkzoNobel ranked first in 2013 and 2012 and second in 2011 in the relevant RobecoSAM ranking. As a result, AkzoNobel’s sustainability performance over the period 2011 through 2013 resulted in a vesting of 141.7 percent for this part of the long-term incentive.

For the 2011 award, the remaining 50 percent was linked to AkzoNobel’s relative total shareholder return (TSR) performance compared with the companies in a defined peer group.

Independent external specialists conduct an analysis to calculate the number of shares that will vest according to the TSR ranking. In order to adjust for changes in exchange rates, all local currencies are converted into euros. The relative TSR performance is compared with a peer group as determined by the Supervisory Board.

The peer group currently consists of the following companies:

  • Arkema
  • DuPont
  • Kansai Paint
  • Kemira OYJ
  • Nippon Paint
  • PPG Industries
  • RPM Industrial
  • Sherwin-Williams
  • Solvay
  • Valspar Corporation
 

This peer group is reviewed on a regular basis to ensure that the companies in the group remain appropriate peers. Occasionally, changes need to be made, particularly if one of the companies in the peer group is taken over. The Supervisory Board will see to it that, to the extent reasonably possible, a replacement has no impact on the company’s relative TSR ranking.

The following vesting scheme has been applied in respect of the conditional grants made in 2011:

TSR vesting scheme for the conditional grants

 

 

 

Rank

 

Vesting (as % of half of conditional grant)

1

 

150%

2

 

135%

3

 

120%

4

 

100%

5

 

75%

6

 

50%

7

 

25%

8 – 11

 

0%

AkzoNobel’s TSR performance over the period 2011 to 2013 resulted in a tenth position within the ranking of the peer group companies. This ranking did not result in any vesting of shares for the TSR part of the share plan.

Based on AkzoNobel’s combined sustainability and TSR performance, the final vesting percentage of the 2011 conditional grant after including the dividend yield during the performance period (determined to be 10.09 percent), equalled 77.98 percent.

This resulted in a total vesting of 77.98 percent of the shares that were conditionally granted in 2011. Upon its ex-post review of the relationship between the chosen performance criteria and the strategic objectives applied, and of the relationship between remuneration and performance, the Supervisory Board, given the importance of the link between the variable remuneration and the company’s strategic ambitions, decided not to make any correction in respect of the definitive award.

The number of performance-related shares conditionally granted under the 2013 plan amounted to 24,200 for the CEO and 18,200 for the CFO. The former members of the Board of Management who left the company during 2013 received pro-rata conditional grants under the plan.

The above vesting schemes apply in respect of conditional share grants made until 2013. As of 2013, the relative weighting is ROI performance 35 percent, TSR ranking 35 percent and SAM ranking 30 percent. No further amendments have been made to the sustainability and TSR schemes. The Supervisory Board has set the ROI metric applied in the LTI for 2013 and to be achieved by the end of 2015 as follows:

ROI vesting scheme of conditional grant series 2013-2015

 

 

 

Performance

 

Vesting (as % of 35% of conditional grant)

≥ 16.5%

 

150%

14.0% to 16.5%

 

linear

14.0%

 

100%

12.5% to 14.0%

 

linear

12.5%

 

50%

< 12.5%

 

0%

A performance between the above points will be measured on a linear scale.

In accordance with provision II.2.13d of the Code, the schedule at the end of this remuneration report sets out for 2008 onwards (i) the number of at target shares conditionally granted; (ii) the number of shares which have vested; (iii) the number of shares held by members of the Board of Management at the end of the lock up period; (iv) the face value at the conditional share grant, at vesting and at the end of the lock up period respectively.

In accordance with the company’s Articles of Association, the Code and the rules of the performance share plan, the number of shares to be conditionally granted to members of the Board of Management is determined by the Supervisory Board, within the limits of the remuneration policy and the maximum number of shares as adopted and approved, respectively, by the AGM. The Supervisory Board has decided that where, in the event of a takeover, the payout under the performance share plan is between 100 percent and 150 percent, it will, at its discretion – taking into account the performance of the company prior to the takeover bid – decide whether the projected outcome is fair and may decide to adjust the vesting upwards or downwards within the bandwidth mentioned. This does not affect the discretion the Supervisory Board has to correct the variable remuneration of the Board of Management upwards or downwards in exceptional circumstances. It is noted that a takeover would not influence the RobecoSAM sustainability ranking of the company nor the ROI performance and therefore the Supervisory Board will in such event primarily take into account the company’s TSR performance.

Valuation1 shares Board of Management

Unconditional shares, vested

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board Member

 

Conditional share grant

 

Number of vested shares

 

End of lock up period (5 years after grant)

 

 

Series

 

Number

 

Value at grant in €

 

Number

 

Value at vesting in €

 

Number

 

Value in €

Keith Nichols

 

Series 2008 - 2010

 

8,733

 

478,481

 

 

 

 

 

 

Series 2009 - 2011

 

27,400

 

806,656

 

19,125

 

714,510

 

9,563

 

538,779

 

 

Series 2010 - 2012

 

18,300

 

849,120

 

13,471

 

670,115

 

6,738

 

NA

 

 

Series 2011 - 2013

 

18,600

 

864,714

 

14,504

 

817,171

 

 

NA

Conditional shares, not vested

 

 

 

 

 

 

 

 

 

 

 

Board Member

 

 

 

Conditional share grant at  target

 

Vesting at min performance

 

Vesting at max performance

 

 

Series

 

Number

 

Value at grant in €

 

Number

 

Number

Ton Büchner

 

Series 2012 - 2014

 

31,900

 

1,191,784

 

 

47,850

 

 

Series 2013 - 2015

 

24,200

 

1,203,829

 

 

36,300

 

 

Matching shares 2012 (vesting 2016)

 

10,810

 

403,862

 

 

10,810

 

 

Matching shares 2013 (vesting 2016)

 

1,429

 

71,086

 

 

1,429

Keith Nichols

 

Series 2012 - 2014

 

23,900

 

892,904

 

 

35,850

 

 

Series 2013 - 2015

 

18,200

 

905,359

 

 

27,300

1 Values based on the share price on January 1 of the relevant financial year (face value).