Note 4: Employee benefits

Salaries, wages and other employee benefits in operating income

 

 

 

 

 

In € millions

 

2013

 

2014

Salaries and wages

 

(2,268)

 

(2,226)

Post-retirement cost

 

(268)

 

(221)

Other social charges

 

(414)

 

(377)

Total

 

(2,950)

 

(2,824)

Average number of employees

 

 

 

 

 

Average number during the year

 

2013

 

2014

Decorative Paints

 

16,800

 

15,500

Performance Coatings

 

21,300

 

21,000

Specialty Chemicals

 

10,600

 

10,000

Corporate and other

 

1,500

 

1,700

Total

 

50,200

 

48,200

The average number of employees working outside the Netherlands was 43,100 (2013: 45,000).

Employees

 

 

 

 

 

At year-end

 

2013

 

2014

Decorative Paints

 

16,200

 

15,200

Performance Coatings

 

21,400

 

20,500

Specialty Chemicals

 

10,400

 

9,800

Corporate and other

 

1,600

 

1,700

Total

 

49,600

 

47,200

At year-end 2014, the workforce has contracted by 5 percent to 47,200 employees (year-end 2013: 49,600 employees). The decrease was mainly due to:

  • A decrease of 400 employees due to divestments
  • A decrease of 2,000 employees due to ongoing restructuring

Share-based compensation

Share-based compensation relates to the performance-related share plan, as well as the share-matching plan. Charges recognized in the 2014 statement of income for share-based compensation amounted to €34 million and are included in salaries and wages (2013: €43 million).

Performance-related share plan

Under the performance-related share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee and executives each year. The number of participants of the performance-related share plan at year-end 2014 was 635 (2013: 689).

Performance-related shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series

 

Balance at January 1, 2014

 

Granted in 2014

 

Vested in 2014

 

Forfeited in 2014

 

Dividend in 2014 1

 

Balance at December 31, 2014

 

Vested on January 1, 2015

1

Equivalent in shares related to accumulated dividend, which is included in the balances on balance sheet date.

2011 – 2013

 

641,024

 

 

(641,024)

 

 

 

 

2012 – 2014

 

1,113,235

 

4,782

 

 

(313,397)

 

19,205

 

823,825

 

823,825

2013 – 2015

 

762,959

 

7,608

 

 

(54,709)

 

17,508

 

733,366

 

2014 – 2016

 

 

647,299

 

 

(43,780)

 

15,933

 

619,452

 

Total

 

2,517,218

 

659,689

 

(641,024)

 

(411,886)

 

52,646

 

2,176,643

 

823,825

The 2012 conditional grant of shares is linked for 50 percent to the ranking of the company in the Robeco-SAM benchmark (SAM) and the remaining 50 percent to the relative TSR performance of the company compared with the peer group. As from the series 2013-2015, an additional performance measure has been added: return on investment (ROI). At the same time, the weighting changed to 35 percent for both TSR and ROI and 30 percent for SAM.

The shares of the series 2011-2013 have vested and were delivered to the participants in 2014.

The conditional shares of the 2012-2014 series vested as follows:

  • Our TSR performance over the period 2012-2014 resulted in a ninth position within the ranking of the peer group companies. This did not result in vesting of conditional shares
  • The average position in the RobecoSAM benchmark resulted in a first position within the ranking

As a result, the conditional shares of the 2012-2014 series vested for 75 percent (series 2011-2013: 70.83 percent), including dividend shares of 9.62 percent, the final vesting percentage amounted to 82.22 percent (series 2011-2013: 77.98 percent).

The fair value of the performance-related share plan at grant date is amortized as a charge against income over the three-year vesting period. The fair value for the shares conditionally started in 2014 without a holding restriction was €54.55 and €44.60 with a holding restriction (2013: €52.15 without and €42.30 with a holding restriction).

The share price of a common AkzoNobel share at year-end amounted to €57.65 (2013: €55.71). For further details on our performance-related share plan, refer to the Remuneration report.

Fair value of performance-related shares

The fair value of the performance-related shares (€51.73) was for 35 percent based on a market condition (TSR: €42.99) and for 65 percent based on non-market based performance conditions (€56.44).

The TSR part of the award is valued applying a Monte Carlo simulation model and the other part is valued based on the share price at grant date discounted for the present value of expected dividends over the vesting period.

Furthermore, for members of the Executive Committee, an additional holding restriction applies after the vesting period, up to a total of five years. Regarding this restriction an additional discount is taken into account. This leads to a lower fair value for their awards (€44.60).

The parameters applied for the fair value calculations are: share price at date of grant (opening of January 2, 2014): €56.44, expected volatility: 28.20 percent, expected dividend yield: 3.04 percent; and risk-free interest rate: 0.54 percent.

For the peer group (TSR) please refer to the Remuneration report.

Share-matching plan

The members of the Board of Management and the members of the Executive Committee are eligible to participate in the share-matching plan. Under certain conditions, members who invest part of their short-term incentives in AkzoNobel shares may have such shares matched by the company. The investment in AkzoNobel shares in 2014 resulted in a total of 5,205 potential matching shares (2013: 2,820).

The fair value of the potential matching shares at the date of the share investment is amortized as a charge against income over the three-year vesting period. The fair value was €49.96 per potential matching share in 2014 (2013: €40.67).