Note 7: Employee benefits

Salaries, wages and other employee benefits in operating income

In € millions

2020

2021

Salaries and wages

(1,449)

(1,395)

Post-retirement cost

(138)

(115)

Other social charges

(263)

(263)

Total

(1,850)

(1,773)

Average number of employees of total AkzoNobel

Average number during the year

2020

2021

Decorative Paints

12,100

12,500

Performance Coatings

17,500

17,000

Corporate and other

3,400

3,200

Total

33,000

32,700

Average number of employees in the Netherlands

Average number during the year

2020

2021

Decorative Paints

600

600

Performance Coatings

1,000

1,100

Corporate and other

700

700

Total

2,300

2,400

Employees

At year-end

2020

2021

Decorative Paints

11,900

12,500

Performance Coatings

17,100

17,200

Corporate and other

3,200

3,100

Total

32,200

32,800

The average number of employees working outside the Netherlands was 30,300 (2020: 30,700).

In 2021, the number of employees increased by 2% to 32,800 people (year-end 2020: 32,200 people). Acquisitions in 2021 added around 400 people.

Employee benefit costs in 2020 included €33 million compensation related to government support measures for COVID-19. For 2021, this number is not material.

Share-based compensation

Share-based compensation relates to the equity-settled performance-related share plan and the restricted share plans, as well as the share-matching plan. Charges recognized in the 2021 statement of income for share-based compensation amounted to €18 million and are included in salaries and wages (2020: €14 million).

Performance-related and restricted share plan

Under the performance-related share plan and the restricted share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee, executives and certain other employee categories each year. The number of participants of the performance-related share plan and the restricted share plan at year-end 2021 was 479 (2020: 335). The shares of the performance-related share plan series 2018-2020 have vested and were delivered to the participants in 2021.

Share plans of AkzoNobel executives

Plan

Performance/Vesting period

Award
date

Vesting date

End of holding period

Balance at January 1, 2021

Awarded in 2021

Vested in 2021

Forfeited in 2021

Dividend in 2021

Subject to performance condition

Unvested in 2021

Subject to holding period

Balance at December 31, 2021

2018-2020 Restricted Share Plan

3 years

1/1/2018

1/1/2021

1/1/2022

167,020

(167,020)

NA

167,020

2018-2020 Performance Share Plan

3 years

1/1/2018

1/1/2021

1/1/2023

70,034

(70,034)

70,034

2019-2021 Restricted Share Plan

3 years

1/1/2019

1/1/2022

1/1/2023

186,870

1,883

(22,390)

(8,908)

 

NA

157,455

157,455

157,455

2019-2021 Performance Share Plan

3 years

1/1/2019

1/1/2022

1/1/2024

75,531

(31,151)

1,450

45,830

45,830

45,830

45,830

2020-2022 Restricted Share Plan

3 years

1/1/2020

1/1/2023

1/1/2024

176,686

2,843

(6,083)

(16,351)

NA

157,095

157,095

157,095

2020-2022 Performance Share Plan

3 years

1/1/2020

1/1/2023

1/1/2025

58,247

4,520

(3,252)

1,177

60,692

60,692

60,692

60,692

2020-2022 Restricted Share Plan

3 years

4/1/2020

4/1/2023

NA

6,590

(700)

NA

5,890

5,890

2021-2023 Restricted Share Plan

3 years

4/1/2021

4/1/2024

4/1/2025

187,123

(373)

(9,803)

NA

176,947

176,947

176,947

2021-2023 Performance Share Plan

3 years

1/1/2021

1/1/2024

1/1/2026

67,974

(5,764)

1,194

63,404

63,404

63,404

63,404

2021-2023 Restricted Share Plan

3 years

4/1/2021

4/1/2024

NA

27,620

(480)

NA

27,140

27,140

2021-2023 Reappointment Award*

NA

4/22/2021

NA

4/20/2023

17,500

(17,500)

17,500

Total

 

 

 

 

740,978

309,463

(283,400)

(76,409)

3,821

196,926

694,453

915,977

694,453

*

Or the actual date of the AGM in which Mr. Vanlancker will relinquish his position as CEO.

In 2021, Mr. Vanlancker was granted a special grant of 17,500 shares to compensate for the loss of shares due to the two-year re-appointment and the fact that shares granted as from 2021 will only vest on a pro-rated basis. The special grant was not subject to performance conditions, but a restriction date of April 20, 2023 applies.

The performance targets for the conditional grant of performance-related shares of the 2019-2021 and 2020-2022 plans for the Board of Management and the Executive Committee are linked for 50% to the relative performance of the company compared with the peer group and for 50% to the performance of the company. The targets for the 2021-2023 performance related share grant are for 20% linked to Revenue Growth, for 40% to , for 20% to ROI and for 20% to performance against Environmental, Social and Governance (ESG) KPI’s. A two-year holding restriction applies.

The plan for the executives and certain other employee categories is a restricted share plan without any performance conditions, whereby the conditional grant of shares will vest upon the condition that they remain in service with the company during the three-year vesting period. A one-year holding restriction applies for the executives.

The conditional shares of the 2019-2021 performance share plan vested for 58.33% (series 2018-2020: 78%), including a dividend yield of 13.14% (series 2018-2020: 14.37%), the final vesting percentage amounted to 66.00% (series 2018-2020: 89.21%).

The share price of a common AkzoNobel share at year end 2021 amounted to €96.50 (2020: €87.86).

Fair value of restricted and performance-related shares

The fair value of the restricted shares of the 2021-2023 grant, amounting to €80.63, is based on the share price on March 3, 2021 of €87.40 and the expected dividend yield of 2.65%. As for the 2021-2023 grant of performance-related shares all conditions are non-market based performance conditions, the fair value of the performance related shares is based on the share price as per April 22, 2021, the date of the at which the new LTI performance criteria for the Board of Management were approved. In the same meeting, the special grant to Mr. Vanlancker was also approved, therefore the same fair value applies for these shares. The fair value of the performance-related shares of the 2018-2020, 2019-2021 and 2020-2022 grant is for 50% based on a market condition (TSR) and for 50% based on a non-market-based performance condition (ROI).

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. The parameters applied for the fair value calculations are: share price at grant date (opening of first trading date from grant date), expected volatility (based on the share price development over the past three years of AkzoNobel), and risk-free interest rate (based on a Dutch zero-coupon government bond).

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. However, they will not be eligible for matching shares for the years 2019, 2020 and 2021. Under certain conditions, members who invest part of their short-term incentive in AkzoNobel shares may have such shares matched by the company. During 2021, 1,720 potential matching shares were matched based on the conditional share matching grants of the 2018 series, leading to no potential matching shares on December 31, 2021. In 2022, the members of the Board of Management and the members of the Executive Committee will become eligible for matching shares by investing part of their 2021 short-term incentive that is paid in 2022 in AkzoNobel shares.

TSR (total shareholder return)

Compares the performance of different companies’ stocks and shares over time. Combines share price appreciation and dividends paid to show the total return to shareholders. The relative TSR position reflects the market perception of overall performance relative to a reference group.

ROI (return on investment)

ROI is adjusted operating income of the last 12 months as a percentage of average invested capital.

Adjusted EBITDA

Adjusted EBITDA is operating income excluding depreciation, amortization and identified items.

AGM or EGM

Annual General Meeting of shareholders; Extraordinary General Meeting of shareholders.