Remuneration report

This report includes both a summary of our Board of Management and Supervisory Board remuneration policies, and our annual report on remuneration, which sets out how our policy was applied in 2021 – and how it will be applied in 2022. On April 22, 2021, the AGM approved the new remuneration policies for the Board of Management, with a majority of 86.3% of the votes, and for the Supervisory Board, with a majority of 99.0% of the votes.

Changes in the remuneration policy for the Board of Management compared with the previous policy are as follows:

1. We decided to update the labor market peer group and only include EU peers.

Dutch

  • ASML
  • DSM
  • Philips
  • Randstad
  • RELX
  • Signify
  • Wolters Kluwer

European

  • Air Liquide
  • Arkema
  • Clariant
  • Covestro
  • Evonik Industries
  • Givaudan
  • Henkel
  • Lafarge
  • Holcim
  • Sika
  • Solvay

As AkzoNobel seeks to outperform its sector peers and aims to attract high caliber members of the Board of Management, a competitive reference point for total remuneration is set between median and third quartile of the European peer group: median for base salary and STI and between median and third quartile for LTI. Remuneration increases above the median market level are reserved for Board of Management members who consistently outperform their targets.

2. To support transparency and alignment with the strategic plan, the list of STI metrics chosen from each year is being replaced by specific STI metrics that will be applicable throughout the effective period of the policy. Metrics for the STI and LTI are directly derived from the strategic plan and have been updated compared with the previous policy.

3. In order to reach the competitive total compensation level, and in line with market practice, the on-target value of the variable remuneration has been adjusted. For the CFO, the on-target short-term incentive (STI) level has been increased from 65% to 80% of base salary. For the CEO, the LTI has been increased from 150% to 200% of base salary, emphasizing the long-term focus of the pay-for-performance relationship.

4. As the Performance Incentive Plan concluded in 2020, from 2021 onwards, the temporary suspension of the Share-Matching Plan is being lifted as planned. This reiterates the importance of share ownership, which underpins alignment over the long term. The Share-Matching Plan is being simplified by removing the link between allowed investment and the share-matching level, and the fulfillment of the Share Ownership Requirement (SOR).

Changes in the remuneration policy for the Supervisory Board compared with the previous policy are summarized below:

An external consultant has carried out an external benchmark of Supervisory Board membership fees versus AEX companies and AkzoNobel’s European remuneration peer group. Based on this benchmark, the Board concluded that the level of the fixed fees – which have remained unchanged since 2014 – fell short of a competitive level. The fixed fees for Supervisory Board members have therefore been increased: by €20,000 for the Chair and the Deputy Chair, and by €15,000 for the other members. Committee fees and the attendance fee for meetings outside the country of residence remain unchanged.

Visit our website for a full description of the remuneration policy for the Board of Management and the Supervisory Board.

The 2020 Remuneration report received 49.7% of favorable votes at the (advisory vote). Investors and other stakeholders explained they would have liked more details on the Board of Management’s personal objectives relating to the short-term incentive. They also perceived a lack of transparency on the discretionary adjustment to evaluate performance against the target for long-term incentives, which was set at the beginning of 2018 to align with the new Grow & Deliver strategy. This 2021 report includes improvements in transparency on the relevant personal objectives, as requested, and is subject to an advisory vote at the 2022 AGM.

Strategic focus

We have a clear strategic focus to become the reference in paints and coatings, with strong global brands, leading market positions and a balanced geographic exposure across all regions. We strive to outperform our competitors, to deliver a solid return to our shareholders and to achieve long-term sustainable value creation for all our stakeholders.

Our Grow & Deliver strategy is aimed at achieving growth at least in line with our , while delivering further profitability improvement. Revenue growth, and return on investment are the prime success indicators of this balanced approach. The Supervisory Board closely monitors realization of the strategy and regularly discusses progress with the Board of Management.

The overriding importance of our long-term sustainable value creation is reflected in the composition of the remuneration packages for members of our Board of Management and Supervisory Board, as it is essential to attracting and retaining high caliber members to our Board of Management and Supervisory Board. The revised European directive on the encouragement of long-term shareholder engagement (SRD II), and its codification in Dutch law, have been considered in the disclosure presented in this report.

AGM or EGM

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

ROI (return on investment)

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

Relevant markets

Segments and regions of the paints and coatings industry from which AkzoNobel generates revenue.

EBITDA

Operating income excluding depreciation and amortization.