Note 7: Employee benefits

The average number of employees working outside the Netherlands was 32,700 (2021: 30,300). In 2022, the number of employees increased by 7% to 35,200 people (year-end 2021: 32,800 people). Acquisitions in 2022 added around 3,000 people, mainly relating to Grupo Orbis employees.

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 2022 statement of income for share-based compensation amounted to €16 million and are included in salaries and wages (2021: €18 million).

Performance-related and restricted share plans

Under the performance-related share plan and the restricted share plans, 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 plans at year-end 2022 was 616 (2021: 479). The shares of the performance-related and restricted share plan series 2019-2021 have vested and were delivered to the participants in 2022.

The performance targets for the conditional grant of performance-related shares of the 2020-2022 plan for the Board of Management and the Executive Committee are linked for 50% to the relative TSR performance of the company compared with the peer group and for 50% to the ROI performance of the company. The targets for the 2021-2023 and 2022-2024 performance-related share grants for the Board of Management and the Executive Committee are for 20% linked to revenue growth, for 40% to adjusted EBITDA, for 20% to ROI and for 20% to performance against Environmental, Social and Governance (ESG) KPIs. A two-year holding restriction applies.

The plans for the executives and certain non-executive employee categories are 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 2020-2022 performance share plan for the AkzoNobel participants vested for 0% (series 2019-2021: 58.33%), including extraordinary dividend shares of 7.33% (series 2019-2021: 13.14%), the final vesting percentage amounted to 0% (series 2019-2021: 66.00%). The reason some shares still vest is because AkzoNobel is legally bound to an agreement with a former member of the Executive Committee regarding the vesting of shares for this individual, as well as a conditional share grant awarded to new Executive Committee Members at the time of their hiring, who received these grants as buy-out from the contract at their previous employer.

The share price of a common AkzoNobel share at year end 2022 amounted to €62.56 (2021: €96.50).

Fair value of restricted and performancerelated shares

The fair value of the restricted shares of the 2022-2024 grant to executives, amounting to €82.47, is based on the opening share price on February 23, 2022, of €88.28 and the expected dividend yield of 2.24%. The fair value of the restricted shares of the 2022-2024 grant to non-executives, amounting to €76.50, is based on the average of the opening share prices during the grant period of April 26 until May 9, 2022, of €82.54 and the expected dividend yield of 2.40%.The fair value of the performance-related 2022-2024 grant, based on the opening share price on February 23, 2022, amounts to €88.28. The fair value of the performance-related share grant to Mr. Poux-Guillaume of the 2022-2024 series, that was approved in the EGM on September 6, 2022, based on the opening share price on October 3, 2022, amounts to €57.70. For the 2022-2024 and 2021-2023 grants of performance-related shares all conditions are non-market based performance conditions. The fair value of the 2021-2023 grant is based on the share price as per April 22, 2021, the date of the AGM at which the new LTI performance criteria for the Board of Management were approved. The fair value of the performance-related shares of the 2020-2022 grant is for 50% based on a market condition (TSR) and for 50% based on a non-market based performance conditions (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. Under certain conditions, members who invest part of their short-term incentive payment in AkzoNobel shares may have such shares matched by the company one-on-one. During 2022, no potential matching shares were matched as the members of the Board of Management and the members of the Executive Committee were not eligible for matching shares on the 2019 series. In 2022, the members of the Board of Management and the members of the Executive Committee invested part of their 2021 short-term incentive in AkzoNobel shares, leading to 4,877 potential matching shares on December 31, 2022. For an overview of the matching shares outstanding for the members of the Board of Management per December 31, 2022, we refer to the Remuneration report.

Fair value of matching shares

The fair value of the matching shares (€75.61) was based on the share price on the investment date (April 21, 2022: €81.40), discounted for expected dividends over the holding period (dividend yield: 2.43%).