Remuneration report
The remuneration policy and structure reflects the strategic
ambitions of the Company and takes into account internal and
external circumstances. The policy seeks to maintain a tight focus
on both short-term and long-term strategic results. The policy
was adopted in the Annual General Meeting of Shareholders in
2005 and the revised policy was adopted in 2007. A review of the
policy is conducted every two years.
62 Report of the Supervisory Board
Remuneration Executive Board as from 2007
The remuneration package of the Executive Board
includes a base salary, a short-term incentive and
a long-term incentive. Base salary accounts for
33 per cent of the total remuneration package
at target level for the CEO and 40 per cent for the
CFO. Target percentage for each of annual bonus
and long-term incentive is 100 per cent of base
salary for the CEO and 75 per cent for the CFO.
The equal division of variable pay between short-
term bonus and long-term incentive ensures
a balanced focus, on both short-term and long-
term performance.
The Company aims to achieve consistency in the
structure of the remuneration packages of both
Executive Board members and senior Heineken
executives. The variable elements in Executive
Board members' remuneration are more strongly
emphasised than those of senior executives,
reflecting the principle of increasing performance
sensitivity in line with the impact on Group results.
Both internal pay relativities and relevant
market data are used to define the remuneration
package for the Executive Board. For market data,
a specific labour market is defined.
Fleineken operates in a highly international labour
market and is headquartered in the Netherlands.
Consequently, the reference for market data
is primarily other Dutch multinational companies.
To reflect the specific business of Fleineken
a minority of continental European companies
that operate in the branded consumer products
markets are included. The labour market peer
group consists of the following companies:
Akzo Nobel N.V.,
Koninklijke DSM N.V.,
Reed Elsevier N.V.,
Koninklijke Ahold N.V.,
Koninklijke KPN N.V.,
Koninklijke Numico N.V.*,
TNT N.V.,
Unilever N.V.,
Koninklijke Philips Electronics N.V.,
InBev S.A.,
Flenkel KGaA,
L'Oréal S.A.,
Nestlé S.A.
Replacement of Koninklijke Numico N.V., following its take
over, will be part of our next review in 2009.
Base salary
The members of the Executive Board are paid
at the median of the labour market peer group.
This represents €750,000 for the CEO and
€550,000 for the CFO.
Annual bonus
The focus of the annual bonus is on annual
operational performance. Organic net profit
growth is the measure used to assess the
operational performance of Heineken on
a one-year basis and accounts for 75 per
cent of the bonus opportunity. Each year, the
Supervisory Board determines an ambitious,
yet realistic organic net profit growth target. The
threshold level of payout is set at 60 per cent of
target. A linear payout curve applies. Part of the
payout is subject to meeting an acceptable cash
conversion rate. The remaining 25 percent of the
annual bonus is linked to yearly personal targets.
The specific targets are commercially sensitive
and cannot be disclosed. At target level, the annual
bonus level for the CEO is €750,000 and for the CFO
€412,500. The maximum payout will not exceed
1.5 times the target bonus level.
Based on its overall assessment, the Supervisory
Board awarded the maximum bonus, as in 2007
all targets were exceeded. This represents
€1,125,000 for the CEO and €618,750 for the CFO.
Long-term incentive
The long-term incentive plan for the Executive
Board, in effect since 1 January 2005, is
a performance share plan. A similar plan was
Heineken N.V. Annual Report 2007
