Remuneration Report (continued)
Remark on future remuneration policy
for 20u and beyond
70 Annual Report 2009 - Heineken N.V.
Report of the Supervisory Board
Long-term incentive
Under the current long-term incentive plan, the vesting
of shares depends solely on one performance measure -
Total Shareholder Return (TSR) relative to the peer group.
The recent unprecedented market volatility related to the
collapse of the financial markets, ongoing consolidations in
the fast moving consumer goods industry and Heineken's
unique share profile have demonstrated a number of
difficulties in using relative TSR as a measure of underlying
company performance.
The Supervisory Board therefore recommends replacing
the relative TSR with key fundamental financial
performance measures that are critical to the long-term
success of Heineken:
Organic Gross Profit beia Growth - a measure to drive
top-line growth - the key measure of company strength
Organic EBIT beia Growth - a measure to drive
operational efficiency
Earnings Per Share (EPS) beia Growth - a measure
of overall long-term company performance
Free Operating Cash Flow - a measure to drive focus on cash.
These four performance measures have equal weights to
encourage sound business decisions for the long-term health
of Heineken and minimise the risk that participants over
emphasise one success measure to the detriment of others.
For each performance measure a threshold, target and
maximum performance level is set with the corresponding
performance share vesting schedule:
threshold performance - 50 per cent of performance
shares vest
target performance -100 per cent of performance shares
vest and
maximum performance -150 per cent of performance
shares vest.
Vesting between the performance levels is on straight-line
basis. The performance levels are commercially sensitive and
will not be disclosed at the beginning of the performance
period. After the performance period, the performance on
each of the measures will be reported in the Annual Report.
The Supervisory Board may at its sole discretion adjust
the number of shares that would have vested under the
plan rules based on the above described vesting schedule
downwards or upwards if the vesting of shares based on plai
rules would produce an unfair result due to extraordinary
circumstances. The Supervisory Board can also recover fror
the Executive Board any shares which vested on the basis of
incorrect financial or other data (clawback provision). This is
facilitated by the existing holding period of five years after
the date of award of performance shares, which is
approximately two years from the vesting date.
The Supervisory Board conducted a scenario analysis with
respect to possible outcomes of the adjustments made to the
remuneration policy concerning variable remuneration as
from 2010.
The remuneration policy proposed and withdrawn in 2009
included the adoption of a new labour market peer group of
European- and UK-based multinational companies operating
in the brewing and branded consumer products sectors. Thi
new labour market peer group is no longer suggested in the
remuneration policy for 2010 as the Supervisory Board
believes that the current economical climate and public
debate require a high degree of prudency.
It is, however, very clear that the global footprint of Heinekei
has increased significantly since the adoption of the existing
labour market peer group in 2007 and is again likely to
increase significantly in 2010, with the intended acquisition
of the beer operations of FEMSA. Hence the current
predominantly Dutch labour market peer group is still
perceived to be suboptimal for the long term. Therefore the
Supervisory Board will propose a new labour market peer
group for 2011.
