54
Report of the Supervisory Board Remuneration Report
The current labour market peer group consists primarily of
Dutch multinational companies and includes a minority of
branded consumer goods companies that operate in Continental
Europe. Individual companies comprising the current peer
group include:
Akzo Nobel (NL)
Anheuser-Busch InBev (B)
Henkei (G)
Ahold (NL)
DSM (NL)
KPN (NL)
Philips (NL)
Nestlé (CH)
L'Oréal (F)
Reed Elsevier (NL)
TNT (NL)
Unilever (NL).
Numico (NL) was also part of the labour market peer group until
its take-over in 2007. Replacement has not taken place.
Each year, the Remuneration Committee evaluates the peer
group to ensure it remains relevant and may recommend
adjustments to the Supervisory Board.
Short-term incentive
The short-term incentive (STI) is designed to drive and reward
the achievement of Heineken's annual performance objectives.
For the 2010 performance year, the target STI opportunity
for the CEO is 100 per cent of base salary and for the CFO
75 per cent of base salary.
The STI opportunity is for 75 per cent based on financial and
operational measures and targets, and for 25 per cent on
individual leadership measures and targets. At the beginning
of the year, the Supervisory Board establishes the new
measures and targets based on Heineken's business priorities.
In the existing remuneration policy these are considered to be
commercially sensitive and are not disclosed at that moment.
At the end of the year, the Supervisory Board reviews the
Company's and individual performance against the pre-set
measures and targets, and approves the STI payout levels
based on the performance achieved. In the Annual Report,
the performance measures and their relative weight is
reported after the end of the year.
For threshold, target and maximum performance the following
STI payout as a percentage of target applies:
Threshold performance - 50 per cent of target
Target performance -100 per cent of target
Maximum performance -150 per cent of target.
Payout percentage for performance between these performance
levels is on a straight-line basis.
The Supervisory Board may, at its sole discretion in determining
the final payout, adjust the STI amount that would have been
payable under the plan rules downwards or upwards if the
payout based on plan rules would produce an unfair result due
to extraordinary circumstances. The Supervisory Board can alsc
recover from the Executive Board any STI payment made on tht
basis of incorrect financial or other data (clawback provision).
Long-term incentive
The long-term incentive (LTI) is designed to drive and reward
sound business decisions for the long-term health of Heineken
and to align the Executive Board and shareholder interest.
For the 2010 - 2012 performance period, the target LTI
opportunity for the CEO is 125 per cent of base salary and
for the CFO 100 per cent of base salary.
Each year, a target number of performance shares is conditional!
awarded, the vesting of which is, since 2010, contingent
on Heineken's performance on four key fundamental financial
performance measures:
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 minimise the risk that participants over-emphasise one
performance measure to the detriment of others. At the
beginning of each performance period, the Supervisory Board
establishes the targets on these measures based on Heineken's
business priorities. The targets are considered to be
commercially sensitive and are not disclosed at that moment.
At the end of the performance period, the Supervisory Board
reviews the Company's performance against the pre-set
measures and targets, and approves the LTI vesting based on
the performance achieved. The performance on each of the
measures is reported in the Annual Report after the end of the
performance period.
For each performance measure, a threshold, target and
maximum performance level is set with the corresponding
performance share vesting schedule:
