Remuneration Report continued
Contents
Overview
Report of the
Executive Board
Report of the
Supervisory Board
Financial
statements
Other information
The CEO and CFO are obliged to invest at least 25 per cent of their STV payout in Heineken N.V. shares (investment shares), to be
delivered by the Company; the maximum they can invest in Heineken N.V. shares is 50 per cent of their STV payout (at their discretion).
These investment shares are then blocked and cannot be sold under any circumstances, including resignation, for five calendar years
to link the value of the investment shares to long-term Company performance. After the blocking period is completed, the Company
will match the investment shares 1:1, i.e. one matching share is granted for each investment share. Matching entitlements will be
forfeited in case of dismissal by the Company for an urgent reason within the meaning of the law ('dringende reden'), or in case of
dismissal for cause ('gegronde reden') whereby the cause for dismissal concerns unsatisfactory functioning of the Executive Board
member. With this'deferral-and-matching' proposition, a significant share ownership by the Executive Board is ensured, creating an
increased alignment of interests with shareholders.
The Supervisory Board has the power to revise the amount of the STV payout to an appropriate amount if the STV payout that
would have been payable in accordance with the agreed payment schedule would be unacceptable according to standards of
reasonableness and fairness. The Supervisory Board is entitled to claw back all or part of the STV payout (in cash, investment shares
or matching shares) insofar as it has been made based on incorrect information about achieving the performance conditions.
Long-term variable award
The long-term variable award (LTV) is designed to drive and reward sound business decisions for HEINEKEN's long-term health and
to align the Executive Board and shareholder interests.
The target LTV opportunities for 2013 are, and for 2014 remain, 150 per cent of base salary for the CEO and 125 percent of base
salary for the CFO.
Each year, a target number of performance shares is conditionally granted based on the aforementioned target LTV opportunity
percentage of the current year, and the closing share price of 31 December of the preceding year. The vesting of these performance shares
is, since the conditional grant in 2010, contingent on HEINEKEN's performance on four fundamental financial performance measures.
Organic Gross Profit beia Growth - a measure to drive top-line growth - a 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 egual 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 corresponding
targets for these performance measures based on HEINEKEN's business priorities. These targets are not reported in the Remuneration
Report as they are considered to be commercially sensitive.
At the end of the performance period, the Supervisory Board reviews the Company's performance against the pre-set targets, and
approves the LTV vesting based on the performance achieved. The performance on each of the measures is reported in gualitative
terms in the Remuneration Report after the performance period has been completed (cf. Part II).
For each performance measure, a threshold, target and maximum performance level is set with the following performance share
vesting schedule:
Threshold performance - 50 per cent of performance shares vest
Target performance -100 per cent of performance shares vest
Maximum performance - 200 per cent of performance shares vest
Vesting in-between these performance levels is on a straight-line basis. Below threshold performance, vesting is zero, whereas beyond
maximum performance it is capped to 200 percent of vesting at target.
The Supervisory Board has the power to revise the amount of performance shares that will vest to an appropriate amount if the
amount of performance shares that would have vested under the agreed vesting schedule would be unacceptable according to
standards of reasonableness and fairness. The Supervisory Board is entitled to claw back all or part of the shares transferred to the
Executive Board members upon vesting (or the value thereof) insofar as vesting occurred based on incorrect information about
achieving the performance conditions.
Heineken N.V. Annual Report 2013
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