Remuneration Report continued
Reportofthe Reportofthe Financial Other
Contents Overview Executive Board Supervisory Board Statements Information
Base salary
Base salaries are determined by reference to the median base salary levels of the aforementioned labour market peer group. Every year, peer group and
base salary levels are reviewed, and the Remuneration Committee may propose adjustments to the Supervisory Board taking into account the external
labour market peer group data and internal pay relativities. The annual base salaries for 2015 were EUR1.150,000 for the CEO, EUR610,000 for the CFO
(Mrs. Laurence Debroux; as from 23 April following the 2015 AGM) and EUR650.000 for the former CFO (Mr. René Elooft Graafland; until the end of the
2015 AGM). For 2016 the Supervisory Board decided to increase the Executive Board base salaries to the aspired policy levels, viz. EUR1,200,000 for the
CEO and EUR720.000 for the CFO, thereby bringing their target variable remuneration, which is defined as a percentage of base salary, closer to the
aspired policy levels as well.
Short-term variable pay
The short-term variable pay (STV) is designed to drive and reward the achievements of HEINEKEN's annual performance targets. Through its payout in
both cash and investment shares it also drives and rewards sound business decisions for HEINEKEN's long-term health while aligning Executive Board and
shareholder interests at the same time. The target STV opportunities for both 2015 and 2016 are 140 per cent of base salary for the CEO and 100 per cent
of base salary for the CFO. These percentage opportunities are well aligned with the global labour market peer group medians.
The STV opportunities are for a weighted 75 per cent based on financial and operational measures for Heineken N.V.,and fora weighted 25 per cent on
individual leadership measures. At the beginning of each year, the Supervisory Board establishes the performance measures, their relative weights and
corresponding targets based on HEINEKEN's business priorities for that year. The financial and operational measures and their relative weights are
reported in the Remuneration Report upfront; the numerical performance targets themselves are not disclosed as they are considered to be commercially
sensitive. In the first weeks of the following year, the Supervisory Board reviews the Company's and individual performance against the pre-set targets, and
approves the STV payout levels based on the performance achieved. The performance on each of the measures is reported in gualitative terms in the
Remuneration Report after the end of the performance period (cf. Part II). The STV payout for 2015 is, and for 2016 remains, subject to four performance
measures with egual weights: Organic Revenue Growth, Organic Net Profit beia Growth, Free Operating Cash Flow and Individual Leadership measures.
For each performance measure, a threshold, target and maximum performance level is set with the following STV payout, as a percentage
of target payout:
Threshold performance - 50 per cent of target payout
Target performance -100 per cent of target payout
Maximum performance - 200 per cent of target payout
For each measure, payout in between these performance levels is on a straight-line basis; below threshold performance the payout is zero,
whereas beyond maximum performance it is capped at 200 per cent of payout at target.
The CEO and CFO (and former 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 circumstance, including resignation, for five calendar years to link the value of the investment shares
to long-term Company performance. Withholding tax on the investment shares and on the cash part of the STV payout is settled with the cash part at the
time of payout. After the blocking period is completed after five calendar years, the Company will match the investment shares 1:1 in the first weeks of the
following year, i.e. one matching share is granted for each investment share. As from then, there are no holding reguirements on these investment shares
anymore, and there are no holding reguirements on the resulting matching shares that remain after withholding tax on these shares. According to plan
rules, matching entitlements will be forfeited in a case of dismissal by the Company for an urgent reason within the meaning of the law ('dringende reden'),
or in a 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 with the
interests of 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.
53 Heineken N.V. Annual Report 2015
