52 Remuneration Report (continued) Base salary Short-term variable pay Heineken NV. Report of the Report of the Financial Sustainability Other Annual Report 2016 Introduction Executive Board Supervisory Board Statements Review Information As from 2017 Philips has been removed from the Labour market peer group due to the divestment of its lighting business, thus leaving two smaller entities that are fairly remote from HEINEKEN industry-wise, and SABMiller has been removed due to its acquisition by Anheuser-Busch Inbev. Going forward the Supervisory Board has decided to include Nestlé in the Labour market peer group instead (cf. Part III). 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 2016 were increased from EUR 1,150,000 to EUR 1,200,000 for the CEO, and from EUR 610,000 to EUR 720,000 for the CFO, to bring their target remuneration closer to the aspired policy levels. For 2017 these base salary levels apply as well. 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 2016 and 2017 are 140% of base salary for the CEO and 100% of base salary for the CFO. These percentage opportunities are well aligned with the Labour market peer group medians. The STV opportunities are for a weighted 75% based on financial and operational measures for Heineken N.V., and for a weighted 25% 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 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 qualitative terms in the Remuneration Report after the end of the performance period (cf. Part II). The STV payout for 2016 is, and for 2017 remains, subject to four performance measures with equal 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% of target payout Target performance - 100% of target payout Maximum performance - 200% 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% of payout at target. In line with policy, 25% of the STV payout is paid out in shares, referred to as investment shares. At their discretion, the Executive Board members have the opportunity to indicate before the end of the performance year whether they wish to receive up to another 25% of their STV payout in additional investment shares. All investment shares thus received 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 requirements on these investment shares anymore, and there are no holding requirements on the resulting matching shares that remain after withholding tax on these shares. According to plan rules, 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 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 on the basis of incorrect information about achieving the performance conditions.

Jaarverslagen en Personeelsbladen Heineken

Jaarverslagen | 2016 | | pagina 53