Remuneration Report (continued)
Actual remuneration paid to former members of the Executive Board
Part III - Adjustments to the Executive Board remuneration policy and implementation for 2017
Policy change, pending approval by the Annual General Meeting of Shareholders in April 2017
Replacements in the Labour market peer group
Report of the
Report of the
Annual Report 2016
The resignation per 1 May 2015 of the former CFO Mr. Hooft Graafland has been considered a retirement under the LTV Plan Rules. Given existing
agreements from 2005 for a specific group of senior managers (including the Executive Board members at the time) to compensate for the
negative effects of a structural change in their variable pay plan designs, this implied that unvested LTV awards as of his resignation date will
continue to be subject to vesting at their regular vesting dates, insofar and to the extent that the predetermined performance conditions are met.
Shares that may vest under these plans will be subject to a holding period of two years in accordance with the LTV Plan Rules, to arrive at a five-year
holding restriction after the date of the conditional performance grant. For Mr. Hooft Graafland this involved the three Long-term variable award
plans over performance years 2013-2015, 2014-2016 and 2015-2017 respectively. Last year the remuneration related to the vesting of the 2013
2015 plan has been disclosed. Following year-end 2016 the 2014-2016 plan has vested with a performance of 175% as mentioned under 'ad (3)'
above, implying a vesting of 28,972 shares for Mr. Hooft Graafland and, given an end-of-year share price of EUR 71.26, a value of EUR 2,064,545.
No. of performance
performance shares vesting
shares vesting in EUR
The Supervisory Board reviewed the remuneration policy versus its implementation, and concluded to recommend one policy change to the 2017
Annual General Meeting of Shareholders, and to adjust one element in its implementation.
Under the Executive Board remuneration policy, the Long-term variable award plan currently includes 'Organic EBIT beia Growth', with a weight
of 25%, as a means to measure the Company's profitability. This EBIT measure includes the Company's share of Net Profit from Joint Ventures
and Associates (i.e. entities that are not consolidated by the Company). Operating Profit on the other hand does not include the Company's share
of Net Profit from Joint Ventures and Associates, but solely reflects the profit earned from the entities that are consolidated by the Company.
Therefore, Operating Profit better reflects the profitability that is under the direct control of management, as management does not have full
control over Joint Ventures and Associates.
Furthermore, Operating Profit measures profitability in a more consistent manner: it does not include any interest or tax performance either at
Joint Ventures and Associates or at fully consolidated entities, whereas EBIT does include these performance items at Joint Ventures and Associates.
Operating Profit is also the relevant measure when calculating operating profit margin, and is already used to measure profitability internally.
As a result, the Supervisory Board is of the opinion that 'Organic Operating Profit beia Growth' is a more suitable means than 'Organic EBIT beia
Growth' to measure the Company's profitability within the context of the Long-term variable award plan, and proposes to replace the latter with
the former measure, also with a weight of 25%, effective as of the 2017-2019 performance plan. A secondary benefit of this replacement is that
it will also simplify our internal reporting. For the sake of completeness, it is noted that 'Organic EBIT beia Growth' will remain as a performance
measure in the pending 2015-2017 and 2016-2018 performance plans.
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, given its industry proximity
Supervisory Board Heineken N.V.
Amsterdam, 14 February 2017