Remuneration Report (continued)
Labour market peer group
Base salary
Short-term incentive
Maximum performance
O Q,
Report of the Executive Board
Report of the Supervisory Board
Remuneration
element
Description
Strategic role
Long-term Is based on achievements of three-year financial
incentive targets for Heineken N.V. as specified on page 54
Aims, at target level, for the median of the labour
market peer group
Is awarded through the vesting of shares, net of
taxes (i.e. after deduction of withholding tax due
on the full before-tax Long-term incentive amount)
Vested shares are blocked for another two years,
to arrive at a five-year holding restriction after the date
of the conditional performance grant
Drives and rewards sound
business decisions for the long
term health of HEINEKEN
Aligns Executive Board and
shareholder interests
Supports Executive Board
retention
Pensions Defined Contribution Pension Plan and/
or Capital Creation Plan
Provides for employee welfare
and retirement needs
A global labour market peer group was adopted by the AGM in 2011, and subsequently adjusted in
2012 and 2017. The median target remuneration of this peer group is a reference point for the target
remuneration of the CEO and CFO. Each year, the Remuneration Committee validates the peer group to
ensure relevance, and recommends adjustments to the Supervisory Board if needed. For 2018 (and 2017),
the peer group consisted of the following companies:
Anheuser-Busch InBev (BE)
Diageo (UK)
Nestlé (CH)
Carlsberg (DK)
Henkel (DE)
Pepsico (US)
Coca-Cola (US)
Kimberley-Clark (US)
Pernod Ricard (FR)
Colgate-Palmolive (US)
Mondelez International (US)
Unilever (NL)
Danone (FR)
L'Oréal (FR)
Heineken N.V. Annual Report 2018
Financial Statements
Sustainability Review
Other Information
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 2018 were €1,250,000
for the CEO, and €735,000 for the CFO. For 2019 the base salary for the CFO will be increased to
€850,000 to align it with the aspired policy level of the labour market peer group median, subject to the
approval by the 2019 Annual General Meeting of Shareholders to re-appoint the CFO as member of the
Executive Board.
The Short-term incentive (STI) 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 STI opportunities for both 2018 and 2019 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 STI 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 STI 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 STI payout for 2018 is subject to four performance measures: Organic
Net Revenue Growth (weight: 35%), Organic Net Profit beia Growth (weight: 15%), Free Operating Cash
Flow (weight: 25%) and Individual leadership measures (weight: 25%). For 2019 the same performance
measures and weights will apply.
For each performance measure, a threshold, target and maximum performance level is set with the
following STI payout, as a percentage of target payout:
Threshold performance
50% of target payout
Target performance
100% of target payout
200% of target payout.
