Remuneration Report (continued)
Long-term incentive
Maximum performance
O Q,
Introduction Report of the Executive Board
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 STI 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 STI 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 STI 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 STI payout to an appropriate amount if the STI 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 STI 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.
The Long-term incentive (LTI) is designed to drive and reward sound business decisions for HEINEKEN's
long-term health, and to align the Executive Board with shareholder interests. The target LTI opportunities
for both 2018 and 2019 are 150% of base salary for the CEO and 125% of base salary for the CFO.
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2018
Other Information
Each year, a target number of performance shares is conditionally granted based on the aforementioned
target LTI opportunity percentage of that year, the base salary of that year, and the closing
share price of 31 December of the preceding year. The vesting of these performance shares is
contingent on HEINEKEN's performance over a period of three years on four fundamental financial
performance measures:
Organic Net Revenue Growth
To drive top line growth
Organic Operating Profit beia Growth
To drive profitability and operational efficiency
Earnings Per Share (EPS) beia Growth
To drive overall long-term Company performance
Free Operating Cash Flow
To drive focus on cash.
These four performance measures have equal 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 numerical targets for these performance
measures based on HEINEKEN's business priorities. These targets are not disclosed upfront as they are
considered to be commercially sensitive. In the first weeks after the end of the performance period, the
Supervisory Board reviews the Company's performance against the pre-set targets, and approves the
LTI vesting based on the performance achieved. The performance on each of the measures is reported
in qualitative 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% of performance shares vests
Target performance
100% of performance shares vests
200% of performance shares vests.
For each measure, vesting in between these performance levels is on a straight-line basis; below threshold
performance the vesting is zero, whereas beyond maximum performance it is capped at 200% of vesting
at target.
