Remuneration Report (continued)
Long-term incentive
O O Qs
Introduction Report of the Executive Board
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
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 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 by linking rewards to
HEINEKEN's share price performance. The target LTI opportunities for 2020 are 150% of base salary
for the CEO and 125% of base salary for the CFO.
Heineken N.V. Annual Report 2019
Financial Statements Sustainability Review 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 e ffi ciency
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
Maximum performance
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.