0
Remuneration Report 2020
Long-term incentive
H ^7 Heineken N.V.
0 Annual Report 2020
Introduction
Report of the
Executive Board
Report of the Financial
Supervisory Board Statements
Sustainability
Review
Other
Information
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.
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 weight 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 III).
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.