DCSIMG
9 Remuneration of Managing Board and Supervisory Board - Annual Report 2015 - DSM

9 Remuneration of Managing Board and Supervisory Board

Remuneration Managing Board in 2015

As part of its remuneration policy for the Managing Board, DSM benchmarks its remuneration package against the packages offered by the labor-market peer group once every three years.

Base salary in 2015

Adjustment of the base salary is at the discretion of the Supervisory Board. The Supervisory Board decided to refrain from an increase in 2015 at the Managing Board’s request in light of the various cost-reduction programs being set up at the company at the time.

Table 1: Fixed annual salary

Fixed annual salary
in €
1 July 2015
1 July 2014
­
   
Feike Sijbesma
870,000
870,000
Geraldine Matchett
570,000
570,000
Stephan Tanda
570,000
570,000
Dimitri de Vreeze
570,000
570,000
Stefan Doboczky1
-
570,000
Rolf-Dieter Schwalb2
-
570,000
1 Left DSM to pursue career outside of the company as of 1 June 2015
2 Retired as member of the Managing Board as of 1 December 2014
Short-Term Incentives (STI) for 2015

STI targets are revised annually so as to ensure that they are stretching but realistic. Considerations regarding the performance targets are influenced by the operational and strategic course taken by the company and are directly linked to the company’s ambitions. The targets are determined at the beginning of the year for each Board member.

Target STI level and pay-out

When they achieve all their targets, Managing Board members receive an incentive of 50% of their annual base salary. Outstanding performance can increase the STI level to 100% of the annual base salary.

The 2015 Integrated Annual Report presents the Short-Term Incentives that have been earned on the basis of results achieved in 2015. These Short-Term Incentives will be paid out in 2016.

The Supervisory Board has established the extent to which the targets for 2015 were achieved. Regarding the financial targets, the score on the EBITDA target was above target, while the score on gross free cash flow was well above target. The target for net sales growth was however not achieved. For the sustainability targets, the score on ECO+ was well above target, and the score on the Employee Engagement Index was on target. The Safety Performance target was not achieved. Managing Board members also have individual targets. The scores achieved on these targets were above target. The realization of the 2015 financial STI targets has been assessed by KPMG. Furthermore, KPMG has assessed the process with respect to the target realization of the non-financial STI targets. The average realization percentage was 60-61% of base salary.

With the STI Deferral and Share Matching Plan, only part of the STI outcome is paid out as cash. 25% of the gross STI value is mandatorily converted into DSM Investment shares. Managing Board members can choose to convert up to a further 25% into additional DSM Investment shares (in 5% increments, with a minimum of 5% and a maximum of 25%).

The company matches these STI Investment shares with an equivalent number of Restricted Share Units (RSUs), vesting of which is deferred for three years, conditional on achieving predefined performance targets equivalent to the measures under the Long-Term Incentive (LTI) Plan. The remainder of the STI gross outcome (50% to maximum 75%) is paid out in cash after tax.

Table 2: Short-Term Incentives

Short-Term Incentives
in €
20151
20142
     
Feike Sijbesma
522,000
320,812
Geraldine Matchett
342,000
92,329
Stephan Tanda
347,700
158,888
Dimitri de Vreeze
342,000
193,088
Stefan Doboczky3
143,291
188,813
Rolf-Dieter Schwalb4
-
166,548
1 Based on results achieved in 2015 and therefore payable in 2016
2 Based on results achieved in 2014 and therefore paid in 2015
3 Left DSM to pursue career outside of the company as of 1 June 2015
4 Retired as member of the Managing Board as of 1 December 2014

All members of the Managing Board decided to invest the maximum of 50% of their gross 2014 STI (payable in 2015) in accordance with the STI Deferral and Share Matching Plan. In all cases, these investment shares were matched with an equal number of Restricted Stock Units (RSU’s).

Long-Term Incentives (LTI)

The following table provides an overview of the LTI performance shares that were granted to members of the Managing Board in the respective year. These performance shares are subject to a three-year vesting period.

Table 3: Number of LTI performance shares granted

Number of LTI performance shares granted1
 
2015
2014
     
Feike Sijbesma
29,000
24,000
Geraldine Matchett
19,000
-
Stephan Tanda
19,000
16,000
Dimitri de Vreeze
19,000
16,000
Stefan Doboczky2
-
16,000
Rolf-Dieter Schwalb3
-
16,000
1 Grant according to Koninklijke DSM N.V. Performance Share Plan
2 Left DSM to pursue career outside of the company as of 1 June 2015
3 Retired as member of the Managing Board as of 1 December 2014

For 2016, the number of conditionally granted ordinary shares under the LTI program will be:
Chairman 31,000
Members 20,500

For an overview of all granted and vested stock options and performance shares see 'Overview of outstanding and exercised stock incentives' on Outstanding and exercised stock incentives.

In 2015, the Supervisory Board established which proportion of the shares conditionally granted in 2012, vested. The following two performance measures are applicable to the 2012 grant: comparable Total Shareholder Return (TSR) versus a peer group and the Greenhouse-gas Emissions (GHGE) reduction over volume-related revenue. Each of these measures determines half of the total vesting percentage. The applicable vesting schemes for the three-year vesting period starting in 2012 were published in DSM’s 2012 Integrated Annual Report. DSM’s TSR performance minus the peer group performance over the vesting period did not result in the vesting of any shares, whilst the performance in terms of GHGE reduction led to full vesting on this measure. Overall this resulted in the vesting of 50% of the total amount of shares granted.

Pensions in 2015

The members of the Managing Board participate in the Dutch pension fund Stichting Pensioenfonds DSM Nederland (PDN). The pension scheme for the Managing Board is equal to the pension scheme for other DSM employees in the Netherlands. The current pension plan for DSM in the Netherlands came into effect in 2011. As of 1 January 2015, the Dutch tax treatment of pension contributions changed. As a consequence, DSM offers two different plans to employees whose pensionable salary exceeds €100,000 per annum.

A. Mandatory plan

  • Covers all employees employed in the Netherlands.
  • Collective Defined Contribution Scheme: accrual based on fixed contribution. Indexation or reduction of accrued benefits, depending on PDN's coverage ratio.
  • The accrual is tax exempt, the benefits will be taxed.
  • Based on career-average base pay. Pensionable salary equals base salary up to a maximum of (in 2015) €100,000 per annum considering a deductible of €13,093 (subject to annual review). Accrual of 1.875% per annum.
  • Retirement age 67 (as of 2015).
  • The scheme includes a spouses’- and disability pension.
  • Employee and employer contributions.

B. Allowance for salary exceeding €100,000

  • Employees whose pensionable salary exceeds €100,000 receive an age-dependent gross allowance that can be used to participate in a net pension scheme. The allowance is taxed.
Revision and claw-back of bonuses

As in 2014, no revision or claw-back of bonuses occurred in 2015.

Remuneration Managing Board and Executive Committee

The remuneration of the members of the Managing Board is determined by the Supervisory Board within the framework of the remuneration policy as approved by the Annual General Meeting of Shareholders. More details about the remuneration policy are included in the 'Report by the Supervisory Board' from Remuneration policy for the Managing Board onwards.

As announced on 25 August 2015, DSM strengthened its management structure by establishing an Executive Committee, enabling faster strategic alignment and operational execution by increasing focus on the development of the business, innovation and people. The members of the Executive Committee are the Managing Board members Feike Sijbesma (CEO/Chairman), Geraldine Matchett (CFO), Stephan Tanda (Nutrition) and Dimitri de Vreeze (Materials), as well as Chris Goppelsroeder (Nutritional Products), Philip Eykerman (Strategy and M&A), Rob van Leen (R&D and Innovation) and Peter Vrijsen (People & Organization). The members of the Executive Committee meet the definition of key management personnel.

The remuneration and related costs (including pension expenditure and other commitments and costs related to long-term incentives) of the current members of the Managing Board amounted to €7.7 million (2014: €7.3 million). The cost of the remuneration of the individual members of the Managing Board and of the other members of the Executive Committee collectively was as follows (these are costs for DSM which are not in all cases compensation paid to all members of the Executive Committee or a cash outflow for DSM):

Table 4: DSM's remuneration expense for the Managing Board and the Executive Committee

DSM's remuneration expense for the Managing Board and the Executive Committee
x € thousand
Salary
Short-term incentive
Pension expenditure
Share-based1 compensation
Other items2
Total
 
2015
2014
2015
2014
20153
2014
2015
2014
2015
2014
2015
2014
                         
Feike Sijbesma
870
863
522
321
180
127
709
594
85
85
2,366
1,990
Geraldine Matchett4
570
538
342
92
72
35
224
-
125
35
1,333
700
Stephan Tanda
570
565
348
159
92
84
464
391
86
40
1,560
1,239
Dimitri de Vreeze
570
531
342
193
85
79
372
106
88
40
1,457
949
Stefan Doboczky5
238
565
143
189
36
84
576
391
17
55
1,010
1,284
Rolf-Dieter Schwalb6
-
518
-
167
-
77
-
359
-
32
-
1,153
                         
Total Managing Board
2,818
3,580
1,697
1,121
465
486
2,345
1,841
401
287
7,726
7,315
                         
Other members of the Executive Committee7
674
-
345
-
119
-
399
-
41
-
1,578
-
                         
Total Executive Committee
3,492
3,580
2,042
1,121
584
486
2,744
1,841
442
287
9,304
7,315
1 Share-based compensation expense represents the non-cash cost for DSM of performance shares awarded to members of the Managing Board and stock options to other members of the Executive Committee. These costs are recognized over the vesting period of the performance shares and stock options and therefore cover several years. The increase in 2015 is a result of the fact that older grants are being replaced by newer, more expensive grants (non-cash).
2 Other items include company car and expense allowance.
3 Since 2015, the pension expenditure contains an age-dependent contribution for the salary exceeding €100,000. For employees with a higher age, a higher contribution level is applicable. The 2015 increase is mainly due to the calculated actuarial impact of the increase of the pensionable age from 65 and 66 years to the new pensionable age of 67 years.
4 Member of the Managing Board as of 1 August 2014; including assignment bonus of €300,000 in 2014.
5 Left DSM to pursue career outside of the company as of 1 June 2015.
6 Retired as Member of the Managing Board as of 1 December 2014. Excluding €95,000 salary (2014: €47,500) and €136,542 (2014: €57,987) other remuneration expenses for Mr. Schwalb as retired Member of the Managing Board.
7 From 1 September 2015 onwards.
Outstanding and exercised stock incentives

The following table shows the stock incentives of the individual members of the Managing Board and the rights exercised.

Table 5: Overview of stock options

Overview of stock options
 
Year of issue
Outstanding at 31 Dec. 2014
In 2015
Outstanding at 31 Dec. 20151
Average share price at exercise (€)
Exercise price (€)
Expiry date
Granted
Exercised
Forfeited/expired
                 
Feike Sijbesma
2008
28,125
-
-
-
28,125
 
29.79
28 Mar 2016
 
2009
18,750
-
-
-
18,750
 
21.10
27 Mar 2017
 
Total
46,875
-
-
-
46,875
     
Of which vested
46,875
     
46,875
     
                 
Stephan Tanda
2008
22,500
-
-
-
22,500
 
29.79
28 Mar 2016
 
2009
15,000
-
-
-
15,000
 
21.10
27 Mar 2017
 
Total
37,500
-
-
-
37,500
     
Of which vested
37,500
     
37,500
     
                 
Dimitri de Vreeze
2008
22,500
-
-
-
22,500
 
29.79
28 Mar 2016
 
2009
18,000
-
-
-
18,000
 
21.10
27 Mar 2017
 
2010
18,000
-
-
-
18,000
 
33.10
6 Apr 2018
 
2011
18,000
-
-
-
18,000
 
46.20
2 May 2019
 
2012
36,000
-
-
(24,000)
12,000
 
40.90
15 May2020
 
2013
36,000
-
-
-
36,000
 
48.91
7 May 2021
 
Total
148,500
-
-
(24,000)
124,500
     
Of which vested
76,500
     
88,500
     
                 
Rolf-Dieter Schwalb2
2008
22,500
-
(22,500)
-
-
51.40
29.79
28 Mar 2016
 
2009
15,000
-
(15,000)
-
-
51.09
21.10
27 Mar 2017
 
Total
37,500
-
(37,500)
-
-
     
Of which vested
37,500
     
-
     
1 Currently Geraldine Matchett does not hold any stock options
2 Retired as member of the Managing Board as of 1 December 2014

Since 2010, the Managing Board has been granted LTI performance shares instead of stock options.

Table 6: Overview of performance shares

Overview of performance shares
 
Year of issue
Outstanding at 31 Dec. 2014
In 2015
Outstanding at 31 Dec. 2015
Share price at date of grant (€)
Granted
Vested
Forfeited / expired
             
Feike Sijbesma
2012
31,000
-
(15,500)
(15,500)
-
40.90
 
2013
24,000
-
-
-
24,000
48.91
 
2014
28,822
-
-
-
28,822
49.88
 
2015
-
32,051
-
-
32,051
52.58
 
Total
83,822
32,051
(15,500)
(15,500)
84,873
 
Retained shares originated from performance shares
58,624
 
             
Geraldine Matchett 1
2015
-
27,008
-
-
27,008
52.58
 
Total
-
27,008
-
-
27,008
 
Retained shares originated from performance shares
-
 
             
Stephan Tanda
2012
20,000
-
(10,000)
(10,000)
-
40.90
 
2013
16,000
-
-
-
16,000
48.91
 
2014
18,990
-
-
-
18,990
49.88
 
2015
-
20,511
-
-
20,511
52.58
 
Total
54,990
20,511
(10,000)
(10,000)
55,501
 
Retained shares originated from performance shares
33,721
 
             
Dimitri de Vreeze
2014
16,910
-
-
-
16,910
49.88
 
2015
-
20,836
-
-
20,836
52.58
 
Total
16,910
20,836
-
-
37,746
 
Retained shares originated from performance shares
-
 
             
Stefan Doboczky2
2012
20,000
-
(10,000)
(10,000)
-
40.90
 
2013
16,000
-
(8,000)
(8,000)
-
48.91
 
2014
19,158
-
(9,579)
(9,579)
-
49.88
 
2015
-
898
-
(898)
-
52.58
 
Total
55,158
898
(27,579)
(28,477)
-
 
             
Rolf-Dieter Schwalb3
2012
20,000
-
(10,000)
(10,000)
-
40.90
 
2013
16,000
-
(8,000)
(8,000)
-
48.91
 
2014
19,158
-
(9,579)
(9,579)
-
49.88
 
Total
55,158
-
(27,579)
(27,579)
-
 
1 Member of the Managing Board as of 1 August 2014
2 Left DSM to pursue career outside of the company as of 1 June 2015
3 Retired as member of the Managing Board as of 1 December 2014
Purchasing shares

In addition to the performance shares granted under the DSM Stock Incentive Plan, the current members of the Managing Board have themselves invested in DSM shares.

All members of the Managing Board have purchased shares in the company to emphasize their confidence in the strategy and the company. At 31 December 2015, the members of the Managing Board together held 161,583 shares in Koninklijke DSM N.V. These shares were bought through private transactions with private funds (including shares bought from earned STI) and obtained through vested performance shares.

Table 7: Managing Board holdings of DSM shares

Managing Board holdings of DSM shares
 
31 December 2015
31 December 2014
 
Ordinary shares purchased with private money
Retention from vested performance shares
Total
holdings
Ordinary shares purchased with private money
Retention from vested performance shares
Total
holdings
             
Feike Sijbesma
48,973
58,624
107,597
45,922
47,900
93,822
Geraldine Matchett1
878
-
878
-
-
-
Stephan Tanda
14,501
33,721
48,222
12,990
26,938
39,928
Dimitri de Vreeze
4,886
-
4,886
3,050
-
3,050
Stefan Doboczky2
n.a.
24,017
n.a.
11,158
5,382
16,540
Rolf-Dieter Schwalb3
n.a.
53,832
n.a.
17,658
31,600
49,258
             
Total holdings
69,238
170,194
161,583
90,778
111,820
202,598
1 Member of the Managing Board as of 1 August 2014
2 Left DSM to pursue career outside of the company as of 1 June 2015
3 Retired as member of the Managing Board as of 1 December 2014
Loans

The company does not provide any loans to members of the Managing Board.

Supervisory Board remuneration in 2015

The remuneration package for the Supervisory Board comprises an annual fixed fee and an annual committee-membership fee.

The fixed fee for the Chairman of the Supervisory Board is €70,000. The other members of the Supervisory Board each receive a fixed fee of €50,000. Audit Committee membership is awarded €10,000 per member and €12,500 for the Chairman. Nomination Committee, Corporate Social Responsibility Committee and Remuneration Committee membership is awarded €5,000 per member and €7,500 for the Chairman.

In addition, Supervisory Board members receive an intercontinental travel allowance of €3,000 for each meeting that they attend outside their continent of residence.

Overview of remuneration awarded to the Supervisory Board in 2015

The total remuneration (annual fixed fee and annual committee membership fee) of the members of the Supervisory Board amounted to €0.5 million (2014: €0.5 million).

The remuneration of the individual members of the Supervisory Board was as follows:

Table 8

in €
Annual fixed fee
Committee fee
Other costs
Total
Total
       
2015
2014
           
Rob Routs, Chairman
70,000
12,500
1,250
83,750
86,750
- Chairman Nomination Committee
         
- Member Remuneration Committee
         
Ewald Kist, Deputy Chairman
50,000
12,500
2,454
64,954
68,651
- Chairman Remuneration Committee
         
- Member Nomination Committee
         
Victoria Haynes
50,000
10,000
19,250
79,250
76,250
- Member Audit Committee
         
Pierre Hochuli
50,000
15,000
1,250
66,250
69,250
- Member Audit Committee
         
- Member CSR Committee
         
Eileen Kennedy
50,000
5,000
19,250
74,250
71,250
- Member CSR Committee
         
Pauline van der Meer Mohr
50,000
12,500
2,454
64,954
68,651
- Chairman CSR Committee
         
- Member Nomination Committee
         
Tom de Swaan
50,000
17,500
2,454
69,954
73,651
- Chairman Audit Committee
         
- Member Remuneration Committee
         
           
Total
370,000
85,000
48,362
503,362
514,453
           
Total 2014
370,000
85,000
59,453
514,453
 

At year-end 2015, two members of the Supervisory Board held shares in Koninklijke DSM N.V.: Pierre Hochuli 7,210 (2014: 7,210) and Victoria Haynes 300 (2014: 300).

Loans

The company does not provide any loans to members of the Supervisory Board.

Table 9

 
Heerlen, 29 February 2016
 
Heerlen, 29 February 2016
       
       
 
Managing Board,
 
Supervisory Board,
       
 
Feike Sijbesma, CEO/Chairman
 
Rob Routs, Chairman
 
Geraldine Matchett, CFO
 
Ewald Kist, Deputy Chairman
 
Stephan Tanda
 
Victoria Haynes
 
Dimitri de Vreeze
 
Pierre Hochuli
     
Eileen Kennedy
     
Pauline van der Meer Mohr
     
Tom de Swaan