Remuneration of Managing Board and Supervisory Board

Remuneration Managing Board in 2016

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 2016

Adjustment of the base salary is at the discretion of the Supervisory Board. During the Remuneration Committee meeting of 7 December 2015, it was decided to adjust the annual base salary of the members of the Managing Board by 3.5% as of 1 January 2016. This was the first increase in base salary since that applied in 2014, given that, at the Managing Board’s request in light of the various cost-reduction programs being set up at the company at the time, the Supervisory Board decided to refrain from an increase in 2015. Since the next moment at which an increase will apply concerns 2017, this 3.5% increase effectively covered the two-year period 2015-2016.

Fixed annual salary

in €
1 July 2016
1 July 2015
­
  
Feike Sijbesma
900,000
870,000
Geraldine Matchett
590,000
570,000
Stephan Tanda
590,000
570,000
Dimitri de Vreeze
590,000
570,000

Short-Term Incentives (STI) for 2016

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 2016 Integrated Annual Report presents the Short-Term Incentives that have been earned on the basis of results achieved in 2016. These Short-Term Incentives will be paid out in 2017.

The Supervisory Board has established the extent to which the targets for 2016 were achieved. Regarding the financial targets, the score on the EBITDA target was between target and maximum achievement, while the score on gross free cash flow was at maximum. The score for net sales growth was below target but above threshold. For the sustainability targets, the score on Brighter Living Solutions was between target and maximum, and the score on the Employee Engagement Index was on target. The Safety Performance score was at maximum. Managing Board members also have individual targets. The scores achieved on these targets were different per person and varying between target and maximum. The realization of the 2016 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 73.5-82.5% of base salary.

With the STI Deferral and Share Matching Plan, only part of the STI outcome is paid in 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.

Short-Term Incentives

in €
20161
20152
   
Feike Sijbesma
742,500
522,000
Geraldine Matchett
457,250
342,000
Stephan Tanda
433,650
347,700
Dimitri de Vreeze
457,250
342,000
Stefan Doboczky3
-
143,291

1 Based on results achieved in 2016 and therefore payable in 2017

2 Based on results achieved in 2015 and therefore paid in 2016

3 Left DSM to pursue career outside of the company as of 1 June 2015

All members of the Managing Board decided to invest the maximum of 50% of their gross 2015 STI (payable in 2016) in accordance with the STI Deferral and Share Matching Plan. In all cases, these investment shares were matched with an equal number of Restricted Share Units (RSU’s). This was also the case with regard to the gross 2016 STI (which will be paid in 2017), with the exception of Stephan Tanda in view of his leaving the company.

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.

Number of LTI performance shares granted1

 
2016
2015
   
Feike Sijbesma
31,000
29,000
Geraldine Matchett
20,500
19,000
Stephan Tanda
20,500
19,000
Dimitri de Vreeze
20,500
19,000

1 Grant according to Koninklijke DSM N.V. Performance Share Plan

For 2017, the number of conditionally granted ordinary shares under the LTI program will be:
Chairman 23,500
Members 15,500

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

In 2016, the Supervisory Board established which proportion of the shares conditionally granted in 2013, vested. The following four performance measures are applicable to the 2013 grant: relative Total Shareholder Return (TSR) versus a peer group, Return on Capital Employed (ROCE), Energy Efficiency Improvement (EEI) and the Greenhouse-gas Emissions (GHGE) reduction over volume-related revenue. Each of these measures determines 25% of the total vesting percentage. The applicable vesting schemes for the three-year vesting period starting in 2013 were published in DSM’s 2013 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 33% of the total amount of shares granted in 2013.

Pensions in 2016

The members of the Managing Board participate in the Dutch pension fund Stichting Pensioenfonds DSM Nederland (PDN). This pension scheme for the Managing Board is equal to the pension scheme for other DSM employees in the Netherlands. In 2016, a one-off pension contribution was made for the CEO. 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 resulting in a change to the DSM pension plan. As a consequence, DSM now offers two non-qualifying individual defined contribution plans to employees whose pensionable salary exceeds €101,519 (2016 ceiling) per annum, including the Managing Board.

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 2016) €101,519 per annum considering a deductible of €13,415 (in 2016 subject to annual review). Accrual of 1.875% per annum.
  • Retirement age 67 (as of 2016).
  • The scheme includes a spouses’- and disability pension.
  • Employee and employer contributions.

B. Allowance for salary exceeding €101,519­

  • Employees whose pensionable salary exceeds €101,519 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 2015, no revision or claw-back of bonuses occurred in 2016.

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 Remuneration policy for the Managing Board.

Since 2015, DSM has had 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 total remuneration and related costs (including pension expenditures, other commitments, short- and long-term incentives) of the current members of the Managing Board amounted to €10.0 million (2015: €7.8 million). The increase was the result of a higher STI payout due to better performance and a one-time contribution of €2.2 million regarding the pension of the CEO granted by the Supervisory Board in view of the fact that the CEO’s total compensation is clearly below targeted policy level, including salary and pension entitlement. The total remuneration and related costs (including pension expenditures, other commitments, short-term and long-term incentives) of the other members of the Executive Committee amounted to €5.7 million (2015: €1.6 million; 4 months) in 2016.

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:

DSM’s remuneration for the Managing Board and the Executive Committee
(IFRS defined reported costs for DSM, are not in all cases the compensation paid, nor the cash outflows for DSM)

x € thousand
Salary
Short-term incentive
Pension expenditure1
Share-based2 compensation
Other items3
Total
 
2016
2015
2016
2015
20164
2015
2016
2015
2016
2015
2016
2015
             
Feike Sijbesma
900
870
743
522
206
180
811
709
50
47
2,710
2,328
     
2,2005
-
    
2,200
-
Geraldine Matchett
590
570
457
342
87
72
445
224
77
93
1,656
1,301
Stephan Tanda
590
570
434
348
116
92
531
464
111
62
1,782
1,536
Dimitri de Vreeze
590
570
457
342
100
85
496
372
40
88
1,683
1,457
Stefan Doboczky6
-
238
-
143
-
2497
-
576
-
4
-
1,210
             
Total Managing Board
2,670
2,818
2,091
1,697
2,709
678
2,283
2,345
278
294
10,031
7,832
             
Other members of the Executive Committee8
1,950
674
1,489
345
408
119
1,255
399
615
41
5,717
1,578
             
Total Executive Committee
4,620
3,492
3,580
2,042
3,117
797
3,538
2,744
893
335
15,748
9,410

1 The employers' pension expenditure increased due to an adjustment of the employer/employee ratio, not impacting the overall contribution to the net pension scheme.

2 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 vested shares/options can be lower than the granted amount.

3 Other items include company car and allowances.

4 The pension expenditure contains an age-dependent contribution for the salary exceeding €101,519. For employees with a higher age, a higher contribution level is applicable.

5 This amount is a one-time additional pension contribution.

6 Left DSM to pursue career outside of the company as of 1 June 2015.

7 This amount includes €212,645 in relation to the settlement of a pension arrangement.

8 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.

Overview of stock options

 
Year of issue
Outstanding at 31 Dec. 2015
In 2016
Outstanding at 31 Dec. 20161
Average share price at exercise (€)
Exercise price (€)
Expiry date
Granted
Exercised
Forfeited/expired
         
Feike Sijbesma
2008
28,125
-
(28,125)
-
-
47.00
29.79
28 Mar 2016
 
2009
18,750
-
(18,750)
-
-
59.57
21.10
27 Mar 2017
 
Total
46,875
-
(46,875)
-
-
   
Of which vested
46,875
   
-
   
         
Stephan Tanda
2008
22,500
-
(22,500)
-
-
47.00
29.79
28 Mar 2016
 
2009
15,000
-
(15,000)
-
-
60.00
21.10
27 Mar 2017
 
Total
37,500
-
(37,500)
-
-
   
Of which vested
37,500
   
-
   
         
Dimitri de Vreeze
2008
22,500
-
(22,500)
-
-
47.10
29.79
28 Mar 2016
 
2009
18,000
-
(18,000)
-
-
60.75
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
12,000
-
-
-
12,000
 
40.90
15 May2020
 
2013
36,000
-
-
(24,000)
12,000
 
48.91
7 May 2021
 
Total
124,500
-
(40,500)
(24,000)
60,000
   
Of which vested
88,500
   
60,000
   

1 Geraldine Matchett does not hold any stock options

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

Overview of performance shares

 
Year of issue
Outstanding at 31 Dec. 2015
In 2016
Outstanding at 31 Dec. 2016
Share price at date of grant (€)
Granted
Vested
Forfeited / expired
       
Feike Sijbesma
2013
24,000
-
(8,000)
(16,000)
-
48.91
 
2014
28,822
-
-
-
28,822
49.88
 
2015
32,051
-
-
-
32,051
52.58
 
2016
-
36,350
-
-
36,350
48.79
 
Total
84,873
36,350
(8,000)
(16,000)
97,223
 
Retained shares originated from performance shares
66,624
 
       
Geraldine Matchett
2015
27,008
-
-
-
27,008
52.58
 
2016
-
24,006
-
-
24,006
48.79
 
Total
27,008
24,006
-
-
51,014
 
Retained shares originated from performance shares
-
 
       
Stephan Tanda
2013
16,000
-
(5,334)
(10,666)
-
48.91
 
2014
18,990
-
-
-
18,990
49.88
 
2015
20,511
-
-
-
20,511
52.58
 
2016
-
24,064
-
-
24,064
48.79
 
Total
55,501
24,064
(5,334)
(10,666)
63,565
 
Retained shares originated from performance shares
37,350
 
       
Dimitri de Vreeze
2014
16,910
-
-
-
16,910
49.88
 
2015
20,836
 
-
-
20,836
52.58
 
2016
-
24,005
-
-
24,005
48.79
 
Total
37,746
24,005
-
-
61,751
 
Retained shares originated from performance shares
-
 

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 2016, the members of the Managing Board together held 198,290 (2015: 161,853) 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.

Managing Board holdings of DSM shares

 
31 December 2016
31 December 2015
 
Ordinary shares purchased with private money
Holdings from vested performance shares
Total
holdings
Ordinary shares purchased with private money
Holdings from vested performance shares
Total
holdings
       
Feike Sijbesma
58,376
66,624
125,000
48,973
58,624
107,597
Geraldine Matchett
4,384
-
4,384
878
-
878
Stephan Tanda
18,065
37,350
55,415
14,501
33,721
48,222
Dimitri de Vreeze
13,491
-
13,491
4,886
-
4,886
Stefan Doboczky1
n.a.
n.a.
n.a.
n.a.
24,017
n.a.
Rolf-Dieter Schwalb2
n.a.
n.a.
n.a.
n.a.
53,832
n.a.
       
Total holdings
94,316
103,974
198,290
69,238
170,194
161,583

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

Loans

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

Supervisory Board remuneration in 2016

The remuneration package for the Supervisory Board comprises an annual fixed fee and an annual committee membership fee. In addition, Supervisory Board members receive an intercontinental travel allowance for each meeting that they attend outside their continent of residence. At the Annual General Meeting held on 29 April 2016, an increase of these fees and travel allowance was approved and applied as of that date. The intercontinental travel allowance is €4,000 (2015: €3,000) per meeting.

The fixed fee per appointed year for the Chairman of the Supervisory Board is €85,000 (2015: €70,000). The other members of the Supervisory Board each receive a fixed fee of €60,000 (2015: €50,000). Audit Committee membership is awarded €10,000 per member and €15,000 (2015: €12,500) for the Chairman. Nomination Committee, Remuneration Committee and Sustainability Committee membership is awarded €7,000 (2015: €5,000) per member and €10,000 (2015: €7,500) for the Chairman.

Overview of remuneration awarded to the Supervisory Board in 2016

The total remuneration (annual fixed fee, annual committee membership fee and other costs such as the intercontinental travel allowance) of the members of the Supervisory Board amounted to €0.6 million (2015: €0.5 million).

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

 
Annual fixed fee
Committee fee
Other costs
Total
Total
    
2016
2015
      
Rob Routs, Chairman
80,000
15,500
1,250
96,750
83,750
- Chairman Nomination Committee
     
- Member Remuneration Committee
     
Tom de Swaan, Deputy Chairman as of 29 April 2016
56,667
20,500
2,437
79,604
69,954
- Chairman Audit Committee
     
- Member Remuneration Committee
     
Victoria Haynes
56,667
14,667
16,250
87,584
79,250
- Member Audit Committee
     
- Member Remuneration Committee as of 29 April 2016
     
Pierre Hochuli
56,667
16,333
1,250
74,250
66,250
- Member Audit Committee
     
- Member Sustainability Committee
     
Eileen Kennedy
56,667
13,000
24,250
93,917
74,250
- Chairman Sustainability Committee as of 29 April 2016 (member until 29 April 2016)
     
- Member Nomination Committee as of 29 April 2016
     
Ewald Kist, Deputy Chairman until 29 April 2016
16,667
4,167
906
21,740
64,954
- Chairman Remuneration Committee
     
- Member Nomination Committee
     
Pauline van der Meer Mohr
56,667
15,500
2,437
74,604
64,954
- Chairman Remuneration Committee as of 29 April 2016
     
- Chairman Sustainability Committee until 29 April 2016
     
- Member Nomination Committee
     
Pradeep Pant
40,000
11,333
20,938
72,271
-
- Member Audit Committee as of 29 April 2016
     
- Member Sustainability Committee
     
      
Total
420,002
111,000
69,718
600,720
503,362
      
Total 2015
370,000
85,000
48,362
503,362
 

At year-end 2016, three members of the Supervisory Board held shares in Koninklijke DSM N.V.: Pierre Hochuli 7,210 (2015: 7,210), Victoria Haynes 300 (2015: 300) and Pauline van der Meer Mohr 1,029 (2015: 0).

Loans

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