Remuneration of Managing Board and Supervisory Board

Remuneration Managing Board in 2017

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 2017

Adjustment of the base salary is at the discretion of the Supervisory Board. On 14 May 2017, it was decided to adjust the annual base salary of the CEO by 2.2% and for the other Managing Board members by 2.5% as of 1 July 2017.

Fixed annual salary

in €
1 July 2017
1 July 2016
­
  
Feike Sijbesma
920,000
900,000
Geraldine Matchett
605,000
590,000
Stephan Tanda1
-
590,000
Dimitri de Vreeze
605,000
590,000

1 Left DSM to pursue his career outside of the company as of 1 February 2017.

Short-Term Incentives (STI) for 2017

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 2017 Integrated Annual Report presents the Short-Term Incentives that have been earned on the basis of results achieved in 2017. These Short-Term Incentives will be paid out in 2018.

The Supervisory Board has established the extent to which the targets for 2017 were achieved and has used their discretionary power to adjust achievements resulting in partially higher pay-out, including impact on ROCE. Regarding the financial targets, the score on the EBITDA target was overachieved, while the score on gross free cash flow was on target. The score for net sales growth was at maximum achievement. For the sustainability targets, the score on Brighter Living Solutions was on target, and the score on the Employee Engagement Index was overachieved. The Safety Performance score was below threshold. Managing Board members also have individual targets. The scores achieved on these targets were at maximum achievement. The realization of the 2017 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 realization percentage was 75% of base salary. The realization percentage in 2017 was 75% of base salary versus 73.5-82.5% on average over 2016.

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 €
20171
20162
   
Feike Sijbesma
682,500
742,500
Geraldine Matchett
448,125
457,250
Stephan Tanda 3
-
433,650
Dimitri de Vreeze
448,125
457,250

1 Based on results achieved in 2017 and therefore payable in 2018.

2 Based on results achieved in 2016 and therefore paid in 2017.

3 Left DSM to pursue his career outside of the company as of 1 February 2017.

All members of the Managing Board decided to invest the maximum of 50% of their gross 2016 STI (payable in 2017) 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 (RSUs). This was also the case with regard to the gross 2017 STI (which will be paid in 2018).

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

 
2017
2016
   
Feike Sijbesma
23,500
31,000
Geraldine Matchett
15,500
20,500
Stephan Tanda2
-
20,500
Dimitri de Vreeze
15,500
20,500

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

2 Left DSM to pursue his career outside of the company as of 1 February 2017.

For 2018, the number of conditionally granted ordinary shares under the LTI program will be:

  • Chairman 17,000
  • Members 11,000

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

In 2017, the Supervisory Board established which proportion of the shares conditionally granted in 2014, vested. The following four performance measures are applicable to the 2014 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 2014 were published in DSM's 2014 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, while 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 in 2014.

Pensions in 2017

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. 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 offers two non-qualifying individual defined contribution plans to employees whose pensionable salary exceeds €103,317 (2017 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 2017) €103,317 per annum considering a deductible of €13,592 (in 2017 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 €103,317­

  • Employees whose pensionable salary exceeds €103,317 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 2016, no revision or claw-back of bonuses occurred in 2017.

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 see Remuneration policy for the Managing Board as included in the 'Report by the Supervisory 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 in 2017 are the Managing Board members Feike Sijbesma (CEO/Chairman), Geraldine Matchett (CFO) 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), who was succeeded by Judith Wiese on 1 January 2018. 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 €5.5 million (2016: €10.0 million).

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 €5.5 million in 2017 (2016: €5.7 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:

DSM's remuneration expense for the Managing Board and the Executive Committee
(the reported costs for DSM, according to IFRS definitions, 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
 
2017
2016
2017
2016
20174
20165
2017
2016
2017
2016
2017
20165
             
Feike Sijbesma
910
900
683
743
214
206
850
811
50
50
2,707
2,710
Geraldine Matchett
598
590
448
457
101
87
634
445
74
77
1,855
1,656
Stephan Tanda6
49
590
-
434
9
116
(895)
531
1
111
(836)
1,782
Dimitri de Vreeze
598
590
448
457
112
100
552
496
39
40
1,749
1,683
             
Total Managing Board
2,155
2,670
1,579
2,091
436
509
1,141
2,283
164
278
5,475
7,831
             
Other members of the Executive Committee
1,995
1,950
1,497
1,489
432
408
1,271
1,255
298
615
5,493
5,717
             
Total Executive Committee
4,150
4,620
3,076
3,580
868
917
2,412
3,538
462
893
10,968
13,548

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 percentage of vesting of shares and options will determine the final income for the Managing Board and Executive Committee members.

3 Other items include company car and allowances.

4 The pension expenditure contains an age-dependent contribution for the salary exceeding €103,317. For employees with a higher age, a higher contribution level is applicable.

5 In 2016, this amount included a one-time additional pension contribution of €2.2 million, bringing the total 2016 pension expenditure to €2,709 thousand and the total remuneration of the CEO to €4,910 thousand. For the entire Managing Board the total remuneration for 2016 was €10,031 thousand.

6 Left DSM to pursue his career outside of the company as of 1 February 2017. The cumulative expense of the share-based compensation previously recognized for not yet vested performance shares has been reversed in 2017.

Pay ratio

Under the new Dutch Corporate Governance Code companies are required to publish a pay ratio. As the code does not provide a definition of the pay ratio, the calculation method applied will vary per company, which will make the pay ratio data incomparable. The pay ratio per company will also differ year on year, since the variable pay (as a percentage of annual base salary) of the CEO/Managing Board is typically much higher (100% at target) than the variable pay of the comparable average employee group (about 5-10% of annual base pay), and this variable pay will fluctuate with business results. On top of that, different regions of the world have different pay structures, so acquisitions/divestments will equally influence the pay ratio. DSM complies with the governance code in providing a pay ratio, using the following calculation method, as measured per 31 December 2017. The ratio of total remuneration of the CEO, including annual base salary, short-term incentives, long-term incentives and other benefits such as pension (as reported in this annual report) versus the average of total global employee (i.e. including Dutch) remuneration (after deduction of total remuneration of the CEO) is 32:1.

Furthermore, the pay ratio of the full Managing Board total remuneration average versus the average of total global employee remuneration (after deduction of total remuneration of the Managing Board) is 25:1. In case the ratio is calculated versus the Dutch employee remuneration average, the ratios will be 20:1 (compared to CEO remuneration) or 16:1 (compared to average Managing Board remuneration). This is based on total NL cost of EUR 522 million (which includes the remuneration of the Managing Board and has been deducted in the ratio calculation) and a head count in the Netherlands of 3,831 as per 31 December 2017.

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. 2016
In 2017
Outstanding at 31 Dec. 20171
Average share price at exercise (€)
Exercise price (€)
Expiry date
Granted
Exercised
Forfeited/expired
         
Dimitri de Vreeze
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
12,000
-
-
-
12,000
 
48.91
7 May 2021
 
Total
60,000
-
-
-
60,000
   
Of which vested
60,000
   
60,000
   

1 The other members of the Managing Board do 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. 2016
In 2017
Outstanding at 31 Dec. 2017
Share price at date of grant (€)
Granted
Vested
Forfeited / expired
       
Feike Sijbesma
2014
28,822
-
(14,411)
(14,411)
-
49.88
 
2015
32,051
-
-
-
32,051
52.58
 
2016
36,350
-
-
-
36,350
48.79
 
2017
-
29,333
-
-
29,333
63.65
 
Total
97,223
29,333
(14,411)
(14,411)
97,734
 
Retained shares originated from performance shares
81,035
 
       
Geraldine Matchett
2015
27,008
-
-
-
27,008
52.58
 
2016
24,006
-
-
-
24,006
48.79
 
2017
-
19,092
-
-
19,092
63.65
 
Total
51,014
19,092
-
-
70,106
 
Retained shares originated from performance shares
-
 
       
Stephan Tanda
2014
18,990
-
-
(18,990)
-
49.88
 
2015
20,511
-
-
(20,511)
-
52.58
 
2016
24,064
-
-
(24,064)
-
48.79
 
Total
63,565
-
-
(63,565)
-
 
Retained shares originated from performance shares
n.a.
 
       
Dimitri de Vreeze
2014
16,910
-
(8,455)
(8,455)
-
49.88
 
2015
20,836
 
-
-
20,836
52.58
 
2016
24,005
-
-
-
24,005
48.79
 
2017
-
19,092
-
-
19,092
63.65
 
Total
61,751
19,092
(8,455)
(8,455)
63,933
 
Retained shares originated from performance shares
4,431
 
       
Other members Executive committee
2016
53,616
-
-
-
53,616
48.79
 
2017
-
45,577
-
-
45,577
63.65
 
Total
53,616
45,577
-
-
99,193
 
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 2017, the members of the Managing Board together held 174,734 (2016: 198,290) 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 2017
31 December 2016
 
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
64,209
81,035
145,244
58,376
66,624
125,000
Geraldine Matchett
7,976
-
7,976
4,384
-
4,384
Stephan Tanda
-
-
-
18,065
37,350
55,415
Dimitri de Vreeze
17,083
4,431
21,514
13,491
-
13,491
       
Total holdings
89,268
85,466
174,734
94,316
103,974
198,290

Loans

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

Supervisory Board remuneration in 2017

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 of €4,000 (2016: €4,000).

The fixed fee per appointed year for the Chair of the Supervisory Board is €85,000 (2016: €85,000). The other members of the Supervisory Board each receive a fixed fee of €60,000 (2016: €60,000). Audit Committee membership is awarded €10,000 (2016: €10,000) per member and €15,000 (2016: €15,000) for the Chair. Nomination Committee, Remuneration Committee and Sustainability Committee membership is awarded €7,000 (2016: €7,000) per member and €10,000 (2016: €10,000) for the Chair.

Overview of remuneration awarded to the Supervisory Board in 2017

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 €0.7 million (2016: €0.6 million).

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

Remuneration Supervisory Board members

in €
Annual fixed fee
Committee fee
Other costs
 
Total
    
2017
2016
      
Rob Routs, Chairman
85,000
17,000
5,250
107,250
96,750
Tom de Swaan, Deputy Chairman (as of 29 April 2016)
60,000
22,000
5,250
87,250
79,604
Victoria Haynes
60,000
17,000
17,250
94,250
87,584
Pierre Hochuli (until 3 May 2017)
20,000
5,667
313
25,980
74,250
Eileen Kennedy
60,000
17,000
17,250
94,250
93,917
Ewald Kist, Deputy Chairman (until 29 April 2016)
-
-
-
-
21,740
Pauline van der Meer Mohr
60,000
17,000
5,250
82,250
74,604
Frits van Paasschen (as of 3 May 2017)
40,000
11,333
16,937
68,270
-
Pradeep Pant (as of 29 April 2016)
60,000
17,000
25,250
102,250
72,271
John Ramsay (as of 3 May 2017)
40,000
6,667
4,938
51,605
-
      
Total
485,000
130,667
97,688
713,355
600,720
      
Total 2016
420,002
111,000
69,718
600,720
 

Committee Overview

 
Nomination
Remuneration
Auditing
Sustainability
     
Rob Routs, Chairman
Chairman
Member
-
-
Tom de Swaan, Deputy Chairman
-
Member
Chairman
-
Victoria Haynes
-
Member
Member
-
Pierre Hochuli (until 3 May 2017)
-
-
Member
Member
Eileen Kennedy
Member
-
-
Chairman
Pauline van der Meer Mohr
Member
Chairman
-
-
Frits van Paasschen (as of 3 May 2017)
-
-
Member
Member
Pradeep Pant (as of 29 April 2016)
-
-
Member
Member
John Ramsay (as of 3 May 2017)
-
-
Member
-

At year-end 2017, two members of the Supervisory Board held shares in Koninklijke DSM N.V.: Victoria Haynes 300 (2016: 300) and Pauline van der Meer Mohr 1,029 (2016: 1,029).

Loans

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