Introduction by the Chair of the Remuneration Committee
The COVID-19 pandemic once again had a significant impact on the daily life of our employees as well as our businesses in 2021. The number one priority remained as always to safeguard the safety, health and well-being of our employees. In January 2021, we paid a special COVID-19 bonus to our employees around the globe in recognition of their continuous efforts to keep the business on track during the pandemic. In all our operating facilities, measures were taken to reduce COVID-19 risks. Building on experiences gained in the course of the pandemic, DSM introduced a hybrid working concept, allowing for new, innovative ways of working. Support was provided in setting up safe and suitable workplaces at home, deploying initiatives to ensure compliance with occupational healthcare considerations when working from home.
Our businesses showed a strong financial performance in 2021 in dynamic market conditions, and we remained well on track on our People and Planet objectives. Good end-user demand drove the continued positive momentum of our Nutrition business while our Materials business recorded a very strong recovery from the impact of the COVID-19 pandemic. By actively managing the volatile dynamics of the global supply chain we remained able to meet the needs of our customers. Nutrition recorded strong organic sales growth, driven by very strong volumes in Animal Nutrition and Personal Care. Human Nutrition and Food Specialties recorded further good organic growth, building upon their strong performances in the prior year. Organic sales growth in Materials was close to 30% on the back of exceptional strong sales supported by supply disruptions and material shortages in the industry. Furthermore, Materials delivered a strong operational performance, successfully navigating global supply chain challenges as well as the disruptions caused by the semiconductor shortages impacting the automotive industry. In 2021, the divestment of our Resins & Functional Materials and associated businesses was successfully completed.
In September, we announced our intention to accelerate our strategic journey to become a company focused on Health, Nutrition & Bioscience, better placed to deploy our resources and capabilities to addressing the urgent societal and environmental challenges linked to the way the world produces and consumes food. The health and well-being of people, animals, and the planet are impacted by multiple systemic and interconnected food system challenges. DSM is well positioned to respond to these challenges, using advances in digital technology and bioscience that offer realistic scalable solutions to innovate and to create new markets. As a global leader, we have the opportunity, capability and therefore responsibility to apply our resources and expertise where these can have the greatest impact. By focusing exclusively on our activities in Health, Nutrition & Bioscience, we will be able to operate with greater agility and impact and meet the growing need for better and more sustainable food systems. Within this context, we are unlikely to be able to maximize the Materials businesses’ full potential to drive the important industrial shift to a bio-based and circular economy. We are therefore reviewing strategic options for both Materials businesses, including a possible change of ownership.
In view of this, we have simplified the operating structure with effect from 1 January 2022. At the heart of our strategic direction is the creation of three market-focused Business Groups: Food & Beverage, Animal Nutrition & Health, and Human Nutrition & Care. Each Business Group will be much more closely aligned with its respective customers and (through the integration of research & development activities previously performed by the DSM Innovation Center) will be fully equipped to rapidly develop impactful, science-based, market-ready innovations. Our Business Groups are supported by global enabling functions. These functions have reviewed their operating model, focusing on their core role, aiming for simplification, and optimizing the use of digital technologies to maximize their contribution to achieving the three Business Groups’ objectives.
Related to the strategic direction, we announced a series of new quantifiable commitments designed by 2030 help to address urgent societal and environmental challenges linked to how the world produces and consumes food. In doing so, we are one of the first companies in the consumer ingredient sector to make its societal impact explicit through a set of measurable Food System Commitments. Besides this, we announced that we will accelerate our greenhouse gas (GHG) emissions reduction target versus 2016, providing a firm foundation for the company to achieve net-zero by 2050.
In last year’s Remuneration report, we announced a review of the Remuneration Policy for the Managing Board, considering the new strategic direction as well as the challenge of attracting senior international business leaders from a remuneration perspective. It was decided to take sufficient time for this review in consideration of the strategic update, the organizational restructuring, and our new quantifiable commitment to address challenges of the world’s food systems, while allowing sufficient time to consult our main stakeholders.
The 2021 remuneration reported herein is fully aligned with the deployment of DSM’s strategic objectives. In addition, we continued in 2021 to deliver improvements in customer-centricity, large innovation projects, integrating acquired businesses, cost control and operational excellence, resulting in sound results, which are reflected in the remuneration as presented in this report.
The Supervisory Board has taken a balanced approach toward the remuneration of the Managing Board. Whereas no base salary increase was applied for the Managing Board and the Executive Committee in 2020, the Supervisory Board decided to adjust base salaries for the Managing Board considering that our Co-CEOs’ remuneration, at the beginning of their tenure, was positioned below the level of the previous CEO and clearly below the median of the peer group. After careful consideration of the impact of the pandemic, the Supervisory Board decided not to take any other remuneration measures in 2021.
I would like to thank my predecessor Pauline van der Meer Mohr who joined DSM’s Supervisory Board in 2011 and chaired the Remuneration Committee since 2016. As member of the Supervisory Board, Pauline made many outstanding contributions to the transformation of the company, for which DSM is very grateful. As Chair of the Remuneration Committee, Pauline has been leading the way in establishing a balanced remuneration policy in line with DSM’s purpose and strategy, reflecting both financial and non-financial targets while meeting new governance requirements. I like to express my deep appreciation for Pauline’s professional and sound judgement and organizational savviness in this field. It is my privilege to take over from her and to build on the strong foundation which was put place under her leadership. We wish Pauline every success with her next endeavors.
This Remuneration report provides a summary of the remuneration policy for the Managing Board of Koninklijke DSM N.V. and the Supervisory Board of Koninklijke DSM N.V. respectively, as well as an overview of the remuneration of the members of the Managing Board and the Supervisory Board in the financial year 2021. The full remuneration policy as approved by the AGM in 2019 is published on the company website. This report is prepared in accordance with the relevant parts of Section 135 Book 2 of the Dutch Civil Code.
Chair, Remuneration Committee