Remuneration
2. Remuneration structure
3. Total cash compensation
1.3 Within the limits of the general remuneration policy as
adopted by the General Meeting of Shareholders, the
Supervisory Board determines the remuneration of
individual members of the Corporate Executive Board.
2.1 The remuneration structure is divided into (i) Total Cash
(consisting of base salary and bonus) and (ii) long-term
incentives consisting of stock options and a share-plan,
and (iii) pension. These three elements will be further
addressed below.
2.2 The Remuneration Committee considers the
remuneration structure regularly to ensure it meets the
objectives of the remuneration policy.
2.3 In determining an individual's remuneration within the
general remuneration policy, the Supervisory Board will
take into account factors such as the required
competencies, skills and performance of the individual
concerned and the specific role and responsibilities of
the relevant position.
2.4 To ensure the competitiveness of the overall
remuneration provided to the Corporate Executive
Board, the remuneration levels are benchmarked
annually against a peer group of companies. Reference
for compensation (base salary, target bonus, long-term
incentives, and pension) is the Dutch market for
Corporate Executive Board members of the leading
companies quoted on the Euronext Amsterdam. For this
purpose, market data of two external service providers
specialized in executive pay are used. Leading AEX
companies are defined on the basis of world-wide
annual sales exceeding EUR 10 billion and total
employees world-wide in excess of 30,000. For 2004
and 2005 the Remuneration Committee and the
Supervisory Board assessed the competitiveness of the
remuneration levels of the Corporate Executive Board
against the following peer group:
- Royal Dutch Shell N.V.
- ING Group N.V.
- FORTIS N.V.
- Unilever N.V.
- ABN AMRO Holding N.V.
- Royal Philips Electronics N.V.
- Aegon N.V.
- AKZO Nobel N.V.
- Royal KPN N.V.
- TNT N.V.
3.1 The reference for "at target Total Cash" (base salary
and at target bonus) is the Dutch market for Corporate
Executive Board members of the top AEX companies.
The "at target Total Cash" will be benchmarked
annually against the aforementioned market(s).
3.2 It is the policy of the Company to set "at target Total
Cash" for members of the Corporate Executive Board
between the 60th and 75th percentile of the relevant
reference market. This is deemed essential to attract
and retain management of the appropriate caliber in
this highly competitive international retail market.
3.3 The "Road to Recovery" strategy as announced on
November 7, 2003 is the cornerstone in the efforts to
rebuild Ahold's position as a company that delivers
value to its stakeholders. In light of this strategy, the
general remuneration policy emphasizes variable
performance related compensation. Because of the
importance of a remuneration which is substantially
based on performance of Ahold and the individual
board member, it is considered desirable that the bonus
represents a higher proportion of Total Cash than is
typically the case among the companies in the defined
reference market.
3.4 A Corporate Executive Board member's bonus can range
from 0 to 125% 1 of the individual's base salary,
depending on performance. Performance "at target"
will yield a bonus pay out at 100% of the Corporate
Executive Board member's base salary. 70% of the at
target bonus will be based on a financial criterion and
30% will be based on one or two measurable personal
targets.
The selected financial criterion is economic value added
("EVA") improvement. EVA measures the Company's
economic value added or economic profit, defined as
Net Operating Profits After Tax ("NOPAT") minus the
cost of capital. EVA is a comprehensive measure of
ongoing operating performance and includes an explicit
charge for invested capital. EVA supports the primary
objective of the Company to create long-term value and
rewards consistent value creation over a long-term
horizon. The Company does not disclose the required
performance levels of the financial and personal
criteria, as these qualify as commercially sensitive
information.
The personal targets may vary per individual Corporate
Executive Board member and may differ year by year.
The attainment of personal targets is assessed by the
Supervisory Board. The Supervisory Board insists and
ensures that personal targets are stretching and
realistic.2
1 In the case of the CEO, up to 250% based on employment contract.
2 The performance criteria listed above apply also to existing employment contracts.
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