Remuneration
5. Pension 1
6. Other contract terms
NEW REMUNERATION POLICY 2006 2
MAIN CHANGES
New reference peer group
Introduction of Total Direct Compensation for
benchmarking
5.1 For Dutch Corporate Executive Board members, the
Dutch Pension Scheme for the Corporate Executive
Board (Pensioenregeling Raad van Bestuur Ahold) will
apply. The main features of this Pension Scheme are:
- Retirement age 60;
- Level of pension benefits amounts to 60% of final
base pay (based on 30 years of service);
- The pension accrual rate is 2% per year of service;
and
- Contributions to be paid by the Corporate Executive
Board member based on a percentage of base salary.
5.2 For non-Dutch Corporate Executive Board members,
the pension scheme will be based on the individual
situation and taking into account the pension practices
in the home country, the existing pension scheme at
the date of hire, age and the possibilities to apply the
Pensioenregeling Raad van Bestuur Ahold. In general
the target level of the pension is 60% final base pay
(in a situation of full service).
6.1 Loans
The Company does not provide loans to members of the
Corporate Executive Board. There are no current loans
outstanding.
In the second half of 2005, the remuneration policy of
Ahold was reviewed in view of the complexity of the existing
policy, evolving market practices and changes in corporate
governance requirements. The Supervisory Board made the
recommendation to change the 2004 remuneration policy to
come to a more simple and transparent system, reinforcing a
performance-oriented culture focused on criteria relevant to
Ahold's strategy. Compared to the prior policy, the basic
objectives have not changed whereas the strategy and
vehicles used have.
The primary changes to the policy include a new peer group
for benchmarking, the introduction of "Total Direct
Compensation" instead of "Total Cash Compensation" as
the basis for comparison with the relevant peer group, new
performance measures for the annual cash incentive and a
new long-term incentive plan replacing the existing stock
option and performance share grant programs.
The new peer group used to assess the competitiveness of
the overall remuneration provided to the Corporate Executive
Board reflects the geographical areas in which we operate
and of the markets most relevant with respect to the
recruitment and retention of top management for the
Company. The peer group is comprised of the following
companies:
- Wal-Mart Stores, Inc.
- Carrefour S.A.
- Metro A.G.
- Tesco PLC
- Costco Wholesale Corporation
- The Kroger Co.
- Target Corporation
- Safeway Inc.
- Sysco Corporation
- Delhaize Brothers and Co. (Delhaize Group)
- Staples, Inc.
The basis elements of the overall remuneration provided
to our Corporate Executive Board members are (1) a base
salary, (2) an annual cash incentive calculated as a
percentage of the base salary and determined by comparing
performance against specific objectives (3) a long-term
incentive plan based on conditional share grants with
employment and performance criteria and (4) a pension.
Whereas the prior policy used "Total Cash Compensation"
(consisting of base salary plus annual cash incentive at
target level) as a reference when comparing to the peer
group, the new policy uses a more complete measure "Total
Direct Compensation" (consisting of base salary plus annual
cash incentive at target level plus the long term incentive at
target level projected on an annual value basis) when
comparing to the reference peer group. It is the Supervisory
Board's view that including the long-term incentive
component in benchmarking is essential to properly assess
the value of the total remuneration package, and to ensure a
proper balance between a short-term and longer term focus.
When comparing remuneration levels against the new peer
group, the composition (risk profile) of the existing
remuneration, will be taken into account. The target Total
Direct Compensation levels will be reached by designated
target levels of the mid- and long-term incentive component.
1 Due to changes in the pension law in The Netherlands the pension scheme for the
Corporate Executive Board will be reviewed over the course of 2006.
2 The new remuneration policy will be submitted for shareholder approval at the
annual General Meeting of Shareholders on May 18, 2006.
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