Annual cash incentive plan
Long-term incentive plan
Long-term incentive
Performance factor determining grant levels
The target Total Direct Compensation will typically be at the
50th percentile. In special cases the levels might move
towards the 75th percentile. In the case of any adjustment,
a conservative (step-by-step) approach will be followed,
taking into account the composition of existing remuneration
(risk profile).
To further align the annual cash incentive program with our
Company strategy, the Supervisory Board had decided to no
longer use EVA as one of the performance measures used in
the annual cash incentive plan. The new program will use
three equally weighted measures:, net sales growth,
operating margin and RoNA ("Return on Net Assets").
Our target for the annual cash incentive payout as a percent
of base salary remains at 100%, contingent on full
achievement of objectives, with a cap at 125% of the base
salary except where pre-existing contractual arrangements
exist.3 The Company does not disclose the required
performance levels of the criteria, as these are considered
commercially sensitive information.
The new remuneration policy eliminates the use of stock
options as an equity reward method. Beginning in 2006,
Ahold shares will instead be granted through a mid-term
(three-year) and a long-term (five-year) conditional share
grant program:
Mid-term incentive
For Corporate Executive Board members, one half of the
conditional shares granted will vest after three years
continued employment (with a mandatory holding period
of two years following the vesting).
The other half of the conditional shares granted will vest
after a performance period of five years. During this period,
performance will be measured against the Total Shareholder
Return (TSR, share price growth and dividends) of the same
peer group used to benchmark the Corporate Executive
Board remuneration levels. The number of shares that will
vest depends on the ranking of Ahold within the peer group.
No shares will vest below the seventh position of the peer
group consisting of twelve companies (including Ahold).
The maximum number of shares that can vest is 150% of
the target number of the conditional shares granted. Should
Ahold reach the first position within the peer group, this
maximum number of shares will vest.
The following table describes the percentage of conditional
shares that will vest depending on the ranking of Ahold
within the peer group:
COMPANY RANKING
Vested
shares
Ranking
1
150
Ranking
2
130
Ranking
3
110
Ranking
4
90
Ranking
5
70
Ranking
6
50
Ranking
7
25
Ranking
8, 9, 10, 11, 12
0
Target grant values for each Corporate Executive Board
member are determined by the Supervisory Board. The grant
level at target, taking into account the individual Executive
Board member's base salary and annual incentive at target,
will provide a Total Direct Compensation in line with the
stated policy level.
The actual number of shares granted in any given year is
determined by applying the performance multiple of the
annual incentive criteria for the preceding year against the
targeted grant level. For example, if the annual incentive
multiple for a given year was 0.8 and the at target grant
level was EUR 100.000, the granted value will be 0.8 x
EUR 100.000 EUR 80.000. The average share price
during the six months preceding the date of grant will be
used to determine the number of shares to be granted.
In case, the annual incentive multiplier is zero, 50% of
the grant value at target will be granted through the TSR
performance related component.
3 Currently, only Mr. Moberg has a pre-existing contract which differs from these
targets.
AHOLD ANNUAL REPORT 2005
27
