Remuneration
The peer group is currently comprised of the following companies:
Wal-Mart Stores, Inc.
Costco Wholesale Corporation
Sysco Corporation
Carrefour S.A.
The Kroger Co.
Delhaize Brothers and Co. (Delhaize Group)
Metro A.G.
Target Corporation
Staples, Inc.
Tesco PLC
Safeway Inc.
To anticipate changes to the peer group, a short list with
substitutes is defined. In selecting the most appropriate
replacement, the Supervisory Board will use the same criteria
as used to select the companies in the current peer group.
Base salary
When comparing base salary levels against the peer group,
the composition (risk profile) of the existing Total Direct
Compensation levels is taken into account. The target
Total Direct Compensation level is typically targeted at the
50th percentile, however, in special cases the levels can
be increased. In the case of any adjustment, a conservative
approach with incremental adjustments is followed.
Annual cash incentive plan
The annual cash incentive plan for the Corporate Executive
Board uses three equally weighted measures: net sales
growth, operating margin and return on net assets ("RoNA").
The at-target pay out as a percentage of base salary is
100 percent, contingent on full achievement of objectives,
with a cap at 125 percent of the base salary except where
pre-existing contractual arrangements exist. In Anders
Moberg's contract an at-target percentage of 142.5 percent
and a cap at 250 percent was already agreed at the time the
2006 remuneration policy was adopted. The Company does
not disclose the required performance levels of the measures,
as this is considered commercially sensitive information.
Equity-based program: Global Reward Opportunity
In 2006 a new program named "Global Reward Opportunity"
("GRO") was introduced. In addition to the Corporate
Executive Board members more than 6,000 employees
participated in the program as of the May 2006 share grant.
Under the GRO only conditional shares are granted through
three- and five-year awards. Following the introduction
of GRO, options were discontinued as a remuneration
component. In principle, plan rules will not be altered during
the term of the plans.
Target values to be granted under GRO are determined by
the Supervisory Board for each Corporate Executive Board
member individually. The number of conditional shares
to be granted depends on the at-target value, the annual
cash incentive plan multiplier of the preceding year and
the average share price during the six months preceding
the date of grant.
For example, assuming an at-target grant value of
EUR 100,000 and an annual incentive multiplier for the
preceding year of 0.8, the value to be granted will be
0.8 x EUR 100,000 EUR 80,000. Assuming furthermore,
a six months average share price preceding the date of grant
of EUR 8.00, the number of shares to be conditionally
granted will be 10,000. Of these 10,000 shares, 5,000 will
be granted through a three-year component and 5,000
will be granted through the five-year component. In the
event that the annual incentive multiplier is zero, 50 percent
of the grant value at target will be granted through the
five-year relative Total Shareholder Return ("TSR") related
program only.
Three-year component
For Corporate Executive Board members, the shares
conditionally granted under this component vest after three
years of continued employment. The Corporate Executive
Board members must retain these shares for a period of five
years from the grant date. The Corporate Executive Board
members are allowed to sell part of the shares to finance tax
due at the date of vesting.
Five-year component
The shares conditionally granted under this component vest
at the end of the performance period of five years and are
conditional upon performance. Performance is measured
using Total Shareholder Return "TSR" (share price growth
and dividends paid over the performance period) as
benchmarked against the TSR performance of the peer
group. The number of shares that vest depends on the
ranking of the Company within the peer group. No shares
will vest in the event that Ahold ranks below the seventh
position of the peer group, consisting of 12 companies
(including Ahold).
The maximum number of the conditional shares, granted to
the Corporate Executive Board members under the five-year
program that can vest is 150 percent times the original,
conditionally granted number of shares. The table below
indicates the percentage of conditional shares that could
vest based on the ranking of the Company within the
peer group:
12 3 4
5
6
7
8
9
10
11
12
Corporate Executive Board members
150% 130% 110% 90%
70%
50%
25%
0%
0%
0%
0%
0%
20 Ahold Annual Report 2006
