Remuneration
Ahold's remuneration policy is prepared
in accordance with the Dutch Corporate
Governance Code and was adopted at
the General Meeting of Shareholders on
May 18, 2006.
Remuneration Committee
Remuneration policy 2012
Ahold Annual Report 2012 69
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Investors
Further details on the Corporate Executive Board members'
employment agreements, individual remuneration, pension, shares
and other interests in the Company are outlined in Notes 31 and 32 to
the consolidated financial statements.
The main responsibilities of the Remuneration Committee include:
Preparing proposals for the Supervisory Board on the remuneration
policy for the Corporate Executive Board, to be adopted by the
General Meeting of Shareholders
Preparing proposals on the remuneration of individual members of
the Corporate Executive Board
Advising on the level and structure of compensation for senior
personnel other than members of the Corporate Executive Board
The Remuneration Committee uses internal and external advisors for
market data and recent developments. In 2012, external advisors were
hired to provide advice regarding market practices and developments
relating to the remuneration policy and short- and long-term incentive
plans. Ultimately, the Supervisory Board determines the level and
composition of the remuneration components for the individual
members of the Corporate Executive Board.
The current members of the Remuneration Committee are Supervisory
Board members Derk Doijer (Chairman), Stephanie Shern, Judith
Sprieser, Mark McGrath and Ben Noteboom. In 2012, the
Remuneration Committee met five times.
Ahold's remuneration policy is focused on Total Direct Compensation,
which is benchmarked against a pre-defined peer group.
Total Direct Compensation
The basic elements of the Total Direct Compensation provided to
Ahold's Corporate Executive Board members are (1) a base salary, (2)
an annual cash incentive and (3) a long-term, equity-based program.
An important component of the overall remuneration package is the
pension benefit, which is not regarded as a component of Total Direct
Compensation.
Peer group
The peer group used to assess the competitiveness of the overall
remuneration provided to the Corporate Executive Board is the same
as that used to benchmark the performance of the Company. This
peer group reflects Ahold's geographic operating areas and the
markets most relevant in relation to the recruitment and retention of
top management. In addition, market practice in the Netherlands is
considered, and peer group companies are selected based on
relevant size, public listing and liquidity of shares.
Wal-Mart Stores, Inc. Costco Wholesale SuperValu Inc.
Corporation
Carrefour S.A. The Kroger Co. Delhaize Brothers
and Co.
Metro A.G. Target Corporation (Delhaize Group)
Tesco PLC Safeway Inc. Staples, Inc.
To anticipate changes to the peer group, a short list of substitutes has
been defined. In selecting the most appropriate replacement, the
Supervisory Board uses the same criteria as were used to select the
companies in the current peer group.
Base salary
The composition (risk profile) of the existing Total Direct Compensation
levels is taken into account when benchmarking base salary levels.
The target Total Direct Compensation level is typically around the
50th percentile.
Annual cash incentive plan
The Corporate Executive Board's annual cash incentive plan uses three
equally weighted measures: net sales growth, operating margin and
Return on Net Assets (RoNA). The at-target payout as a percentage of
base salary is 100%, contingent on full achievement of the individual's
objectives, with a cap at 125% of the base salary. Ahold does not
disclose the required performance levels of the measures, as this is
considered commercially sensitive information. A claw back provision
is embedded in the rules of the Annual Incentive Plan.
Equity-based program: Global Reward Opportunity
Under the Global Reward Opportunity (GRO) program, conditional
shares are granted through three-year (with a performance hurdle at
grant) and five-year (with a performance hurdle at grant and vesting)
programs. In principle, plan rules will not be altered during the term
of the plan.
The Supervisory Board has set the target value to be granted under
GRO for the members of the Corporate Executive Board at 150% of
base pay. The number of conditional shares to be granted is
determined by the at-target value of the grant, 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 €100,000 and an annual
incentive multiplier for the preceding year of 0.8, the value to be
granted would be 0.8 x €100,000 €80,000. Assuming,
furthermore, a six-month average share price preceding the date of
grant of €8.00, the number of shares to be conditionally granted
would be 10,000. Of these 10,000 shares, 5,000 would be granted
through the three-year component and 5,000 through the five-year
Total Shareholder Return (TSR)-related component. If the annual
incentive multiplier is zero, 50% of the grant value at target would be
granted through the five-year program only.
As a result of the two above-mentioned factors (the relation between
the annual cash incentive and the GRO program, and the fact that the
maximum annual cash incentive multiplier is capped at 1.25), the
maximum grant value is 187.5% of base salary.
Scenario analyses are prepared regularly to estimate possible future
payout levels. These analyses are included in the annual evaluation of
the remuneration policy, each of its components and the mix of these
components (the risk profile of the package).