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Remuneration (continued)
Ahold at a qlance
Our strategy
Our performance
Governance
Total Direct Compensation
The basic elements of the Total Direct
Compensation provided to Ahold's ExCo members
are (1) a base salary, (2) an annual cash incentive
and (3) a long-term equity-based program.
Another important component of the overall
remuneration package is the pension benefit;
however, this component is not regarded as part of
Total Direct Compensation.
Benchmarking
To assess the competitiveness of the overall
remuneration provided to the ExCo, the package
is benchmarked annually. The peer group used for
this purpose is the same as that used to benchmark
the performance of the Company (see table
below). This peer group reflects Ahold's geographic
operating areas and the markets most relevant to
the recruitment and retention of top management.
In addition, AEX market practice in the Netherlands
is considered, as Ahold is based in the Netherlands.
The composition (risk profile) of the Total Direct
Compensation levels is taken into account when
benchmarking these levels. The target Total Direct
Compensation level is typically around the median.
Base salary
The level of the base salary of the members of the
ExCo is derived from the benchmarking of Total
Direct Compensation. Adjustment of the base salary
is at the discretion of the Supervisory Board.
Annual cash incentive plan
The ExCo's adjusted annual cash incentive plan
uses three equally weighted financial measures:
net sales growth (30%), operating margin (30%)
and operational cash flow (30%). In addition,
a non-financial performance measure (10%) is
included that relates to responsible retailing targets.
The at-target payout as a percentage of base salary
is 100%, contingent on full achievement of the
objectives, with a cap at 150% of the base salary.
Ahold does not disclose the required performance
levels of the measures, as this is considered
commercially sensitive information.
The actual 2013 EIP payout is 89% of base salary.
Wal-Mart Stores
Costco
Supervalu
Carrefour
Kroger
Delhaize Group
Metro
Target
Staples
Tesco
Safeway
2013 EIP Performance measures
and weighting
(30%) Net sales growth
(30%) Operating margin
(30%) Operating cash flow
(10%) Responsible retailing
Financials
Investors
Annual Report 2013
In addition to quantitative financial targets, we
have also set non-financial targets that relate
to our responsible retailing strategic ambitions.
These non-financial targets are more qualitative
and are therefore monitored in a more qualitative
way. Targets set are aspirational, ambitious and
aim mainly to provide a sense of direction rather
than a required end-state. They are also intended
to facilitate a dialogue between Ahold's ExCo and
all relevant stakeholders. The additional information
provided by the ExCo should enable the Supervisory
Board to determine the ultimate score on RR.
To ensure there is a quantifiable aspect to the
non-financial component and avoid any potential
opportunity loss to the participant (as it is not
possible to "overscore" on the non-financial
component), the calculation of the score under
the non-financial component is linked to the
performance of the financial components. In short,
the achieved financial multiplier is applied to the
score on the non-financial component. If the
financial multiplier is zero, the score on the non-
financial component will be zero (regardless of the
achieved score on the non-financial component)
resulting in no pay-out.
Equity-based program: Global Reward
Opportunity
Under the Global Reward Opportunity (GRO)
program, shares are granted through a three-
year program. The program consists of two
components: shares with a performance hurdle
at grant (conditional share grant) and shares with
a performance hurdle at vesting (performance
share grant).
The at-target value of the shares to be granted
is divided by the average share price over the six
months preceding the date of grant to calculate the
number of shares. No adjustment for risk has or will
be made.
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).
