Executive Compensation Roles
and Analysis
Role of the Board of Directors
Role of the Remuneration Committee
Role of certain Executive Committee
Members in Executive Compensation
Decisions
Executive Management
Compensation
Base Salary
Annual Short-Term Incentive Award
Payment of Short-Term Incentive
Awards in 2014
Delhaize Group Annual Report 2014 59
The Remuneration Policy includes principles
related to unvested equity-based compensa
tion recovery from an officer who has com
mitted a fraud or wrongdoing that results in a
restatement of the Company's financial results.
The changes in the Remuneration Policy as
mentioned in this Report followed a thorough
analysis of Executive Management Plans to
ensure that the design of these plans support
the Company's strategy and remain aligned
with market practices.
The Board of Directors, upon the recommen
dation of the RC, determines the remuneration
of directors and the members of Executive
Management.
The role of the RC is, among other matters,
to advise and make recommendations to the
Board of Directors on compensation matters.
In March 2014, the Board approved dividing
the work of the former Remuneration Nomi
nation Committee of the Board as of May 2014
into two separate committees, the Governance
and Nomination Committee, and the RC.
The roles and responsibilities of the RC are
described in its Terms of Reference and are set
forth as Exhibit C to the Corporate Governance
Charter.
The Company's CEO makes recommenda
tions concerning compensation for Executive
Management. These recommendations reflect
the results of an annual performance review
for each executive. The Company's Executive
Vice President for Human Resources ("CHRO")
assists the CEO in this process. The CHRO also
supports the RC in its evaluation of the CEO's
performance and compensation recommen
dations, and the General Counsel provides
legal advice concerning applicable laws and
governance matters.
The compensation of Executive Management
includes the following components:
Base Salary;
Annual Short-term Incentive ("STI") awards;
Long-term Incentive ("LTI") awards; and
Other benefits, retirement and post-employ
ment benefits.
When determining compensation for Executive
Management, the RC considers all of these
elements.
In general, these components can be catego
rized as either fixed or variable. The base sal
ary and other benefits, such as retirement and
post-employment benefits that are specified
contractually or by law, are considered fixed
compensation. The short-term incentive award
and the different components of the long
term incentive award are considered variable
compensation.
Delhaize Group believes that the current pro
portion of fixed versus variable compensation
offers members of Executive Management the
right balance of incentives to optimize both
the short- and long-term objectives of the
Company and its shareholders.
The following graphs illustrate the proportion
of fixed versus variable compensation for the
CEO and other members of Executive Com
mittee. These charts reflect base salary and
target amounts for STI and LTI awards granted
in 2014.
FRANS MULLER
65%
Variable
OTHER MEMBERS OF
EXECUTIVE COMMITTEE
62%
Variable
Base salary is a key element of the compensa
tion package. The Company determines short
term incentive awards and long-term incentive
awards as percentages of base salary.
Base salary is established and adjusted as a
result of an annual review process. This review
process considers both market practices as
well as individual performance.
The Company's short-term incentive plan is
designed to enhance a performance-based
management culture that aims to support the
Company's strategy with clear financial and
individual performance targets. Any payment
of STI is entirely at the discretion of the Board of
Directors upon recommendation of the RC.
The short-term incentive awards paid in 2014
were based on achievement in 2013 of both
Company and individual performance targets.
Funding Threshold - In order for any short
term incentive to have been paid in 2014, the
Company's performance had to exceed a
minimum performance "funding threshold".
Should the Company not have achieved
this required minimum performance, no
STI would have been paid under any of the
performance criteria (including individual
performance), irrespective of the perfor
mance achieved in such criteria. For 2013
this "funding threshold" was fixed at 90% of
the Delhaize Group underlying operating
profit (UOP) budget.
Company Performance Metrics - 50% of
the payment is based on Company perfor
mance subject to a yearly decision of the
Board of Director in function of the strategic
focus as recommended by Management.
For 2014, the performance criteria are
measured as 50% of comparable store sales
growth and 50% of UOP. The amount paid
could range from 0% to 150% of the target
short-term incentive amount in function of
achieved performance against targets.
Individual Performance Metric - 50% of
the 2014 payment was based on individual
performance. This performance was directly
linked to the achievement of 4 to 5 individ
ual targets that were identified through an
individual target setting process. The portion
of the award tied to individual performance
could be funded from 0% to 150% depending
on individual performance.
