EXECUTIVE BOARD REMUNERATION POLICY

Transcription

1 Arcadis NV Remuneration Policy Executive Board EXECUTIVE BOARD REMUNERATION POLICY Objectives The remuneration policy for members of the Executive Board of Arcadis N.V. ( Arcadis or the Company ) is reviewed every two years by the Arcadis Remuneration Committee at the instruction of the Supervisory Board. The remuneration policy should serve to attract, motivate and retain international executives of the highest caliber in order to deliver our ambitious business strategy. The current remuneration policy was adopted by the General Meeting in May 2005 and last amended in April The remuneration policy aims to support the business strategy, further enhancing the link between pay and performance and further aligning the interests of the members of the Executive Board with the shareholders interests by stimulating share ownership all while adopting the highest standards of good corporate governance. Remuneration elements The remuneration policy for the members of the Executive Board consists of four elements: fixed compensation, a short-term variable remuneration, a long-term variable remuneration and other benefits such as a pension scheme. Labor market reference Arcadis has developed from a multi-local to the leading international natural and built asset design and consultancy company. In order to align with Arcadis size (in terms of revenues, average market capitalization, total assets and number of FTE), geographic and industry scope, and labor market competition, two reference groups are defined. 1 The first group focuses on Dutch headquartered companies with significant international activities. The second group consists mainly of global industry peers: Dutch headquartered companies with significant international activities Global industry peer companies Randstad (NL) AECOM (US) AkzoNobel NL Jacobs Engineering (US) DSM (NL) CBRE (US) BAM (NL) Amec Foster Wheeler (UK) KPN (NL) SNC Lavalin (CAN) Wolters Kluwer (NL) Worley Parsons (AUS) PostNL (NL) Jones Lang LaSalle (USA) Boskalis (NL) WSP Global (CAN) SBM Offshore (NL) WS Atkins (UK) Aalberts Industries (NL) Stantec (CAN) Fugro (NL) Tetra Tech (USA) Refresco (NL) Sweco (S) 1 For the avoidance of doubt, changes to the two reference groups may be required from time to time e.g. following mergers or acquisitions in which one or more companies in the reference groups are involved. 1 of 5

2 Vopak (NL) TKH Group (NL) Brunel (NL) TomTom (NL) Cardno (AUS) RSP Group (UK) Hill International (USA) Pöyry (FIN) In both groups 2, Arcadis is positioned around the median in terms of the average of the afore mentioned parameters revenues, average market capitalization, total assets and number of FTE. The remuneration policy aims at Total Direct Compensation levels (the sum of fixed compensation, short-term variable remuneration and long-term variable remuneration) around the median of the levels defined by both reference groups, whereby alignment with Dutch headquartered companies is primary and alignment with the global reference group secondary. Fixed compensation The annual fixed compensation of members of the Executive Board is as follows: Chairman 660,000 Chief Financial Officer 475,000 Non-U.S. Board Member 440,000 US Board Member $ 672,000 Fixed compensation levels can be adjusted with a maximum of 3% per annum, to be decided upon by the Supervisory Board, based on general market movement and inflation figures. Short-term variable remuneration The short-term variable remuneration ranges from 0% to 85% of the fixed compensation, with 50% being the target. The short-term variable remuneration is payable in cash. Performance criteria In order to support the Company s strategy, the financially driven criteria determine 75% of the short-term variable remuneration, reflecting the Company s financial priorities. Of the 75% financial criteria, 50%-points are collective criteria, relating to Earnings Per Share and Return on Invested Capital. The remaining 25%-points reflect financial criteria determined for each member of the Executive Board individually. The individual financial criterion for the Chief Financial Officer is related to free cash flow and the criterion for the Chairman and the other EB members is related to organic growth. The part of the short-term variable remuneration determined by the individual financial criteria will only be awarded under the condition that a pre-set minimal operating EBITA (on a like for like basis excluding acquisitions) linked to the annual plan is realized. The non-financial criteria determine 25% of the short-term variable remuneration. These criteria are derived from the Company s strategy and are set for all members of the Executive Board. They relate to the core values of Arcadis (Integrity, Sustainability, Client Focus, Collaboration), Health and Safety and the Arcadis Leadership Model. 2 The Labor Market Reference assessment has been executed Mid of 5

3 Criterion Weight Financial criteria 75% Collective financial criteria Earnings Per Share 50% Return on Invested Capital Individual financial criterion Chairman: Organic Growth (all operating segments) Chief Financial Officer: Free Cash Flow 25% Board Members: Organic Growth (Operating segment) Criterion Weight Non-financial criteria 25% Total 100% The short-term variable remuneration targets will be pre-set annually by the Supervisory Board based on the plan and budget for the respective year, and in light of the strategic aspirations of the Company. No payout will be made for below threshold performance. All short-term variable remuneration criteria allow for rewarding excellent performance. Short-term variable remuneration will not exceed 85% of the fixed compensation. Long-term variable remuneration The long-term variable remuneration serves to align the interests of the members of the Executive Board with long-term shareholders interests. Members of the Executive Board annually receive conditional performance shares. The conditional performance shares will vest and become unconditional upon achievement of performance after three years, and are restricted for another two years. Size of awards The size of the award is defined as a percentage of fixed remuneration, with the actual grant being determined by this percentage and the HR fair value of the shares awarded. The following percentages apply: Chief Executive Officer 110% Chief Finance Officer 90% Executive Board Member (US, Non-US) 75% With this we aim to create a strong alignment of the Executive Board remuneration with the shareholders interest. The HR fair value of the granted performance shares is based on the Volume Weighted Share Price ( VWAP ) between mid-december of the year before grant and mid-january of the year of grant and the expected vesting percentage based on an equal probability chance for each position against the Total Shareholder Return ( TSR ) peer group after three years (62.5%), corrected for dividend. 3 of 5

4 Performance criterion: Total Shareholder Return The vesting percentage of the performance shares is conditional upon the achievement of performance measured as relative TSR, which is defined as share price movements including dividends, assuming dividends are reinvested. The TSR performance of Arcadis is measured against the performance of direct competitors. The TSR peer group is as follows 3 : TSR Peer Group Arcadis (NL) RPS Group (UK) AECOM (US) SNC-Lavalin (CA) Cardno (AU) Sweco (S) Hill International (US) Tetra Tech (US) WorleyParsons (AU Stantec (CAN) Jacobs Engineering (US) WS Atkins (UK) Pöyry (FIN) WSP Global (CA) The position of Arcadis within the peer group, after three years, determines the final number of shares that vest and become unconditional, in accordance with the following performance incentive zone: Ranking Vesting 0% 50% 75% 100% 125% 150% 175% 200% Other benefits In line with best practice, the company provides benefits which the Supervisory Board considers appropriate for a global company which needs to attract and retain Executive Board members from different parts of the world. 4 Any benefits provided will be reported in the Remuneration Report. 3 Note that changes to the peer group may be required from time to time e.g. following mergers or acquisitions in which one or more peer companies are involved. 4 Such as providing additional benefits when an EB member is relocated or spends a considerable amount of their time in more than one jurisdiction. 4 of 5

5 Share ownership guidelines One of the aims of the remuneration policy is to increase alignment with shareholders interests by stimulating share ownership. The members of the Executive Board have to retain the shares awarded under the short-term and long-term variable remuneration for a period of at least five years from the grant date, while allowing part of the shares to be sold to finance tax due at the date of vesting, if any. Furthermore, members of the Executive Board have to hold shares in the Company with a value 5 equal to 250% of fixed compensation for the Chairman, 150% of fixed compensation for the Chief Financial Officer and 125% of fixed compensation for the other Executive Board members, for which a build-up period of five years applies. All shares obtained by means of remuneration are held until the required ownership level is reached. Policy in case of a take over In the event of a takeover of Arcadis, the treatment of shares and options granted to the Executive Board (and other senior staff) will be determined by the Supervisory Board, upon advice by the Remuneration Committee, taking into account the share price in the period preceding the disclosure of an offer, as well as all other relevant circumstances at that moment. This means that the exercise price of outstanding options and the number of unvested conditional shares can be adjusted to correct for (part of) the increase in share price caused by the offer. Unvested shares and options will vest proportionally to the number of months of the three-year vesting period that elapsed since the grant date. Other Severance compensation: in line with the Dutch Corporate Governance Code severance compensation is maximized at one year gross annual fixed compensation (so excluding variable remuneration and other elements such as expense allowance pension contributions). In accordance with the Dutch Corporate Governance Code, severance compensation will not be awarded if the Executive Board membership and/or the management agreement is terminated early at the initiative of the Executive Board member, or in the event of seriously culpable or negligent behavior on the part of the Executive Board member. Existing ultimum remedium and claw back clauses in Management Contracts with Members of the Executive board are in line with applicable legislation and the Dutch Corporate Governance Code. 5 To determine the number of shares to be held by each EB member, the following calculation is made: a) the relevant multiple of the EB member s base salary at the annual shareholder meeting in May 2014, or the shareholder meeting after that date in which the EB member is appointed; divided by b) the Volume Weighted Average Price of the Arcadis share during the five trading days after the May 2014 annual shareholder meeting, or the shareholder meeting after that date in which the EB member is appointed (whichever is applicable). NB. for EB members that receive their base salary in another currency than EUR, the average exchange rate during the same five trading days as under b) is used. 5 of 5