Edictos Oficiales
ADMINISTRACIÓN GUBERNAMENTAL DE INGRESOS PÚBLICOS
COMPENSATION AND BENEFITS OF DIRECTORS AND SENIOR EXECUTIVES 15.1 Compensation of the chairman and chief executive officer and of directors
Set forth below is the total compensation (including benefits) paid during fiscal year 2006 to directors and the chairman and chief executive officer by the Company and by its subsidiaries as defined in article L.233-16 of the French Commercial Code (Code de commerce).
15.1.1 Chairman and chief executive officer’s compensation
Compensation paid to Mr. Proglio in 2006 was determined according to terms proposed by the nominations and compensation committee and approved by the board of directors.
During 2006, Mr. Proglio received the fixed portion of his compensation for 2006 as well as the variable portion of his compensation for the 2005 fiscal year paid in 2006, which was determined at the board of directors’ meeting of March 28, 2006. He also received other benefits (avantages en nature), as well as the directors’ fees to which he was entitled as a director of Veolia Environnement and certain of its subsidiaries.
2006 Fixed Compensation
The board of directors followed the recommendation of the nominations and compensation committee, and decided during the meeting held on March 28, 2006 to maintain the fixed portion of Mr. Proglio’s compensation for the 2006 fiscal year at the same level of that for 2005, in other words an amount of €945,000.
Variable Compensation
70% of the variable portion of compensation is based on the satisfaction of various performance criteria that have been pre-determined by the board of directors, while 30% is based on qualitative performance as determined by the board.
• Variable compensation for 2005: Based on the recommendations of the nominations and compensation committee, the board of directors decided at its meeting of March 29, 2005 that the performance indicators to be used by the board in determining the quantitative portion of Mr. Proglio’s variable compensation in respect to the 2005 fiscal year (based on IFRS accounts and on the objectives of the 2005 budget) would be: the level of return on capital employed and the level of EBIT (recurring operating income), with each indicator carrying a 50% weighting. At its meeting of March 28, 2006, the board awarded Mr. Proglio €1,062,500, that is 100% of the variable portion of his compensation for the 2005 fiscal year, based on its qualitative assessment of his performance as well as the achievement of the performance objectives set forth above.
• Variable compensation for 2006: Based on the recommendations of the nominations and compensation committee, the board of directors decided at its meeting of March 28, 2006 that the performance indicators (under IFRS) to be used by the board in determining the quantitative portion of the chairman and chief executive officer’s variable compensation in respect to the 2006 fiscal year, based on the objectives of the 2006 budget and achievements, would be the recurring operating income and the recurring net income. For the fiscal year 2006, the board of directors decided to replace the criteria for the return of capital employed by the recurring net income according to new accounting standards relating to concessions that will substantially impact the return on capital employed (bringing about an automatic increase of this ratio). At its meeting of March 29, 2007, the board awarded Mr. Henri Proglio €1,275,000, that is 100% of the variable portion of his compensation for the 2006 fiscal year, based on application of formulas and taking into account results obtained.
Other Benefits
In addition to the fixed and variable compensation described above, Mr. Proglio received benefits in 2006 totaling €2,666, relating to use of a company car.
Directors’ fees paid by Veolia Environnement and its subsidiaries
In 2006, Mr. Proglio received gross directors’ fees from Veolia Environnement totaling €38,250, which were paid in respect of the last quarter of 2005 and the first three quarters of 2006 (fees due for the last quarter of 2006 were paid in January 2007). Directors’ fees paid to Mr. Proglio are subject to French taxes (CSG/CRDS deduction) that are withheld from the amounts paid to Mr. Proglio.
Mr. Proglio also received directors’ fees with respect to offices he holds in Veolia Environnement’s subsidiaries in both France and abroad totaling €66,382.
Variation between Mr. Proglio’s Compensation in 2005 and 2006
The table below sets forth total gross compensation paid to Mr. Proglio in 2005 and 2006 (including fixed and variable compensation, directors’ fees and benefits).
Various compensation
(in euros) Fixed Variable
Directors’ fees paid by VE Directors’ fees paid by subsidiaries Benefits (1) Total gross compensation Compensation paid in 2005 944,996(2) 850,000(3) 34,000 70,912 2,616 1,902,524 Compensation paid in 2006 944,996(2) 1,062,500(4) 38,250 66,382 2,666 2,114,794
(1) Related to a company car.
(2) The amount approved by the board of directors (€945,000) was rounded when paid. (3) Variable compensation due in respect of the 2004 fiscal year and paid in 2005. (4) Variable compensation due in respect of the 2005 fiscal year and paid in 2006.
Retirement Plan
Mr. Proglio benefited from a collective supplementary retirement plan with a fixed subscription (cotisations définies) that Veolia Environnement provides to its senior management, and the collective supplementary retirement plan with defined benefits (prestations définies) put in place by the Company as of the 2006 fiscal year for its chairman and chief executive officer and the members of the Executive Committee (cf.§15.2).
Obligations concerning share subscription and share purchase options granted to the president and chief executive officer and granting of free shares.
The law of December 30, 2006, relating to the development of the participation of employees in stock ownership plans, introduced new measures included in article L.225-185 of the Commercial Code, regarding share subscription options or share purchase options granted to legal representatives. The board of directors must decide whether the options cannot be exercised by the parties before the end of their functions, or must fix the quantity of shares held following the exercise of options which they have to conserve until the end of their functions. The same constraints are applicable to shares granted freely to the chairman and chief executive officer under Article L.225-197-1 of the Commercial Code. These provisions are applicable to plans implemented after the law came into effect.
Following the publication of this law, the nominations and remuneration committee undertook a review of the provisions that may be applied to the next stock option plan for the benefit of the chairman and chief executive officer, and presented its conclusions to the board on March 29, 2007 (cf.§17.3.3 below).
According to these recommendations, the board adopted internal rules pursuant to which Henri Progolio will have to form and retain a portfolio of Veolia Environnement shares in proportion to the excess value, net tax and financing, realized on the exercised options. In accordance with these regulations, the president and chief executive officer will hold a portfolio of the Company’s shares equal to 50% of the remaining shares issued by the exercise, after payment of taxes (taxation of the exercise value and corporate payments) and the cost of financing (number of options which it is necessary to exercise to finance the exercise price of the portfolio).
Because the policy of granting free shares decided by the board of directors during its meeting of March 29, 2007 (cf.§17.4 below) did not include the granting of any shares to the chairman and chief executive officer, the board did not define, for the chairman and chief executive officer any restrictions such as those applicable to share subscription or purchase options.
15.1.2 Board of directors’ compensation24 Directors’ Fees Paid in 2006
The table below sets forth the amount of the fees paid to board directors during 2006 and 2005 by both Veolia Environnement and its subsidiaries:
Director Directors’ fees paid by Veolia Environnement
(in euros)
Directors’ fees paid by Subsidiaries
(in euros)
2006 2005 2006 2005
Jean Azema 48,250 45,250 0 0
Daniel Bouton 48,250 39,000 0 0
Jean-François Dehecq (1) 15,495 n/a 0 n/a
Jean-Marc Espalioux 48,250 45,250 0 0 Jacques Espinasse (2) 16,500 34,000 0 0 Paul-Louis Girardot 48,250 45,250 48,535 49,059 Philippe Kourilsky 38,250 34,000 0 0 Arthur Laffer (3) 28,688* 25,500* 0 0 Francis Mayer (3) 38,250 34,000 0 0 Serge Michel 76,250 65,000 10,025 8,213 Baudoin Prot 38,250 34,000 0 0 Georges Ralli 38,250 34,000 0 0 Louis Schweitzer 48,250 45,250 0 0 Murray Stuart 84,188* 57,750* 0 0
* Net amount after tax withholdings.
24 With the exception of the chairman and chief executive officer, the members of the board of directors do not receive any
compensation other than the fees paid in connection with their participation in the Company’s or its subsidiaries boards (jetons de présence). The figures below therefore represent such persons’ compensation for serving as directors only.
(1) Appointed by the shareholders’ meeting of May 11, 2006.
(2) Term of the office as director expired at the end of the shareholders’ meeting of May 11, 2006. (3) End of the office recorded by the board of directors on December 12, 2006.
Total Amount and Division of Directors’ Fees
The total annual amount of fees to be paid to the Company’s directors set at €600,000 by the shareholders’ meeting held on April 30, 2003, was not modified until 2006. However, following the recommendation of the nominations and compensation committee, the board of directors decided in March 2005 to modify the allocation of fees in order to take into account the appointment of an additional member to the accounts and audit committee, the replacement of a member on the nominations and compensation committee, as well as the duties incumbent upon the chairman of the accounts and audit committee in particular.
On May 11, 2006, following recommendations by the board of directors, the shareholders’ meeting increased to €770,000 the total fees to be paid to directors from fiscal year 2006. The proposed increase was designed to take into account the duties incumbent upon committee members (in particular those of the accounts and audit committee) and to align the Group’s practices with those of other companies included in the CAC 40 that are listed in the U.S.
At the meeting of March 28, 2006, the board of directors decided to allocate directors’ fees of €730,000 for the 2006 fiscal year as follows:
• Person acting in role of board member only: €40,000
• Person acting in role of board member and committee member: €50,000 • Chairman of the nominations and compensation committee: €80,000 • Chairman of the accounts and audit committee: €120,000
The board of directors, during its meeting on March 29, 2007, decided not to propose an increase in director’s fees of €770,000 to the general meeting to be held on May 10, 2007, but has modified the distribution among directors in order to account for the creation of the strategic research, innovation and sustainable development committee (cf. § 16.2.1.3 infra). The board thus decided to allocate €60,000 to the chairman of the strategic research, innovation and sustainable development committee and €60,000 to the two other members of the strategic committee who are also members of the accounting and auditing committee for their seat on these two committees. Otherwise, the distribution described above remains unchanged.
15.2 Retirement and other benefits
In 2006, there was no contract between board members (including the chairman and chief executive officer) and the Company or its subsidiaries that provided for compensation or other indemnity to be paid to such board member in the event he ceased to perform services on behalf of the Company or its subsidiaries other than the supplementary collective retirement plan as described above.
In addition, neither the Company nor its subsidiaries has allocated any amount for the payment of pension or retirement benefits to any board member named in paragraph 14.1, other than the Chairman and Chief Executive Officer (within the guidelines set forth below)25.
Supplementary retirement plan with defined benefits for the chairman and chief executive officer and other members of the executive committee.
25 Veolia Environnement paid an annuel contribution (cotisation) in connection with the executive officers’ collective
At its meeting of September 15, 2005, the board of directors decided to establish a supplementary retirement plan with defined benefits, starting from the fiscal year 2006, for the chairman and chief executive officer and other members of the executive committee, in line with the practices of other companies listed in the CAC 40. This supplementary retirement plan is a regulated agreement subject to the new provisions of Article L.225-42-1 of the French Commercial Code, and was approved at the general shareholders’ meeting of May 11, 2006.
The supplementary retirement plan, whose financing is outsourced to an insurance company, has the following characteristics:
▪ a specific regime that takes into account the cancellation following the separation of the groups Vivendi and Veolia Environnement of the retirement plan from which Group executives benefited until December 31, 2002 and the acquired seniority as employees of the former principal shareholder of the Company, Compagnie Générale des Eaux (later named Vivendi Universal, and then Vivendi); ▪ a retirement benefit that is in addition to other retirement benefits, acquired as a function of seniority, which is capped at 25% of covered compensation (for 25 years of seniority);
▪ a limit on total retirement benefits fixed at 50% maximum of covered compensation based on the average of the three most recent compensations received.
As of December 31, 2006, and based on current estimates, the total cost of this retirement plan (current value of future benefits or Valeur Actuelle des Prestations Futures) is expected to amount to €25.7 million for the members of the executive committee, of which €11.5 million is allocated to the chairman and chief executive officer. This is subject to the beneficiaries’ continued service with the Company until the time that they retire, in accordance with the provisions of the French “Fillon” law. 15.3 Compensation of executive committee members
In 2006, the aggregate amount of compensation paid to members of Veolia Environnement’s executive committee named in Chapter 16 supra (paragraph 16.1.2 hereof), excluding the chairman and chief executive officer, for services in all capacities was €4,381,494, of which €2,431,494 represented the fixed portion of 2006 compensation and €1,950,000 represented the variable portion of compensation relating to the 2005 fiscal year which was paid in the first half of 2006.
The table below sets forth the total gross compensation (including fixed and variable compensation) paid to members of Veolia Environnement’s executive committee, excluding the chairman and chief executive officer, by Veolia Environnement in 2005 and 2006:
(in euros) Fixed
compensation compensationVariable compensation Total
Compensation paid in 2005 2,393,989 1,539,360* 3,933,349
Compensation paid in 2006 2,431,494 1,950,000** 4,381,494
* Variable compensation due in respect of the 2004 fiscal year and paid in 2005. ** Variable compensation due in respect of the 2005 fiscal year and paid in 2006.
In addition to the above compensation, a profit-sharing payment of €36,000 in respect of the 2005 fiscal year was paid in June 2006.
Directors fees to members of the executive committee of the Company totaled €201,065 as result of their positions within companies of the Groupe Veolia Environnement in France and abroad.