Capítulo IV. Resultados y Discusión
IV.1. Desarrollo y optimización de un sistema cuantitativo de extracción de ADN en alimentos
IV.1.3. Optimización de las condiciones de extracción del método Wizard ® sin fase de
KPN is dedicated to foster a strongly action-oriented culture aimed at delivering results. KPN’s pay programs therefore emphasize variable pay and long-term value creation. KPN’s plans are designed to achieve the following objectives:
• Attracting and retaining the necessary leadership talent in order to sustain and expand KPN’s unique competencies and capabilities;
• Driving performance that generates long-term profitable growth;
• Promoting behavior that reinforces the business strategy and desired culture;
• Encouraging teamwork across business units and functional areas;
• Strongly linking rewards to value creation for shareholders and other stakeholders
• Complying with best practice in corporate governance; and
• General acceptance by all stakeholders Principles of KPN’s pay policy
KPN’s pay policy is guided by three broad principles:
1) Paying competitively: this is achieved through benchmarking against an employment-market peer group consisting of companies with whom KPN generally competes for talent;
2) Pay-for-performance: target pay aims at 30–40% of pay in base salary, and 60–70% in variable pay in order to maintain a strong alignment with the Company’s annual financial performance goals and long-term value creation strategy; and
3) Differentiating by experience and responsibility:
this is achieved through alignment of the pay with the responsibilities, relevant experience, required competence and performance of individual jobholders.
Consequently, there can be substantial differentials in pay levels, despite employees having similar job titles.
These principles apply to all levels of senior management.
The Company’s pay policy is compliant with the relevant legal requirements and the principles of the Dutch Corporate Governance Code.
66
Remuneration and Organizational Development ReportComposition of employment-market peer group and market assessment
To ensure the overall competitiveness of KPN’s pay levels, these levels are benchmarked against an employment market peer group. The Committee uses one peer group consisting of AEX-listed companies and European sector-specific companies. The table below shows the current composition of KPN’s employment peer group:
Employment peer group
AkzoNobel NV Randstad Holding NV
DSM NV Royal Philips Electronics NV
Heineken NV Unilever NV/Plc
Reed Elsevier NV/Plc Portugal Telecom SA
Royal Ahold NV Swisscom
Belgacom SA Vodafone Group Plc
BT Group Plc Cap Gemini
The Committee regularly reviews the peer group to ensure that the composition is still appropriate. The composition of the peer group might be adjusted as a result of mergers or other corporate activities.
It should be noted that KPN ranks, on average, between the median and upper quartile level in terms of revenues, market capitalization and number of employees.
This relative size of KPN is taken into account when determining whether KPN ‘pays competitively’.
Base salary
The Committee determines appropriate base salary levels based on KPN’s relative positioning in the peer group. In line with KPN’s pay-for-performance principle, base salary is targeted at the low end of the market-competitive range.
Each year the Supervisory Board considers whether circumstances justify an adjustment in base salary within the market-competitive target range for individual members of the Board of Management.
Short-Term Incentives (STI) General
At the beginning of each year, the Supervisory Board sets financial and non-financial target ranges for the Board of Management. These ranges are based on the Company’s business plan. At the end of the year, the Supervisory Board reviews the Company’s performance against the target ranges. The Company’s external auditor has been engaged to perform procedures to verify a consistent application of the approved calculation method, the mathematical accuracy of the STI calculations and a reconciliation of the source data used in the financial statements. Members of the Board of Management are eligible for an annual cash incentive only if Company performance is at or above the predetermined ranges.
Objectives
The objective of this STI scheme is to ensure that the Board of Management is well incentivized to achieve Company performance targets in the shorter term.
Specific details on targets cannot be disclosed for all performance measures, as this would require providing commercially sensitive information.
Component Form of
compensation Value determination Targets Payout at threshold performance
Payout at or above maximum performance 1
STI Cash ‘On-target’ incentive
equals 90% of base salary for the CEO and 60% of base salary for the other members of the Board of Management.
The ‘on-target’
incentive is used as input for the Profit before Tax, Free Cash Flow and various measures of compliance and risk management,
of base salary for the other members salary for the CEO and 90% of base salary for the other members of the Board of Management).
1) Maximum including the effect of the discretionary factor.
Remuneration and Organizational Development Report
67
KPN | Annual Report 2011
Performance incentive zone
The target ranges for financial and operational performance comprise:
• A ‘threshold’ below which no incentive is paid;
• An ‘on-target’ performance level at which an
‘on-target’ incentive is paid; and
• A ‘maximum’ at which the maximum incentive is paid.
The STI is designed to strike a balance between the Company’s risk profile and the incentive to achieve ambitious targets. The payout methodology is based on a payout approach for each of the financial and non-financial targets.
The Supervisory Board’s ability to apply a discretionary factor ranges between 0.7 (i.e. cutting the cash incentive by 30%) and 1.3 (i.e. increasing the cash incentive by 30%).
With this discretionary factor, the Supervisory Board is able to express the assessment of the overall individual performance of each member of the Board of
Management. The ability to apply a discretionary factor does not increase average achievement levels. It does, however, allow the Supervisory Board some discretion in differentiating on the basis of individual contributions to Company performance.
The Supervisory Board has the discretionary authority to reward extraordinary management achievement that outperforms the regular business plan(s) and has created
substantial additional value for the Company and its shareholders. Other than that, discretion both upwards and downwards can be applied by the Supervisory Board if the outcome of the STI scheme would produce an unfair result or if the outcome would not be considered to reflect the basic objectives and principles of pay as outlined in this section.
Actual payout levels
For 2011, amongst other targets, Revenues were above threshold, broadband market share was below threshold and Profit before Tax was below threshold. The Supervisory Board considers the STI amounts awarded to the CEO and the members of the Board of Management a fair reflection of their contribution to the performance of the Company during 2011.
Long-Term Incentives (LTI) General
In addition to the base salary and the short-term annual cash incentive described above, a long-term incentive based on performance shares is used to ensure that the interests of management are aligned with those of its long-term (or prospective) shareholders and to provide an incentive for members of the Board of Management to continue their employment relationship with the Company.
The number of shares granted under this plan is based on fixed numbers as shown in the following table.
Component Form of Compensation Value determination Drivers On target
Scenario maximum (position 1 to 3 in peer group and maximum performance on non-financial targets) Long-term
share-based compensation
Shares CEO: 95,000 shares
with deferred dividend Other members of the Board of Management:
66,000 shares with deferred dividend
For 75% based on Total Shareholder Return (TSR) and 25%
based on non-financial parameters (energy reduction and reputation)
100% of the granted shares vest
200% of the granted shares vest
Special LTI 1 Shares 50% of base salary TSR and ‘Back to Growth’ targets
Top 3 position in the peer group ranking,
‘Back to Growth’ targets
200% of the granted shares vest
1) As presented in the 2009 AGM, the Supervisory Board agreed to an uplift to the LTI entitlements for 2009 and 2010 in order to reflect the high ambitions of the
‘Back to Growth’ strategy.
68
Remuneration and Organizational Development ReportAs from 2011, the number of shares that actually vest is conditional on the extent to which the returns to KPN shareholders outperform the returns to shareholders of a peer group of Western European telecommunications companies (75% weighting) and for 25% on the achievement of the assigned non-financial parameters.
The actual vesting of the 2009 and 2010 LTI plans are solely based on KPN’s relative TSR performance. It is felt that comparing KPN with a wider group of companies (either geographically or with other industries) is not meaningful. Variations in returns would most likely be attributed largely to macroeconomic events and/or sector shifts rather than to variations in management actions.
Therefore, benchmarking TSR achievements relative to other, similar companies emphasizes rewarding for specific KPN performance. The non-financial parameters set for 2011 are based on energy reduction targets and a reputation dashboard. Please refer to KPN’s Sustainability Report 2011 for detailed information about the energy reduction targets. Vesting of the non-financial parameters will only take place if KPN’s ranking position in the TSR peer group is at least position 7.
Vesting is also subject to the condition that the member of the Board of Management has not resigned within three years of the date of the initial grant.
The performance period of the LTI plan is set at three years. The Committee uses scenario analysis to estimate the possible outcomes of the value of the shares vesting in coming years and decides whether a correct risk incentive is set for the Management Board members with respect to the overall level of pay and pay differentials within the Company.
In addition to the information provided in the Remuneration Report, please refer to Note 3 of the Consolidated Financial Statements for a further description and valuation of the option and share plans.
Performance-measuring and peer group performance
Vesting of the shares is for 75% conditional on KPN’s relative shareholder return and for 25% based on non-financial parameters. The table below provides an overview of KPN’s performance peer group to determine KPN’s relative shareholder return.
Companies included in the peer group
Belgacom SA Telecom Italia Spa
BT Group Plc Telefonica SA
Deutsche Telekom AG Telekom Austria AG France Telecom SA Telenor ASA Hellenic Telecom (OTE) TeliaSonera AB Portugal Telecom SA Vodafone Group Plc
Swisscom AG KPN NV
The table below provides an overview of the final ranking of the 2009 share plan that vests in 2012.
Position Top 8 vesting % existing share plan
Top 8 ranking companies for 2009 share plan (vests in 2012)
Position 1 200% of the shares vest Telenor ASA Position 2 200% of the shares vest Vodafone Group Plc Position 3 200% of the shares vest BT Group Plc Position 4 175% of the shares vest Teliasonera AB Position 5 150% of the shares vest Portugal Telecom SA Position 6 125% of the shares vest Swisscom AG Position 7 100% of the shares vest Telefonica SA Position 8 No vesting takes place KPN NV Please note that the peer group used for relative TSR reflects the relevant competitive market in which KPN competes for investor preference. As such, it is different from the employment-market peer group, which is used to determine pay levels for the CEO and members of the Board of Management. The peer group may be adjusted if an individual company no longer qualifies as a relevant peer company.
Performance incentive zone
Since 2008, the design of KPN’s LTI plan ensures that shares are rewarded for ‘above average’ returns while no shares are rewarded for ‘below average’ returns. Once vested, the shares will have to be held for a minimum period of two years. An exception to this rule is made for shares that are sold to cover income tax obligations in relation to the vested shares (typically the value taxed as income equals the amount of shares vested multiplied by the share price at the time of vesting).
The external remuneration consultant calculates the end-of-year TSR peer group position and the number of shares vested and makes certain that calculations are performed objectively and independently.
The Supervisory Board has the discretionary authority to reward extraordinary management achievement that outperforms the regular business plan(s) and has created substantial additional value for the Company and its shareholders. Other than that, discretion both upwards and downwards can be applied by the Supervisory Board if the outcome of the LTI incentive scheme would produce an unfair result or if the outcome would not be considered to reflect the basic objectives and principles of pay as outlined in this section.
It is KPN’s policy to remunerate management in the event of a change of control in a manner which encourages management to take into account the interests of all stakeholders of the enterprise as is required under Dutch law. An amendment to the remuneration of the members of the Board of Management in case of a change in control was adopted by the AGM in April, 2010.
Actual payout levels
KPN’s performance over the period 2009–2011 resulted in the 8th position in the TSR performance peer group with respect to the 2009 share award, which does not lead to vesting of the granted shares in April 2012.
Remuneration and Organizational Development Report
69
KPN | Annual Report 2011
Special LTI
As presented in the 2009 AGM, the Supervisory Board agreed to an uplift of the LTI entitlements for 2009 and 2010 in order to reflect the extremely high ambitions of the ‘Back to Growth’ strategy. This will result in an uplift of 50% of the LTI value determination for members of the Board of Management. The uplift in LTI will be rewarded if the challenging financial targets in 2009 and 2010 are met and KPN would reach a number 1, 2 or 3 position in the TSR peer group ranking. The uplift for 2009 is not rewarded. After the three-year performance period at the end of 2012 the Committee will review if the uplift for 2010 will be rewarded.
Claw-back clause
The Supervisory Board has committed itself to the claw-back clause since 2009. This clause provides for the ability to recover variable pay based on incorrect financial or other data.
Benefits Pensions
Members of the Board of Management are eligible for a defined contribution pension plan with a contribution based on the fiscal defined contribution table that corresponds to a retirement age of 65 and an annual accrual rate of 2.25%. Mr. Dirks will remain eligible for pension benefits (combined defined benefit and defined contribution) as part of his current German
pension arrangement with a retirement age of 65.
Additional arrangements
The additional arrangements, such as expense allowances, use of cellphones and Company car provisions needed for the execution of their roles, are broadly in line with other companies of similar size and complexity, as well as with market practice.
Loans
Company policy does not allow loans to be granted to members of the Board of Management.
Terms of employment
All members of the Board of Management have a permanent employment contract for an indefinite period of time.
Members of the Board are appointed for a period of four years, which is in line with requirements of the Dutch Corporate Governance Code.
Severance arrangements
Severance payments for the CEO and members of the Board of Management are aligned with the Dutch Corporate Governance Code (one year base salary), with the exception of Mr. Dirks. Please refer to the
‘Change in composition and responsibilities of the Board of Management’ section of this report for further explanation.
Change in composition and responsibilities of the Board of Management
Mr. Blok became Chief Executive Officer on April 6, 2011.
The appointment of Mr. Dirks as a member of the Board of Management came into effect as of KPN’s EGM on November 7, 2011. Mr. Dirks is Chairman of the Board of Management (Geschaftsfuhrung) of E-Plus and CEO of Mobile International. The conditions of Mr. Dirks’ contract largely fit within KPN’s remuneration policy as approved by the General Meeting of Shareholders. Given his current and continued position as Chairman of the Board of Management of E-Plus his aggregated remuneration package will be implemented with two contracts: his current contract with E-Plus (as amended) and a separate contract with KPN.
Mr. Dirks will earn a total base salary of EUR 650,000 per year. Furthermore, he is eligible to short- and long-term variable incentives, which are dependent on the performance of KPN versus the Company’s financial and/
or non-financial targets. He will be subject to German social security arrangements, including retirement benefits.
The conditions deviate in two respects from KPN’s remuneration policy. Given the short remaining period until the end of 2011, Mr. Dirks continued to be eligible for the variable incentives for 2011 as agreed under his current contract. These incentives put more focus on the shorter term, but – dependent on the level of realization of the targets – do not substantially deviate from the amounts he could receive under the incentive schemes foreseen under the remuneration policy. Mr. Dirks’ existing German contract furthermore contains a non-competition clause for which he will, as required by German law, receive compensation equal to 50% of his (German) salary (base and short-term incentive) during a maximum period of 12 months. In case of termination of his German contract he will receive this compensation on top of the severance pay of 12 months base salary as may be due in accordance with KPN’s remuneration policy and the Dutch Corporate Governance Code.
Mr. Coopmans will leave the Company by mutual agreement with the Supervisory Board as at April 1, 2012.
Mr. Coopmans will receive a severance payment compliant with the Dutch Corporate Governance Code amounting to one year’s base salary (EUR 590,000). Mrs. Smits-Nusteling will leave the Company as at April 1, 2012 and at her request a severance payment will not be applicable. Any conditional shares granted under the LTI plan that have not yet vested will be treated in accordance with the applicable plan rules.
Outlook for 2012
No material adjustments to the pay policy are considered for 2012.