DSM operates in a competitive international industry and so closely monitors industry and company-specific international developments with respect to its Managing Board remuneration. Regarding Supervisory Board remuneration, DSM adheres to the principles of good corporate governance.
Managing Board remuneration in 2013
As part of its remuneration policy for the Managing Board, DSM benchmarks its remuneration package against the packages offered by the labor-market peer group once every three years. Benchmarking of the Managing Board remuneration policy was conducted in Q1 2011 and clearly showed that the remuneration of the members of the Managing Board, particularly the variable part, was well below the median at target level of the peer group.
Base salary in 2013
In view of the above-mentioned market comparison and given the fact that the last salary increase dated from July 2011, the base salaries of the Managing Board members were increased with effect from 1 July 2013:
- CEO: from €840,000 to €855,000 (+1.8%).
- Other Managing Board members: from €545,000 to €560,000 (+2.8%).
Short-Term Incentives (STI) for 2013
STI targets are revised annually so as to ensure that they are stretching but realistic. Considerations regarding the performance targets are influenced by the operational and strategic course taken by the company and are directly linked to the company’s ambitions. The targets are determined at the beginning of the year for each Board member.
Target STI level and pay-out
When they achieve all their targets, Managing Board members receive an incentive of 50% of their annual base salary. Outstanding performance can increase the STI level to 100% of the annual base salary.
The Short-Term Incentives have been earned on the basis of results achieved in 2013. These Short-Term Incentives will be paid out in 2014.
The Supervisory Board has established the extent to which the targets for 2013 were achieved. The realization of the 2013 financial STI targets has been reviewed by EY. Furthermore, EY has reviewed the process with respect to the target realization of the non-financial STI targets. The average realization percentage was 55.5% of base salary.
Performance shares in 2013
Performance shares were granted to the Managing Board on 7 May 2013. The following table shows the number of performance shares granted to the individual Board members:
For an overview of all granted and vested stock options and performance shares see Overview of stock options and Overview of performance shares.
Revision and claw-back of bonuses
In 2013 no revision or claw-back of bonuses occurred.
Pensions in 2013
The members of the Managing Board are participants in the Dutch pension fund Stichting Pensioenfonds DSM Nederland (PDN). PDN operates similar pension plans for various DSM companies. The pension scheme for the Managing Board is equal to the pension scheme for the employees of DSM Executive Services B.V. and DSM employees in the Netherlands.
A new pension plan for DSM in the Netherlands has been agreed with labor unions with effect from 1 January 2011. The plan, which also applies to the Managing Board, comprises the following elements:
- Career-average pay plan, with annual accrual of pension rights (old-age pension) over base salary exceeding €13,227 (reviewed annually) at a rate of 2%.
- Retirement age 66 years for accrual from 2012 onwards. Until 2011 the accrual was linked to a pensionable age of 65 years.
- The scheme includes a partner pension as well as a disability pension.
- Employee's contribution of 3.5% of base salary up to €59,235 and 7.5% of pensionable salary above this amount (reviewed annually).
- Collective defined contribution: indexation of pensions and pension rights, depending on PDN's coverage ratio.
- For participants who started participating before 2006, transitional arrangements related to the plan changes in 2006 apply as described in previous annual reports.
All members of the Managing Board have purchased shares in the company to emphasize their confidence in the strategy and the company. At 31 December 2013 the members of the Managing Board together held 147,296 shares in Koninklijke DSM N.V., compared to 139,012 at 31 December 2012. These shares were bought through private transactions with private funds, and obtained through vested performance shares.
The remuneration and related costs of the Managing Board (including pension costs and costs relating to the Dutch ‘crisis levy’ of 16% imposed on employers for salary and bonus payments made in the year to employees whose salary exceeded €150,000) amounted to €9.6 million in 2013 (2012: €6.6 million). The increase was mainly caused by costs in relation to the early retirement of Mr. Gerardu to facilitate succession planning for the Managing Board and the Dutch crisis levy.
Overview of remuneration awarded to the Managing Board in 2013
The tables below show the remuneration awarded to the Managing Board in 2013.
1 Retired as of 1 September 2013
2 Board Member as of 1 September 2013
1 Based on results achieved in 2013 and therefore payable in 2014
2 Based on results achieved in 2012 and therefore payable in 2013
3 Retired as of 1 September 2013
4 Board Member as of 1 September 2013
1 Pensions built up in the Dutch Pension Plan. The accrual is linked to a retirement age of 66 years.
2 Retired as of 1 September 2013
3 Board Member as of 1 September 2013
Long-Term Incentives (LTI)
For 2014, the number of conditionally granted ordinary shares under the LTI program will be:
- Chairman 24,000
- Members 16,000
DSM did not provide any loans to members of the Managing Board in 2013.
Adjustments to remuneration policy Managing Board in 2014
For 2014 no other adjustments will be implemented except the introduction of the face value calculation method for the 2014 grant of performance shares.