Managing Board remuneration
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 2011
As part of its remuneration policy for the Managing Board, DSM will benchmark 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 2011
Managing Board base salaries were last increased in 2008. Therefore the Supervisory Board agreed to increase the base salaries with effect from mid 2011.
Short-Term Incentives (STI) for 2011
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 2011 Integrated Annual Report presents the Short-Term Incentives that have been earned on the basis of results achieved in 2011. These Short-Term Incentives will be paid out in 2012.
The Supervisory Board has established the extent to which the targets for 2010 were achieved. The realization of the 2011 financial STI targets has been reviewed by Ernst & Young Accountants. Furthermore, Ernst & Young has reviewed the process with respect to the target setting and realization of the non-financial STI targets. The average realization percentage was 79.83% of base salary. This reflects a prudent interpretation of the realization of the targets.
See below for a tabular overview of the actual Short-Term Incentive pay-out per individual Board member in 2011.
Performance shares in 2011
In 2011 performance shares were granted to the Managing Board on 28 April 2011. The following table shows the number of performance shares granted to the individual Board members:
Number of stock incentives granted
| Performance shares | |
|---|---|
| Feike Sijbesma | 24,000 |
| Stefan Doboczky | 16,000 |
| Nico Gerardu | 16,000 |
| Rolf-Dieter Schwalb | 16,000 |
| Stephan Tanda | 16,000 |
For an overview of all granted and vested stock options and performance shares see note 10 from page Overview of stock options.
Pensions in 2011
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.
As already mentioned in the 2010 annual report, for DSM in the Netherlands a new pension plan has been agreed with Labor Unions with effect from 1 January 2011. The plan comprises the following elements:
- Career-average pay plan, with annual accrual of pension rights (old-age pension) over base salary exceeding €12,898 (reviewed annually) at a rate of 2%. The old pension plan was a final pay plan.
- Retirement age 65 years for accrual until 2012. From 2012 onwards the accrual will be linked to a pensionable age of 66 years.
- The scheme includes a partner pension as well as a disability pension.
- Employee's contribution of 3.5% of base salary up to €57,499 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.
The new pension plan also applies to the Managing Board.
For participants who started participating before 2006, transitional arrangements related to the plan changes in 2006 apply.
Board members participate in the revised PDN pension plan 2011. For Mr. Sijbesma and Mr. Gerardu, who both started participating before 2006, the transitional arrangement applies, as it does for all employees participating before 2006. For Mr. Sijbesma, who was already a Board member before 2006, a specific transitional arrangement applies. This arrangement, too, has now been adjusted, related to the plan changes as of 2011, leading to earlier accrual of an extra old age pension in 2011 and 2012 of €41,563. This accrual has no funding implications as the premium was already paid under the specific pension plan operated before 2006.
Loans
DSM did not provide any loans to members of the Managing Board in 2011.
Purchasing shares
All members of the Managing Board have purchased shares in the company to emphasize their confidence in the strategy and the company. These share purchases are private transactions with private money. At 1 January 2012 the members of the Managing Board together held 117,512 shares in Koninklijke DSM N.V., compared to 77,512 at 1 January 2011. More information can be found in the Information about the DSM share.
Total remuneration
The total remuneration paid to the Managing Board (including pension costs relating to current and former Board members) amounted to €5.5 million in 2011 (2010: €3.7 million). This was largely due to the expansion of the Managing Board from four to five members.
Overview of remuneration awarded to the Managing Board in 2011
The tables below show the remuneration awarded to the Managing Board in 2011.
| Fixed annual salary in € | 1 July 2011 | 1 July 2010 |
|---|---|---|
| Feike Sijbesma | 840,000 | 766,000 |
| Stefan Doboczky | 545,000 | n.a. |
| Nico Gerardu | 545,000 | 509,000 |
| Rolf-Dieter Schwalb | 545,000 | 509,000 |
| Stephan Tanda | 545,000 | 509,000 |
| Short-term incentives in € | 20111 | 20102 |
|---|---|---|
| Feike Sijbesma | 657,460 | 683,655 |
| Stefan Doboczky | 279,3153 | n.a. |
| Nico Gerardu | 431,485 | 464,463 |
| Rolf-Dieter Schwalb | 423,580 | 444,103 |
| Stephan Tanda | 411,722 | 451,738 |
1 Based on results achieved in 2011 and therefore payable in 2012
2 Short-Term Incentives paid in 2011 based on results achieved in 2010
3 For the period from 1 May 2011, the date of appointment of Mr. Stefan Doboczky as Managing Board Member
Pensions
| Pension costs (employer) | Accrued pension (retirement age is 65) | |||
|---|---|---|---|---|
| in € | 2011 | 2010 | 31 Dec 2011 | 31 Dec 2010 |
| Feike Sijbesma | 110,595 | 113,292 | 416,5841 | 376,283 |
| Stefan Doboczky | 49,386 | n.a. | 6,615 | n.a. |
| Nico Gerardu | 74,755 | 76,027 | 336,220 | 313,802 |
| Rolf-Dieter Schwalb | 74,755 | 76,027 | 53,613 | 42,201 |
| Stephan Tanda | 74,755 | 76,027 | 71,605 | 59,580 |
1 This includes €9,565 at retirement age 66
Changes expected to the remuneration of the Managing Board in 2012
Since a benchmark exercise had indicated that the remuneration of the members of the Managing Board was below the median of the labor market peer group, in 2011 the Remuneration Committee looked at a number of alternatives to bring this remuneration closer to the median. These alternatives included an increase in the STI potential.
Given the uncertain economic conditions, the Supervisory Board has agreed, at the request of the CEO and the members of the Managing Board, not to change the current remuneration policy for now and not to increase base salaries for the Managing Board until mid 2013.
As the TSR peer group was reduced to ten members in 2011 (Danisco and Rhodia were delisted), Arkema and Christian Hansen will be added to the TSR peer group as from 2012.
Long-Term Incentives (LTI)
For 2012, the number of conditionally granted ordinary shares under the LTI program will be:
- Chairman 31,000
- Members 20,000
