Remunerations des patrons Etude Towers Watson 2013

Board pay in the Eurotop 100Insight and analysis on levels, design and trends

September 2013

Introduction 3

Analysis of Actual Total Direct Compensation

(TDC) in the last financial year 4–9

Analysis of incentive design and shareholding

guidelines in the last financial year 10–11

Developments on the horizon 12–13

Additional analysis and contact 14–15

Appendices 16–24

Contents

2 towerswatson.com

Board pay in the Eurotop 100 3

• Top pay in quoted companies all over Europe is subject to increasing institutional investor and public scrutiny. Legislators and regulators have been active in many jurisdictions and are intervening in the determination, disclosure and voting regimes on pay, not just at the top.

• Meanwhile, the pressure on companies to perform and to deliver growth and returns to shareholders is exacerbating the commercial challenge of attracting and retaining senior leaders to run quoted companies. Most of the Eurotop 100 are international and the talent pools – in some industries more than others – are borderless.

• All these factors make the role of the decision makers on executive pay even tougher. On the one hand, boards, remuneration committees and their internal advisors are all seeking to make good business-based decisions. On the other, they must work within an often prescriptive regulatory and legal framework. Increasingly, and in many markets, it is essential to have the support of diverse institutional shareholders and voting guidance services who will not all agree on ‘the right answer’.

• We think, in order to make good decisions, it is important to start with some reliable facts.

• For this reason this report summarises compensation levels, incentive design practices and emerging remuneration trends for Executive Directors in the Eurotop 100.

• We present an analysis of remuneration levels and incentive design practices observed in the last financial year, followed by changes to pay levels and incentive design practices observed going forward, plus a summary of European corporate governance developments. Where relevant, we have highlighted and commented on sector and country differences.

• Our analysis covers 97 companies within the Eurotop 100 which have published their remuneration reports as at 30 June 2013. This list and composition of companies is included in the appendices, together with details of the LTI valuation methodology supporting our analysis.

• We hope that you find this report interesting and useful. Should you have any questions or comments please contact your usual Towers Watson consultant.

Key factsBase salary • Median base salary levels for the last financial year were approximately €1.28 million for the CEO and €807,000 for Other Executive Directors.

• Median base salary increases received in the last financial year were 1% to 2% for Executive Directors. 40% of companies froze base salary for the CEO.

Annual bonus • The median actual bonus received for performance in the last financial year was 111% of base salary for the CEO and 88% of base salary for Other Executive Directors.

• Median target and maximum bonus opportunity levels for the CEO, where disclosed, were 100% and 180% respectively for the last financial year. Similar levels were also observed for Other Executive Directors.

• 47% of companies required executives to compulsorily defer bonus, and typically, 50% of bonus paid.

• Profit/income, other non-financial measures and individual measures were the most prevalent measures on short-term incentive plans.

Long-term incentives (LTI) • In the last financial year, most companies made awards of performance shares. TSR was the most common performance metric attached to long-term incentive plans.

• For awards granted in the last financial year, the median LTI expected value for the CEO was 152%.

Actual Total Direct Compensation (TDC) • Median actual TDC levels for the last financial year were approximately €5.1 million for the CEO and €3 million for Other Executive Directors.

Shareholding guidelines • Almost half of companies have shareholding policies. At median, guideline levels are 275% of base salary for the CEO and 200% of base salary for Other Executive Directors.

Introduction

Board pay in the Eurotop 100

4 towerswatson.com

Analysis of Actual TDC in the last financial year

CEO actual TDC versus market capitalisationMarket capitalisation has some influence on actual TDC levels.

€0

€2,000

€4,000

€6,000

€8,000

€10,000

€12,000

€14,000

€16,000

€18,000

€20,000

€0

€20,0

00

€40,0

00

€60,0

00

€80,0

00

€100,0

00

€120,0

00

€140,0

00

€160,0

00

€180,0

00

Act

ual T

DC (t

hous

ands

)

Market capitalisation (millions)

� UK � Spain � Italy � Germany

� France � Switzerland � Benelux � Nordics

y = 3201.4ln(x) - 28641

= 0.4145R2

The above analysis of actual TDC includes only those CEOs that have served in position for the full financial year and where information is disclosed in order to derive actual TDC. Market capitalisation figures are as at 1 July 2013 and sourced from Datastream.



• Statistics are company weighted and independently arrayed.

• Not all companies have disclosed target bonus, maximum bonus and LTI awards. The above analysis is only based on information where disclosed.

• The analysis of actual TDC includes only those incumbents that have served in position for the full financial year.

• Definitions for each of the elements in the table and details of our LTI valuation methodology are included in the appendices (see page 16).

Eurotop 100 pay levelsThe table below shows pay levels for the CEO and Other Executive Directors in the Eurotop 100 for the last financial year.

Chief Executive Officer Other Executive Directors

Average LQ Median UQ Average LQ Median UQ

Base salary

€1,453,893 €1,140,433 €1,279,567 €1,549,971 €873,735 €666,333 €806,933 €967,892

Base salary % increase

3% 0% 1% 4% 4% 0% 2% 4%

Actual bonus(% of base)

118% 50% 111% 159% 103% 59% 88% 132%

Target bonus(% of base)

110% 78% 100% 145% 103% 67% 100% 110%

Maximum bonus (% of base)

186% 149% 180% 225% 178% 120% 175% 200%

Actual total cash

€3,127,924 €1,901,085 €2,795,000 €3,900,000 €1,780,805 €1,079,601 €1,477,943 €2,255,614

Actual TDC €5,464,325 €3,671,680 €5,106,372 €7,062,648 €3,171,779 €2,227,583 €2,998,328 €3,806,954

6 towerswatson.com


CEO actual TDC levels by countryThe highest pay levels are found in Switzerland, Spain and Germany.

� Country index median � Eurotop median

1,910

3,785

3,965

4,130

5,705

6,305

7,215

7,635

1,880

3,465

2,265

2,365

3,005

2,375

5,505

Nordics

France

Benelux

Italy

UK

Germany

Spain

Switzerland

Median actual TDC (thousands)

(IBEX 35)

4,975 (DAX 30)

(FTSE 100)

(AEX 25)

(MIB)

(CAC 40)

(SMI)(n=8)

(n=15)

(n=5)

(n=21)

(n=4)

(n=5)

(n=14)

(OMX30)(n=7 )

€0

€1,000

€2,000

€3,000

€4,000

€5,000

€6,000

€7,000

€8,000

€9,000

The above analysis of actual TDC includes only those CEOs that have served in position for the full financial year and where information is disclosed in order to derive actual TDC.


Analysis of Actual Total Direct Compensation (‘TDC’) in the last financial yearAnalysis of Actual TDC in the last financial year

The distribution of CEO actual TDC <1

1–1

.5

1.5–2

2–2

.5

2.5–3

3–3

.5

3.5–4

4–4

.5

4.5–5

5–5

.5

5.5–6

6–6

.5

6.5–7

7–7

.5

7.5–8

8–8

.5

8.5–9

9–9

.5

9.5–1

0

10–1

0.5

10.5–1

1

11–1

1.5

11.5–1

2

12–1

2.5

12.5–1

3

13+

Actual TDC (EUR millions)

0

2

4

6

8

10

12

% of

79

com

pani

es

The distribution is perhaps more ‘normal’ than we might expect from a pay distribution curve.

8 towerswatson.com


CEO average pay mix by countryIncentive pay is most significant in the German, UK and Swiss companies.

24%28% 28%

33%

37% 38%41%

69%45%

22%

30%

36%

46%

13%

25%

12%

31% 50% 42% 31% 17% 49% 34% 19%%

0

10

20

30

40

50

60

70

80

90

100

Germany(n=15)

UK(n=21)

Switzerland(n=8)

France(n=14)

Spain(n=5)

Benelux(n=5)

Italy(n=4)

Nordics(n=7)

� Base salary % � Actual bonus % � LTI expected value %



Short-term incentive (STI) designProfit/income is the most prevalent performance measure on STI plans.

%

21%

25%

31%

60%

53%

58%

62%

0 10 20 30 40 50 60 70

Return on measure

Sales/revenue

Cash�ow

Other �nancial measure

Individual

Other non-�nancial measure

Pro�t/income measure

STI performance measures – % of 89 companies

96 out of the 97 Eurotop companies analysed operate an STI plan. The above analysis is based on 89 out of the 96 Eurotop companies that have disclosed performance measures for the primary STI plan in operation.

10 towerswatson.com

Analysis of incentive design and shareholding guidelines in the last financial year

Long-term incentive (LTI) designMost companies operate at least one LTI plan with one or two performance measures to be met for awards to vest.

Number of LTI plans in operation – % of 97 companies

Number of performance measures on LTI plans – % of 124 plans

� 14% No plan � 50% 1 plan � 30% 2 plans � 6% 3 plans

14 companies donot operate an LTIplan for ExecutiveDirectors.

� 20% None � 28% 1 measure � 28% 2 measures

� 13% 3 measures � 9% 4 measures � 2% 5+ measures

These include restrictedshares, share matchingplans, stock optionsand plans with pre-grantperformance conditions.

The above analysis is based on 83 out of the 97 Eurotop companies that operate an LTI plan for executives. A total of 124 LTI plans are operated across the 83 companies.


Analysis of incentive design and shareholding guidelines in the last financial year

Long-term incentive (LTI) designPerformance share plans are the most common LTI vehicle.

LTI plan types in operation – % of 83 companies

%

66%

25%24% 24%

7%

0

10

20

30

40

50

60

70

Performanceshares/units

Share matchingplans

Stock options/units

Long-termcash

Restricted shares/units

This is the mostprevalent LTI vehiclein most countries.

These are mostcommon in theNordics and UKcompanies.

These are mostcommon in theFrench andSwiss companies.

These are mostprevalent in theGerman, French andItalian companies.

Limited use ofrestricted shares.

The above analysis is based on 83 out of the 97 Eurotop companies that operate an LTI plan for executives.

12 towerswatson.com

Developments on the horizon

European corporate governance developmentsThere has been a fresh round of EU and national initiatives relating to senior pay and more interventions are awaited.

Financial services: pay caps proposed in banking and some investment funds

General industry: disclosure and voting reforms proposed; diversity and non-financial reporting

New disclosure

and voting regime

Fiscal, disclosure,

voting and option

changes proposed

Improved

disclosure proposed

Financial services –

20% variable pay cap

Pay practice restrictions;

information and voting changes

Changes proposed on pay limits,

differentials, disclosure and voting


Developments on the horizon

European corporate governance developmentsImproved disclosure and more shareholder ‘say on pay’ is one of the pre-dominant themes.

Board Executives EU Belgium France Germany Italy Nether-

landsSpain Sweden Switzer-

landUK

Pay policy

Shareholder vote Proposed Advisory Proposed

Advisory(binding proposed)

Advisory Binding Advisory

Binding(high level policy)

Proposed (Binding)

Binding(new)

Actual/realised pay

Shareholder vote Proposed Advisory Advisory

Proposed(Binding on aggregate pay)

Advisory

Link to performance

• More generic performance measures/more prescriptive investor views on these

• Tailoring of performance measures encouraged/less prescriptive views

Leverage

• Acceptance of high leverage accompanied by high performance conditionality of pay

• Some preference for less leverage/allowing share price to do work of linking pay/wealth to performance

Type of performance

• Relative performance • Absolute performance

* We have recently completed a study of leading investors’ views on the changing environment for executive pay in the UK. Close to 30 institutions took part, and participants included both corporate governance specialists and fund managers.

Our research* suggests that a potentially major shift is occurring in investor views on the most effective/appropriate way to link pay to performance.

Not just pay... ...but also wealth

Driven by incre

asing

scep

ticism o f effe

ctiveness of incentives

Driven by increasing scepticism of effective-ness of incentives

Driven by increasing scepticism of

effectiveness of incentives

Flows of pay governed by performance measures

Stocks of executive shareholdings in company/longer time horizons/other holding conditions

14 towerswatson.com

Additional analysis and contact

Our database covers over 1000 companies across 14 countries in Europe

In addition to the analysis included in this report, we can also provide you with analysis for pan-European sectors or bespoke peer groups tailored to your specific requirements on a line-by-line and/or aggregate basis (for example, by industry, by different markets and/or by company size).

In addition to this we can provide analysis of special recruitment awards, termination arrangements, executive contracts and severance arrangements.

Executive Directors’ Compensation

Non-executive Directors’ Compensation

Incentive Design and Shareholding Guidelines

• Financial year and/or forward-looking base salary increases

• Actual and/or target total direct compensation levels*

• Actual and/or target total remuneration levels*

• Realised pay levels • Analysis of realised pay versus target/maximum pay opportunity

• Analysis of pay mix* • Pay differentials by sector and/or country*

• Leverage analysis* • Pay versus performance analysis*

• Base/fixed fee levels • Chairmanship and membership fees for board committees (for example, audit, remuneration, nomination)

• Attendance fees and travel allowances

• Other incentives and benefits

• Short-term incentive performance measures and relative weightings

• Short-term incentive deferral analysis

• Long-term incentive vehicles • Long-term incentive performance measures, relative weightings and performance targets

• Long-term incentive performance periods, vesting arrangements and holding periods

• Analysis of forward-looking amendments to short and long-term incentive plans and details of new plans

• Analysis of shareholding guidelines

* This analysis includes long-term incentive expected values based on the Towers Watson valuation methodology.

The full Board pay in the Eurotop 100 report includes

• CEO and Other Executive Directors’ actual total direct compensation levels by sector

• CEO actual total direct compensation by company (line-by-line)

• CEO average pay mix by sector • Further details of short-term incentive performance measures

• Short-term incentive deferral analysis • Long-term incentive performance measures • Long-term incentive performance periods • Analysis of shareholding guidelines • 2013 base salary increases • Changes to short-term incentive design • Changes to long-term incentive design


Additional analysis and contact

Country Contact name Email Phone

UK and Ireland Karin Richter [email protected] +44 20 7170 3577

Sonia Padda [email protected] +44 20 7170 2927

France Laurent Nguyen [email protected] +33 1 53 93 13 14

Gerald Joliy [email protected] +33 1 53 93 13 38

Germany Ralph Lange [email protected] +49 69 1505 5144

Stephanie Schmelter [email protected] +49 69 1505 5168

Switzerland Hans Muench [email protected] +41 43 488 4466

Maike Wehage [email protected] +41 43 488 44 09

Netherlands Sven Slavenburg [email protected] +31 88 5433183

Bram van Oenen [email protected] +31 88 543 3037

Spain Manuel Montecelos [email protected] +34 91 590 3986

Cristina Martin [email protected] +34 91 590 3087

Italy Edoardo Cesarini [email protected] +39 06 367361

Leonardo Mansueto [email protected] +39 02 6378 0190

Nordics Anders Tapper [email protected] +46 8 506 417 10

Peter Skoog [email protected] +46 8 506 417 23

Belgium Bram van Oenen [email protected] +31 88 543 3037

Noemie Tack [email protected] +32 2 678 1511

16 towerswatson.com

Appendices

Company CountryMarket capitalisation (€ m)

Sector

A P MOLLER - MAERSK A/S Nordics 23,961 Industrials

ABB LIMITED Switzerland 38,846 Industrials

ASML HOLDING Benelux 27,139 Technology/Telecoms

AXA France 36,787 Banks/Insurance

AIR LIQUIDE France 29,581 Basic Materials

ALLIANZ Germany 51,659 Banks/Insurance

ANGLO AMERICAN UK 21,030 Basic Materials

ANHEUSER-BUSCH INBEV Benelux 111,187 Consumer Goods/Services

ASTRAZENECA UK 46,082 Health Care

ATLAS COPCO AB Nordics 22,209 Industrials

BASF Germany 63,099 Basic Materials

BG GROUP UK 44,924 Oil and Gas

BHP BILLITON * UK 112,564 Basic Materials

BMW Germany 43,441 Consumer Goods/Services

BNP PARIBAS France 52,684 Banks/Insurance

BP UK 101,309 Oil and Gas

BT GROUP UK 29,225 Technology/Telecoms

BANCO BILBAO VIZCAYA ARGENTARIA Spain 36,197 Banks/Insurance

BANCO SANTANDER Spain 54,588 Banks/Insurance

BARCLAYS UK 42,751 Banks/Insurance

BAYER Germany 68,116 Basic Materials

BRITISH AMERICAN TOBACCO UK 76,991 Consumer Goods/Services

CENTRICA UK 21,700 Utilities

CHRISTIAN DIOR France 23,161 Consumer Goods/Services

CREDIT SUISSE Switzerland 33,124 Banks/Insurance

DAIMLER Germany 49,961 Consumer Goods/Services

DANONE France 36,510 Consumer Goods/Services

DEUTSCHE BANK Germany 33,038 Banks/Insurance

DEUTSCHE POST Germany 23,319 Industrials

DEUTSCHE TELEKOM Germany 39,687 Technology/Telecoms

DIAGEO * UK 56,686 Consumer Goods/Services

E.ON Germany 24,934 Utilities

EADS France 32,329 Industrials

Eurotop 100 Company List

Diageo and BHP Billiton have been excluded from the analysis as the 2012/13 remuneration report were not published at the time of this analysis.Market capitalisation figures are as at 1 July 2013 and sourced from Datastream.


Appendices


Sector

ELECTRICITE DE FRANCE France 32,660 Utilities

ENEL Italy 22,944 Utilities

ENI Italy 58,038 Oil and Gas

ERICSSON ‘B’ Nordics 28,954 Technology/Telecoms

GDF SUEZ France 36,144 Utilities

ASSICURAZIONI GENERALI Italy 21,360 Banks/Insurance

GLAXOSMITHKLINE UK 95,150 Health Care

GLENCORE XSTRATA* UK 43,326 Basic Materials

HSBC HOLDINGS UK 151,123 Banks/Insurance

HEINEKEN Benelux 28,642 Consumer Goods/Services

HENKEL AG & COMPANY KGAA Germany 28,684 Consumer Goods/Services

H&M HENNES & MAURITZ AB Nordics 43,675 Consumer Goods/Services

HERMES INTERNATIONAL France 26,466 Consumer Goods/Services

ING GROEP Benelux 27,401 Banks/Insurance

IBERDROLA Spain 25,073 Utilities

IMPERIAL TOBACCO GROUP UK 25,965 Consumer Goods/Services

INDITEX Spain 60,831 Consumer Goods/Services

INTESA SANPAOLO Italy 20,195 Banks/Insurance

KONINKLIJKE PHILIPS ELECTRONICS NA Benelux 20,722 Industrials

L’OREAL France 77,503 Consumer Goods/Services

LVMH France 64,712 Consumer Goods/Services

LINDE Germany 26,513 Basic Materials

LLOYDS BANKING GROUP UK 53,341 Banks/Insurance

MUNCHENER RUECKVERSICHERUNGS-

GESELLSCHAFT Germany 25,698 Banks/Insurance

NATIONAL GRID UK 31,889 Utilities

NESTLÉ Switzerland 163,373 Consumer Goods/Services

NORDEA BANK Nordics 35,748 Banks/Insurance

NOVARTIS Switzerland 147,510 Health Care

NOVO NORDISK Nordics 67,210 Health Care

ORANGE* France 19,204 Technology/Telecoms

PERNOD-RICARD France 23,321 Consumer Goods/Services

PRUDENTIAL UK 32,878 Banks/Insurance

RECKITT BENCKISER UK 39,472 Consumer Goods/Services


Data for Glencore reflects pre-merger data reported by Glencore International.Data for Orange reflects data reported by France Telecom.Market capitalisation figures are as at 1 July 2013 and sourced from Datastream.

18 towerswatson.com

Appendices


Sector

REPSOL YPF Spain 21,770 Oil and Gas

COMPAGNIE FINANCIERE RICHEMONT Switzerland 35,725 Consumer Goods/Services

RIO TINTO UK 61,048 Basic Materials

ROCHE HOLDING Switzerland 163,818 Health Care

ROLLS-ROYCE HOLDINGS UK 25,560 Industrials

ROYAL BANK OF SCOTLAND GROUP UK 36,941 Banks/Insurance

ROYAL DUTCH SHELL UK 158,755 Oil and Gas

SABMILLER UK 59,736 Consumer Goods/Services

SAP Germany 67,668 Technology/Telecoms

SANOFI France 106,330 Health Care

SCHNEIDER ELECTRIC France 31,503 Industrials

SIEMENS Germany 70,260 Industrials

SOCIETE GENERALE France 21,105 Banks/Insurance

STANDARD CHARTERED UK 41,543 Banks/Insurance

STATOIL Nordics 51,060 Oil and Gas

THE SWATCH GROUP Switzerland 22,119 Consumer Goods/Services

SWISS RE Switzerland 21,182 Banks/Insurance

SYNGENTA Switzerland 27,862 Basic Materials

TELEFONICA Spain 45,506 Technology/Telecoms

TELENOR Nordics 23,798 Technology/Telecoms

TELIASONERA Nordics 21,851 Technology/Telecoms

TENARIS Italy 18,499 Basic Materials

TESCO UK 31,422 Consumer Goods/Services

TOTAL France 89,128 Oil and Gas

UBS Switzerland 50,777 Banks/Insurance

UNICREDIT Italy 21,080 Banks/Insurance

UNILEVER UK 87,133 Consumer Goods/Services

VINCI France 23,370 Industrials

VIVENDI France 19,370 Consumer Goods/Services

VODAFONE GROUP UK 106,550 Technology/Telecoms

VOLKSWAGEN Germany 71,419 Consumer Goods/Services

VOLVO Nordics 21,895 Industrials

ZURICH INSURANCE GROUP Switzerland 29,604 Banks/Insurance


Market capitalisation figures are as at 1 July 2013 and sourced from Datastream.


Appendices

Composition of the Eurotop 100The majority of constituents in the Eurotop 100 are headquartered in UK, France and Germany. A broad array of sectors is represented.

Composition by country

Composition by industry

� 28% UK

� 6% Spain� 6% Italy� 15% Germany� 19% France

� 11% Switzerland � 5% Benelux� 10% Nordics

� 10% Technology/Telecoms

� 11% Industrials� 6% Health Care� 26% Consumer Goods/Services� 10% Basic Materials

� 7% Oil and Gas � 23% Banks/Insurance� 7% Utilities

Market capitalisation figures are as at 1 July 2013 and sourced from Datastream. Revenue figures are sourced from annual reports and Datastream.

Market capitalisation (€ m) Revenues (€ m)

LQ 25,317 16,367

Median 36,144 30,803

UQ 58,887 56,837

20 towerswatson.com

Appendices

Points to consider when interpreting the analysis

• The analysis covers a total of 97 companies that have published their remuneration report as at 30 June 2013. It should be noted that because we have excluded data points for some CEOs in many cases our analysis is based on 79 Eurotop 100 companies.

• Due to the differing regulatory and governance environments across countries, disclosures on compensation arrangements differ widely, in particular with respect to the pay of Other Executive Directors (excluding CEO) and disclosure of long-term incentive awards. As such we are unable to derive the actual TDC figures for all executives covered in the Eurotop 100.

• Furthermore, the analysis of actual TDC includes only those incumbents that have served in position for the full financial year.

• As a result, we have excluded 19 CEOs from the analysis of actual TDC. These are listed on page 21 with reasons for exclusion.

• The aggregated compensation data presented for Other Executive Directors is company weighted.

• Compensation data is presented in Euros. The exchange rates used to convert data are outlined below:

2012 average conversion rates to Euros

EURCHF GBP USD AUD HKD SEK DKK NOK

0.8296 1.2329 0.7781 0.8055 0.1002 0.1148 0.1343 0.1337


Appendices

CEOs who have been excluded from analysis of actual TDC

Company Incumbent Reason for exclusion

Anglo American Mark Cutifani New appointment; data pro-rated.

AP Moller - Maersk A/S Nils S. AndersenData needed to derive actual TDC not disclosed.

Assicurazioni Generali Mario Greco New appointment; data pro-rated.

AstraZeneca Pascal Soriot New appointment; data pro-rated.

Barclays Anthony Jenkins New appointment; data pro-rated.

Christian Dior Sidney ToledanoData pro-rated due to change in financial year end.

Compagnie Financiere Richemont Johann RupertData needed to derive actual TDC not disclosed.

Deutsche Bank AG Jürgen Fitschen, Anshuman Jain New appointment; data pro-rated.

EADS Thomas Enders New appointment; data pro-rated.

EDF Henri ProglioData pro-rated due to change in remuneration arrangements during financial year.

Hermes International Patrick Thomas

Data not comparable; remuneration package based on percentage of group’s consolidated income before tax and revenues.

Novo Nordisk Lars Rebien SørensenData needed to derive actual TDC not disclosed.

Repsol Antonio Brufau NiubóData needed to derive actual TDC not disclosed.

SABMiller Alan Clark New appointment; data pro-rated.

Swiss Re Michel M. Liès New appointment; data pro-rated.

Telenor Jon Fredrik BaksaasData needed to derive actual TDC not disclosed.

Tenaris Paolo RoccaData needed to derive actual TDC not disclosed.

Vivendi Jean-François Dubos New appointment; data pro-rated.

Zurich Insurance Group Martin SennData needed to derive actual TDC not disclosed.

22 towerswatson.com

Appendices

Definition of elements covered by this report

Pay element Definition

Base salaryThe annual base salary received for the last financial year, as reported in the emoluments table.

Base salary % increaseThe percent increase in the annual base salary reported for the last financial year.

Actual bonus The total annual bonus earned for the last financial year (including bonus deferred without additional performance conditions).

Actual bonus (% of base)Actual bonus (as defined above) expressed as a percent of annual base salary received for the last financial year.

Target bonus (% of base)

The percent of annual base salary paid as an annual bonus/incentive for target/on-budget, or expected performance, under the annual bonus/incentive plan in operation for the last financial year (including deferrals).

Maximum bonus (% of base)The maximum percent of annual base salary paid as an annual bonus/incentive under the annual bonus/incentive plan in operation for the last financial year (including deferrals).

Actual total cashThe sum of base salary (as defined above), actual bonus (as defined above) and amount received under a profit sharing plan. The analysis excludes fees received for membership of board.

LTI expected value

The total expected value of all forms of long-term incentives awarded in the last financial year (including deferred bonuses with an additional performance condition), calculated at the time of grant using the Towers Watson LTI valuation methodology.

LTI expected value (% of base)The LTI expected value (as defined above) expressed as a percent of annual base salary received for the last financial year.

Actual total direct compensation (TDC)The sum of actual total cash (as defined above) and LTI expected value (as defined above).


Appendices

In general terms, the reported LTI value represents the fair/expected value of an award as at the date of grant, taking into account the specific characteristics of the vehicle awarded (for example, share price volatility, dividend yield) and any applicable performance vesting conditions. The reported value represents the sum of the values of all types of LTI award made to an individual in the year, including performance/restricted shares, stock options, deferred bonus matching shares and long-term cash awards.

Stock options

• The value of stock options is calculated using a binomial lattice model, based on a number of input assumptions (as set out below). A discount is then applied to this value to take account of any applicable performance vesting conditions.

• Our valuations are based on an expected life approach when computing the binomial value of the option. This expected life is taken as the mid-point between the vesting period and the term of the option (for example, for an option with a 3 year vesting period and a 10 year life, the expected life is 6.5 years).

• Where applicable, the relevant performance condition discount factor is determined by the type of the applicable condition:

• Relative Total Shareholder Return tests: A country-specific discount is applied to the binomial lattice value.

• Absolute share price/Total Shareholder Return tests: We value such awards by incorporating the absolute share price target into the binomial valuation model. For absolute TSR tests, an equivalent absolute share price target is calculated using a company specific dividend yield assumption.

• Internal/non-market tests: We apply a single discount factor to take account of such performance conditions. This discount factor is country-specific, based on our experience of the average proportion of shares that might typically be expected to vest, based on typical local performance condition calibration.

Performance/restricted shares

• The value of performance/restricted shares represents the face value of shares (that is the number of shares multiplied by share price) as at the date of grant, less the value of dividends paid during the vesting period if participants do not receive the benefit of these, with a discount applied to take any applicable performance vesting conditions into account.

• Where applicable, the relevant performance condition discount factor is determined by the type of the applicable condition: • Relative Total Shareholder Return tests: We consider the award’s specific vesting schedule and calculate the expected proportion of shares due to vest, assuming that all percentile ranks are equally likely to be achieved. We apply an uplift factor to this value to take into account the strong correlation between relative TSR performance and share price growth. This adjustment factor is 20% if the comparator group is made up of selected sector peers, 25% if the company uses a broad index. For tests comparing the company’s TSR performance to that of an index, we apply the above methodology, assuming that the condition is calibrated such that threshold vesting is achieved for the equivalent of median performance, and maximum vesting achieved for the equivalent of upper quartile performance.

• Absolute share price/Total Shareholder Return tests: We value such awards as nil-cost options with the performance condition incorporated into the binomial valuation model as described above.

• Internal/non-market tests: We apply a single discount factor to take account of such performance conditions. This discount factor is country-specific, based on our experience of the average proportion of shares that might typically be expected to vest, based on typical local performance condition calibration.

• Where there is no defined maximum award size and awards are expressed as a ‘target’ number of shares with the potential for the actual vesting number to be higher or lower based on performance levels, the value is more simply the face value of this target number of shares as at the date of grant.

Towers Watson’s LTI valuation methodology

24 towerswatson.com

Appendices

Deferred bonus matching shares

• We assume that executives seek to maximise their reward opportunity and will therefore elect to defer the maximum amount of bonus allowable. Deferred bonus matching share awards are then valued as performance share awards (see previous page).

• Please note that deferrals not subject to further performance conditions are included as part of the annual bonus and are not valued as part of long-term incentives.

• Some plans have a feature (sometimes known as malus) under which deferred shares can be clawed back in the event of a downturn in business performance. Typically, this malus condition is only likely to be applied in extreme circumstances and we do not take this into account in the valuation. However, in cases where a malus condition can be considered a true long-term performance condition, the deferred award is valued as performance shares and included in long-term incentive value.

Co-investment plans

• Similar to deferred bonus matching plans, we assume that executives seek to maximise their reward opportunity and will therefore elect to co-invest the maximum amount. Co-investment matching share awards are then valued as performance share awards (see previous page).

Long-term cash bonus

• Consistent with other types of long-term incentive award, long-term cash bonuses are valued at date of grant (not payout). The value represents the target/expected payout level.

Other award types

• For complex or unusual plan types which do not fit into the categories described above, a bespoke valuation will be applied, using consistent principles and assumption setting methodology.

Input assumptions

• In order to calculate values for long-term incentive awards, it is necessary to make a number of input assumptions. These assumptions are based on a consistent approach for all companies in order to result in valuations which can be compared on a like-for- like basis. The principal assumptions and the methodology to derive them are set out below.

Share price volatility

• Share price volatility assumptions have been calculated based on the average actual volatility experienced by each company over the three-year period to 1 January 2012. Where this historic average is likely to be unrepresentative of future volatility levels (for example, a business restructuring), an assumption based on more detailed analysis is used.

Dividend yield

• Dividend yield assumptions have been calculated based on the average actual dividend yield for each company over the one-year period to 1 January 2012. Where this historic average is likely to be unrepresentative of future dividend yield levels, an assumption based on more detailed analysis is used.

Risk-free rate

• Risk-free rate assumptions have been calculated based on the yield on a zero-coupon government bond for the country in which the company is listed over the vesting period/expected share option term, as at 1 January 2012.

We also analyse the pay ‘realised’ by Executive Directors – that is to say, the remuneration from base, bonus and long-term incentives that was paid and/or vested for the financial year. Let us know if you would like access to this data.

Towers Watson21 Tothill StreetWestminster London SW1H 9LL

towerswatson.com

About Towers WatsonTowers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of benefits, talent management, rewards, and risk and capital management.

Copyright © 2013 Towers Watson. All rights reserved.TW-EU-2013-34124b. September 2013.

Towers Watson is represented in the UK by Towers Watson Limited and Towers Watson Capital Markets Limited.

The information in this publication is of general interest and guidance. Action should not be taken on the basis of any article without seeking specific advice.

To unsubscribe, email [email protected] with the publication name as the subject and include your name, title and company address.

Remunerations des patrons Etude Towers Watson 2013

Business

Transcript of Remunerations des patrons Etude Towers Watson 2013