principle features of the remuneration report

The remuneration policy that applies to the USG People Executive Board was set by the 2015 General Meeting of Shareholders for the period from 2015 to 2018.

The remuneration policy makes it possible to attract, retain and motivate qualified directors. The objective of USG People’s remuneration policy is to achieve a good balance between short-term operating results and sustainable value creation for the long term.

market-compatible policy

To assess the market compatibility of the remuneration levels within the Executive Board of USG People a peer group has been composed of companies comparable in their size and complexity. The criteria result in a group of 14 – mostly Dutch – companies compared to which USG People qualifies around the median level in terms of complexity. A comparison between the current remuneration of the Executive Board and the median of the peer group is therefore appropriate. The remuneration and appointments committee regularly assesses whether the companies included in the peer group are still adequate.

In setting the remuneration policy for the 2015-2018 period the remuneration and appointments committee not only performed an external comparison but also assessed the balance between the level, structure and composition of the remuneration of the members of the Executive Board and those of senior management of USG People.

structure of remuneration of the Executive Committee

The remuneration of the Executive Board consists of five components:

  1. a fixed gross annual salary;
  2. a variable short-term remuneration;
  3. a variable long-term remuneration;
  4. a pension contribution and
  5. other emoluments.

For an overview of the remuneration components for 2015 please refer to the notes to the consolidated financial statements and the remuneration report that can be consulted via the USG People website.

fixed gross annual salary

USG People offers its Executive Board members a market-compatible fixed gross annual salary in comparison with a group of peer companies (with the peer group).

The fixed gross annual salary is complemented by a variable short-term and a variable long-term remuneration component. The purpose of the variable remuneration is for it to be in line with the business strategy of USG People while achieving a healthy balance between the organisation’s short-term and long-term objectives. Accordingly the short-term focus of the remuneration policy is on operating results, while the long-term objective is the creation of sustainable value. In view of strategic developments within USG People, the Supervisory Board annually assesses the results to be achieved within the target areas, prior to each performance period. The extent to which the applicable annual targets have been met is determined after each performance period.

variable short-term remuneration

The variable short-term remuneration amounts to 60% of the fixed gross annual salary for both Executive Board members if all objectives are on target, 30% if the minimum requirements are met, and up to 90% of the fixed gross annual salary if the performance was exceptional. No variable short-term remuneration is awarded if the minimum requirement is not met, and a straight-line payment scheme applies for performance between the minimum and maximum requirement. The variable short-term remuneration is linked to financial, quantitative targets and qualitative targets and is paid in cash.

variable long-term remuneration

The allocation of the variable long-term remuneration is linked to the realisation of the same targets that apply to the variable short-term remuneration. The realisation of short-term operating results is a prerequisite for creating long-term value. For this reason USG People believes that the overlap between the short-term and long-term performance criteria is appropriate to determine the remuneration of Executive Board members. The variable long-term remuneration is awarded conditionally in shares. The shares are conditionally granted after the first performance year and the unconditional award is deferred for a period of three years. The final number of shares at the end of the fourth year can increase or decrease based on a second performance assessment, and is only awarded if the Executive Board member is still employed by USG People at that time. The second performance assessment is based on the creation of sustainable long-term value for shareholders. This sustainable value creation is measured by innovation and market share growth criteria. Innovation is measured by the return on investments in and integration of new applications in the business model of USG People.

pension

Members of the Executive Board receive a pension contribution that amounts to 23% of the gross fixed annual salary. There is no collective pension scheme for the members of the Executive Board.

other emoluments

The members of the Executive Board have a lease car at their disposal suitable to their position. The members of the Executive Board receive no fixed expense allowance. Any business-related representation expenses are claimed and reimbursed.

shareholding requirement

To ensure that their interests are in line with those of shareholders, the members of the Executive Board of USG People are required to hold at least twice their gross annual salary in USG People shares. The shareholding must be built up over a period of five years starting from 1 January 2015. These shares must remain in the Executive Board members’ possession during their full term of employment. The value of the shareholding is determined based on the share price at the time that the shares are unconditionally granted and/or the time that the shares are purchased. The exact date can vary from year to year but is usually the day after the AGM adopts the financial statements. Executive Board members have the option to use the shares received from the variable long-term remuneration to build up their shareholding.

The shareholding requirement applies instead of a restriction on the sale of shares acquired as proposed under the Dutch Corporate Governance Code. The reason for this is that the internationally accepted shareholding requirement leads to a sustainable composition and alignment of the interests of the Executive Board members with those of the shareholders.

termination arrangements

A notice period of three months has been agreed for the members of the Executive Board and six months for USG People.

The severance payment upon termination of the contract of employment for reasons not attributable to the person is subject to the agreed term of notice and may not exceed the amount of one year’s fixed gross annual salary (including pension contribution). Any variable remuneration not yet awarded will be paid out at target level and on a pro rata basis.

If USG People terminates the appointment and employment for reasons attributable to the person, USG People is not obliged to provide any severance payment whatsoever. Any entitlement to variable remuneration not yet distributed will lapse if the employment is terminated for reasons attributable to the person.

Please refer to the section on the Dutch Corporate Governance Code in this report for more information on severance payments upon termination in the event of a change of control.

remuneration of Supervisory Board

For an overview of the individual remuneration of the members of the Supervisory Board please refer to the notes to the consolidated financial statements and the remuneration report that can be consulted via the USG People website.