The following remuneration report of the Supervisory Board (the ‘Board’) contains an overview of how the remuneration policy is implemented. The remuneration policy was adopted by the General Meeting of Shareholders of 26 April 2017.
In February 2017, an external advisor compared the remuneration package of the Executive Board with that of a number of companies of a comparable scale, complexity, significance and results: the ‘peer group’. The peer group is made up of companies that were at numbers 15 to 25 of the AMX (mid-cap index) and on numbers 1 to 10 of the AScX (small-cap index) in the last quarter of 2016. The outcome of the comparison was used to determine the total direct remuneration (fixed salary, short- and long-term bonus) of the members of the Executive Board from 1 January 2017. The outcome was also used for the total direct remuneration of Mr Yoram Knoop (CEO) from 1 January 2018, partly in light of his nomination for re-election by the General Meeting of Shareholders ('AGM') on 26 April 2018.
Prior to the preparation of the remuneration policy and the adoption of the remuneration of individual members of the Executive Board, the Board analysed the aspects as referred to in best practice provision 3.1.2 of the Dutch Corporate Governance Code (the ‘Code’) on the basis of a proposal by the Remuneration committee. In formulating the proposal for the remuneration of the members of the Executive Board, the Remuneration committee ascertained the individual directors’ vision of the level and structure of their own remuneration.
Annual salary for members of the Executive Board
The fixed basic salaries of the members of the Executive Board were indexed on 1 January 2017. In respect of this indexation, the Board made an estimate of the expected inflation development and the relative range of salaries in comparison with the outcome of the peer group. The percentages used and the salaries as at 1 January 2017 were:
Yoram Knoop - €450,192 per year (+ 0.4% vs. 2016)
Arnout Traas - €367,210 per year (+ 3.5% vs. 2016)
Jan Potijk - €382,345 per year (+ 1.7% vs. 2016)
Short term performance bonus of members of the Executive Board
The targets for the short-term performance bonus for 2017 were 70% related to financial targets and 30% to qualitative targets. The CEO also receives a fixed, annual, short term bonus of €100,000 during the term of his current contract (until the General Meeting of Shareholders in 2018). This bonus is to be used to participate in the employee participation plan for senior management.
The realisation of the previously established short-term performance bonus targets for 2017 was determined at the beginning of 2018. The table below shows the various performance criteria as well as the results per Executive Board member, including the maximum percentage and the percentage of the basic salary actually achieved.
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The financial targets over the financial year were related to net profit of ForFarmers and for the COO of ForFarmers the Netherlands also the operating profit (EBIT) of this cluster, excluding (pre-established) incidental expenses and/or income. The qualitative targets related to accounts receivable management and specific projects for 2017 as part of the implementation of the Horizon 2020 strategy such as the creation of world-class teams, the composition of the M&A portfolio and increasing efficiency in the supply chain. Depending on the member of the Executive Board in question, a project counts for a share of between 5% and 20% of the target. If performance remains below the 90% of the agreed target, no bonus will be paid for that target. The maximum bonus will be paid when 110% of the target has been realised.
Long term performance bonus of members of the Executive Board
The targets for the long-term performance bonus were 60% related to financial targets and 40% to qualitative targets. The long-term performance bonus was determined over a period of three years, i.e. 2015-2017.
The realisation of the long-term performance bonus targets, as established beginning 2015, for the years 2015-2017 was also determined at the beginning of 2018. The table below shows the various performance criteria as well as the results per Executive Board member, including the maximum percentage and the percentage of the basic salary actually achieved.
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For the long-term performance bonus 2015-2017, the (cumulative) financial targets were related to the realisation of net-profit growth over three years, both organically and through acquisitions. The qualitative targets related to sustainability, implementation of Horizon 2020, and the listing on the public stock exchange. For the long-term performance bonus 2016-2018, the targets are the same as those for 2015-2017; the listing on the public stock exchange has been replaced by progress in employee engagement goals, however.
For the long-term performance bonus 2017-2019, the financial targets are the development of earnings per share after tax (EPS), (corrected for the share buy-back), total shareholder return, and return on average capital employed ('ROACE'). The topics of the qualitative targets for 2017-2019 are the same as those for 2016-2018. If performance remains below the 90% of the agreed target, no bonus will be paid for that target. The maximum bonus will be paid when at least 110% of the target has been realised. The applicable percentages with respect to the ROACE target are 80% and 120%.
For the Total Shareholder Return (TSR) targets (2017-2019), the Board established which companies form part of the peer group. These are the ten companies that were at numbers 15 to 25 of the AMX (mid-cap index) and the ten companies at numbers 1 to 10 of the AScX (small-cap index) as at 1 October 2016. The percentage bonus allocated for TSR is determined using the position occupied by ForFarmers within the peer group based on the following scale.
The overview below shows which bonus percentages for 2017 and for the period 2015-2017 have been achieved by each individual member of the Executive Board.
The members of the Executive Board used (part of) the short-term performance bonus and the fixed long-term bonus to participate in the employee participation scheme for senior management. Yoram Knoop participated with 61,034 depositary receipts, Arnout Traas with 9,094 and Jan Potijk with 26,048. A lock-up period of five years applies to the depositary receipts that were acquired based on this scheme in 2017. A discount of 20% was given on the regular purchase price, in accordance with the remuneration policy and the rules as referred to in Article 2:135, paragraph 5 of the Dutch Civil Code as approved by the General Meeting of 26 April 2017.
As at 31 December 2017, the members of the Executive Board hold the following shares or depositary receipts:
|Depositary receipts in lock-up for 3 years with release in 2018||Depositary receipts in lock-up for 3 years with release in 2019||Depositary receipts in lock-up for 5 years with release in 2022||Depositary receipts/Shares (not in lock-up)|
In the remuneration policy a target with respect to the ownership of shares has been included. The members of the Executive Board shall hold (depositary receipts of) shares in the Company with a value amounting to at least two times their gross annual fixed salary.
In accordance with the remuneration policy, the Company did not allocate remuneration in the form of options, shares or depositary receipts to members of the Executive Board and/or the Executive Committee. The remuneration of the members of the Executive Board does not depend on a change of control in the Company. No loans were granted to members of the Executive Board.
An overview of the costs incurred by ForFarmers N.V. (the ‘Company’) in the financial year 2017 in relation to Executive Board remuneration gives a summary of the remuneration of the individual members of the Executive Board. No fees other than those shown in the overview were paid to members of the Executive Board in the financial year. Please also refer to Note 36 of the annual accounts.
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The Board has seen no reason in the financial year to make use of its special powers to add to or claw back any allocated variable or long-term remuneration. Over the financial year, no severance payments or other special payments were granted to members or former members of the Executive Board.
To determine pay ratios within the Company, the total direct remuneration (i.e. the fixed salary and the (short- and long-term) variable salary) of all ForFarmers employees was used. Partly due to the countries in which ForFarmers operates at the moment, this provides a relatively uniform and representative reference group. This principle will be re-assessed every year.
The average for the total direct remuneration of all ForFarmers staff (except the members of the Executive Board) came to €45,903 gross in 2017 (compared to €45,714 gross in 2016). This amount is calculated based on the –inaccurate- assumption that all employees work full time. This means that the real average is lower. This amount offset against the total direct remuneration of Mr Knoop (CEO) in 2017, i.e. €1,104,148, gives a pay ratio of 1:24.1. For Arnout Traas (CFO) and Jan Potijk (COO) the pay ratio compared to Yoram Knoop (CEO) is 1:1.7 and 1:1.6 respectively.
Remuneration of members of the Supervisory Board
The annual remuneration of the members of the Board amounts, in line with the policy adopted at the General Meeting of Shareholders of 26 April 2017, to €60,000 for the Chairman, €46,000 for the Vice-Chairman and €43,000 for the other members of the Board with an additional compensation of: €10,000 for the chairman of the Audit committee, €7,500 for the chairman of the other committees, €7,000 for the member of the Board who is a member (not the chairman) of the Audit committee and €6,000 for the member of the Board who is a member (not the chairman) of one of the other committees of the Board. These are gross amounts. The members of the Board receive a fixed annual expenses allowance of €500.
In 2017, the following remuneration payments were made to members of the Supervisory Board.
In the period under review, the Board has not granted any additional remuneration to members of the Board in connection with the fulfilment of extra tasks.
As at 31 December 2017, the members of the Board hold the following shares or depositary receipts in ForFarmers N.V. and/or a balance on the participation account of FromFarmers U.A.
The Company did not allocate options, depositary receipts or shares to members of the Supervisory Board. The remuneration of the members of the Board does not depend on the results of the Company or on a change of control in the Company. Loans were not provided to members of the Board.
Lochem, 12 March 2018