The remuneration policy was adopted by the General Meeting of Shareholders on 23 April 2010, as proposed by the Supervisory Board, with due account taken of the recommendation of the Remuneration, Selection and Appointments Committee.
Context of the remuneration policy
In just a few years, Gasunie has grown into an international gas infrastructure company with many international customers in a converging European market. The company is not only active in regulated markets, but also develops non-regulated activities, and creates value for its stakeholders. It creates value for the Dutch economy primarily through the development of a strong ‘hub’ function in a liquid market, through enabling the throughput of significant gas flows and competitive gas trading for the domestic gas market, through offering flexibility through its storage facilities, and through developing and maintaining the L-gas market.
Since 1 January 2012, N.V. Nederlandse Gasunie has had a new senior management structure. This consists of an Executive Board and three business units, i.e., GTS, Gasunie Deutschland, and Participations & Business Development. In addition to these business units, there are Asset Service Providers (Operations and Projects) and a number of Corporate Service Providers. The company has a number of subsidiaries and joint ventures.
The aims and principles underlying the remuneration policy
The aim of the remuneration policy is to attract, motivate and retain Executive Board members of the right quality and experience, both from within the company and in the form of proven talent from the market. This management talent is necessary for Gasunie to achieve its essential strategic objectives. The implementation of this policy is based on the attainment of challenging objectives and the rewarding of those responsible, based on the following considerations:
- the remuneration policy must reflect the balance between short- and long-term results, and between operational and strategic performance;
- the company bases remuneration packages for members of the Executive Board on a market comparison, based on a relevant reference group in the labour market;
- the level and structure of the remuneration of members of the Executive Board is determined on the basis of analyses that also take into account the remuneration ratios within the company;
- in principle, having the State as a 100% shareholder, Gasunie applies the same principles that are applied to the remuneration policy in state-owned companies. If the Supervisory Board feels that this may lead to unacceptable risks for the company, it will consult with the shareholder.
The remuneration consists of the following elements:
- a fixed component (basic annual salary);
- a variable component, dependent on the attainment of both short- and long-term goals;
- the employer’s contribution to the pension premium;
- other secondary employment conditions.
Basic annual salary
When determining the basic annual salary for members of the Executive Board (the fixed component), the Supervisory Board bases its decision on the results of a market comparison with a labour market reference group chosen for this purpose. The Supervisory Board has verified that the external consultant who carried out this market comparison in 2009 is independent of the members of the Executive Board.
At the request of the shareholder, the Supervisory Board will limit the sum of the fixed and variable salary on appointment to a maximum of € 350,000. The Supervisory Board decides on annual salary increments. If the maximum salary has been reached, further growth is limited to the structural increments laid down in the collective labour agreement.
The variable remuneration is based on the remuneration policy that has been approved by the shareholder. The maximum variable remuneration is 35% of the basic annual salary. The targets that must be attained in order to qualify for these bonuses are agreed annually. These targets will, where possible, be both measurable and ambitious. The Supervisory Board is authorised to adjust the variable component within the limits mentioned below if it is likely to lead to unfair outcomes due to exceptional circumstances during the performance period. The Supervisory Board is also authorised to reclaim from members of the Executive Board a variable bonus that was awarded on the basis of inaccurate data (financial or otherwise).
Progress in attaining the targets will be measured after the end of the year concerned, initially by the Remuneration, Selection and Appointments Committee and then by the full Supervisory Board.
The Supervisory Board has chosen performance criteria that relate to the implementation of Gasunie’s strategic goals, both short- and long-term. For each pillar of the strategy, one or more performance criteria have been developed. The three strategic pillars of Gasunie and the associated performance criteria are as follows:
- To optimise the value of our existing assets (Financial targets and Asset Utilisation Rate)
- To strengthen our leading position as a cross-border gas infrastructure company in Europe (Economic Value Added)
- To enable the transition towards more sustainable energy usage (Corporate Social Responsibility)
In defining the company’s strategy, account is explicitly taken of the social impact of Gasunie’s activities and their effects on the environment and society. Criteria have therefore also been defined to assess performance in this area.
Given the nature of the variable remuneration elements, the possibility of carrying out a scenario analysis (as mentioned in the Corporate Governance Code) is not relevant.
Variable short-term remuneration
The purpose of the variable short-term remuneration is to reward the attainment of the agreed challenging targets in a number of primarily operational key areas. These operational targets apply to all Gasunie staff; attainment of some of these targets (i.e., the collective Gasunie targets) will also reward other employee groups.
The criteria for awarding the variable remuneration relate mainly to the implementation of the strategy. The strategy has been approved by the Supervisory Board and tested against Gasunie’s public interest. This is reflected in, for example, challenging, quantified targets relating to safety, security of supply and cost-efficiency.
At the request of the shareholder, the variable component is subject to an upper limit of 25% of the individual’s basic annual salary. A long-term bonus of up to 10% may also be awarded (see below).
The breakdown of this 25% is as follows:
|Collective group targets (10%):|
|Corporate Social Responsibility||2%|
|Individual targets (15%):|
|Targets relating to the individual Executive Board member’s area of responsibility||10%|
|Overall assessment of the contribution made by the individual Executive Board member (to be determined by the Supervisory Board)||5%|
Variable long-term remuneration
Gasunie also pays its Executive Board members a variable bonus, linked to the creation of value over the long term. With effect from 2012, the variable long-term bonus will have three components. The first is the Operational Cost Index for the TSOs, which reflects the ratio of operating costs to the asset base for which the costs are incurred. The second component is the Asset Utilisation Rate, also for the TSOs; this component indicates the extent to which the assets are actually used (the commercial utilisation level). The third component is EVA™ (Economic Value Added), which also existed prior to 2012. This performance is measured over a period of three years and is dependent on the development of the EVA (EVA = (ROIC – WACC) × Invested Capital) for the non-TSO parts of the company. If the three components are realised in full, the variable salary amounts to 4%, 3% and 3% of the basic annual salary respectively.
The targets for eligibility for variable remuneration are agreed at the start of the relevant year between the Supervisory Board and the members of the Executive Board, once the chairman of the Executive Board has discussed the proposal to this effect with the Remuneration, Selection and Appointments Committee.
Variable bonuses are paid following approval by the General Meeting of Shareholders of the annual accounts for the year for which the targets were set.
Gasunie offers its Executive Board members a career-average pension scheme. The retirement age currently provided for is 65. Any statutory changes to the retirement age will be taken into account. If a member of the Executive Board stands down before reaching retirement age but continues to be employed by Gasunie, agreements will be made about that individual’s pension provisions up to retirement age.
Other secondary employment conditions
Gasunie has put together a package of secondary employment conditions for its Executive Board members which also apply to other staff.
Term of office
Members of the Executive Board are appointed for a period of four years, with a possibility of reappointment for a further four years. Members stand down on reaching the age of 62.
For members of the Executive Board a notice period of two months applies. For other Gasunie employees, a notice period of four months must be observed.
Compensation for dismissal
Compensation for dismissal for Executive Board members will be limited to a maximum of one year’s basic salary, in accordance with the Corporate Governance Code, except where such a limitation is clearly unreasonable.
Change in control
Executive Board members are covered by a ‘change in control’ clause, which states that if they are forced to leave the company due to a merger or the acquisition of the company by an external party, or in the event of a fundamental change in the nature, management or structure of the company that is beyond the control of the Executive Board, they will be awarded compensation up to a maximum of one year’s basic salary, regardless of which party terminates the employment contract.
The current composition of the Board is not in compliance with a balanced composition as mentioned in the Management and Supervision Act (art. 2:166 BW). When new members need to be appointed, attention will be specifically paid to conforming to this provision.
Remuneration package for 2012
Based on the policy outlined above, the Supervisory Board agreed the following basic annual salaries and variable bonuses for members of the Executive Board active on 31 December 2012:
|In euros||Basic annual salary 2012||Variable bonus (for performance 2012)|
|P.C. van Gelder, Chairman||268,783||80,638|
See note 23 to the Consolidated Financial Statements for the allocation of other remuneration package components in 2012.
Composition of the Executive Board
Mr Chin Sue retired from the Executive Board on 1 July 2012. He will continue in the employment of Gasunie, performing various duties, until 1 July 2013.
Mr Oudejans was appointed as CFO on 1 October 2012.