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Report of the board of management

Remuneration Board of Management

Remuneration policy and its implementation in 2019

To ensure Corbion’s development as a successful sustainable ingredient solutions company, the objective of the remuneration policy for the Board of Management is to create internationally competitive remuneration packages and employment conditions, which align the interests of the Board of Management with the strategic direction and horizon of the company, with a strong emphasis on performance-related pay and long-term value creation. The policy is in place since 2015 and was approved by the annual General Meeting of Shareholders in that same year. An update of the policy was approved at the annual General Meeting of Shareholders in 2018. The full remuneration policy is available on our website www.corbion.com. This section describes how the remuneration policy has been implemented in 2019.

The implementation of the remuneration policy contributes to long-term value creation, as the long-term incentive for the Board of Management is aimed at longer-term value creation in line with stakeholder interests, measured over a performance period of three calendar years. To ensure that short-term performance also leads to sustainable long-term value creation, the short-term and long-term incentive performance metrics are aligned. In implementing the remuneration policy scenario analyses have been taken into consideration.

Remuneration reference levels

The total compensation levels (base salary, short-term incentive, long-term incentive) and pay mix are based on a combined reference group of comparable European biotechnology companies and Dutch general industry companies (AMX and smaller AEX). Every two years a reference check is performed to independently benchmark the total compensation levels with market levels; this was done for the first time in 2017. Based on this benchmark no major changes in remuneration levels and policies (pay mix, incentive design) were proposed.

Base salary

Members of the Board of Management are entitled to a base salary. Based on median market data the base salary for the CEO will be set between € 500,000 and € 600,000. For the CFO base pay is set between € 300,000 and € 400,000. The individual pay of the members of the Board of Management will be determined by the Supervisory Board within the boundaries of the aforementioned ranges (from time to time). There are no automatic annual increases in the base salary levels.

As per 1 April 2019, the annual base salary for Tjerk de Ruiter (stepped down as CEO on 8 August 2019) amounted to € 600,000 and that for Eddy van Rhede van der Kloot (CFO) € 400,000. The annual base salary for the newly appointed CEO, Olivier Rigaud (CEO as of 8 August 2019) amounts to € 550,000.

Short-Term Incentive Plan (STIP)

Members of the Board of Management are eligible for a short-term incentive. The STIP rewards operational execution and is aimed at strengthening and growing the Corbion business. It is determined by the following targets: EBITDA, earnings per share (EPS) (both as defined in the policy), and sustainability. EBITDA will account for 70% of the total STIP, EPS for 20%, and the remaining 10% will be determined by sustainability. A range of 30% around each performance target (or such lower percentage as determined by the Supervisory Board) is set annually to determine the actual payout. The STIP payout at target level is set at 50% of base salary for the CEO, and 40% for the CFO. For 2019, the Supervisory Board applied the range of 30% for actual payout as follows: the threshold level was set at 85% and the maximum level at 115% for each target.

An actual payout level of 128.1% has been achieved for the EBITDA target, 0% for EPS, and 100% for sustainability in the year under review. This has led to a total payout of 99.7% of the at-target STIP for both Tjerk de Ruiter and Eddy van Rhede van der Kloot as well as for Olivier Rigaud on a pro-rata basis. 

The Supervisory Board has decided to use its discretionary authority in accordance with the remuneration policy to grant to Olivier Rigaud an additional 5% cash pay-out over 2019 (pro-rata) based on successfully initiating and proposing the new strategy and preparing the implementation thereof. The Supervisory Board has decided to use its discretionary authority in accordance with the remuneration policy to apply for Tjerk de Ruiter a minus 5% cash pay-out over 2019 (pro-rata) due to the Algae Ingredients business performing below expectations.

Long-Term Incentive Plan (LTIP)

The long-term incentive for the Board of Management is aimed at longer-term value creation in line with stakeholder interests, measured over a performance period of three calendar years. To ensure that short-term performance also leads to sustainable long-term value creation, the LTIP performance measurements are fully aligned with the STIP: EBITDA will account for 60% and EPS for 20% of the LTIP. In addition, 20% of the LTIP is determined by relative Total Shareholder Return (TSR) as compared to a specific TSR peer group.

The CEO is entitled to a conditional share grant value of 100% of base salary. The CFO is entitled to a conditional share grant value of 80% of base salary.

Meeting the performance target(s) will result in an LTIP payout at target level. A range of 50% around the performance target(s) (or such lower percentage as determined by the Supervisory Board) is set for the EBITDA and EPS performance to determine the actual payout. For TSR performance, threshold payout is set at reaching the 8th position in the peer group. Based on independent analysis by a leading bank in the Netherlands the TSR performance of Corbion versus the TSR peer group will be assessed after the three-year performance period.

The number of conditionally granted but not yet vested shares as per 1 January 2019 for each of the members of the Board of Management is as follows.

Name, position

Specification of the plan

Shares awarded, not vested per 1 January 2019

T. de Ruiter, CEO (former CEO)

LTIP 2016-2019

27,404

E. Rhede van der Kloot, CFO

13,951

O. Rigaud, CEO

 
   

T. de Ruiter, CEO (former CEO)

LTIP 2017-2020

23,585

E. Rhede van der Kloot, CFO

11,772

O. Rigaud, CEO

 
   

T. de Ruiter, CEO (former CEO)

LTIP 2018-2021

23,576

E. Rhede van der Kloot, CFO

12,259

O. Rigaud, CEO

 

For the LTIP shares conditionally granted under the 2016-2019 plan to Tjerk de Ruiter and Eddy van Rhede van der Kloot, an actual payout level of 61% has been achieved for the EBITDA target, 79% for EPS, and 100% for TSR as Corbion ranked 4th in the peer group. This has led to a total payout of 72.4% of the at-target LTIP for both Tjerk de Ruiter and Eddy van Rhede van der Kloot. The number of vested shares received by Tjerk de Ruiter is 19,840 representing a value of € 555,123 at the time of vesting (with a vesting price of € 27.98). The number of vested shares received by Eddy van Rhede van der Kloot is 10,101 representing a value of € 282,626 at the time of vesting (with a vesting price of € 27.98). The members of the Board of Management used the option of selling shares to finance the income tax due on the vested shares.

The number of performance shares conditionally granted to Tjerk de Ruiter in 2019 (possible vesting in 2022) is 22,762 representing a value of € 600,006 at the time of the grant (with a grant price of € 26.36). The number of performance shares conditionally granted to Eddy van Rhede van der Kloot in 2019 (possible vesting in 2022) amounts to 12,140 representing a value of € 320,010 at the time of the grant (with a grant price of € 26.36). The number of performance shares conditionally granted to Olivier Rigaud in 2019 (possible vesting in 2022) is 20,865 representing a value of € 550,000 at the time of the grant (with a grant price of € 26.36).

The overview below shows the number of conditionally granted but not yet vested shares as per 31 December 2019 for each of the members of the Board of Management, the grant price of the granted shares, and the remaining vesting period.

Name, position

Specification of the plan

Grant price

Shares awarded, not vested per 31 December 2019

Vesting date

T. de Ruiter, CEO (former CEO)

LTIP 2017-2020

24.38

23,585

May 2020

E. Rhede van der Kloot, CFO

11,772

O. Rigaud, CEO

 
     

T. de Ruiter, CEO (former CEO)*

LTIP 2018-2021

25.45

17,027

May 2021

E. Rhede van der Kloot, CFO

12,259

O. Rigaud, CEO

 
     

T. de Ruiter, CEO (former CEO)*

LTIP 2019-2022

26.36

8,852

May 2022

E. Rhede van der Kloot, CFO

12,140

O. Rigaud, CEO

20,865

*Pro rata entitled to LTIP grant

Benefits allowance

As a consequence of the use of executive assignment agreements, the company does not provide benefits such as pension (individual retirement), medical or life insurance, or a company car, to members of the Board of Management. That is why each member of the Board of Management is provided with a benefits allowance. This is a fixed annual amount of € 200,000 for a CEO with an international background and € 150,000 for the CFO, to cover the cost of these expenses.

Other compensation

Tjerk de Ruiter is entitled to a special incentive of € 500,000 per year. This incentive bridges part of the compensation gap between the United States and the Netherlands. The payout will be in cash, under the obligation to purchase Corbion shares for the full net amount. It is subject to a lock-up period ending one year after his Board term ends, for whichever reason. In 2019, an amount of € 500,000 has been paid to Tjerk de Ruiter.

Overview remuneration

The total annual remuneration for the Board of Management in 2019 amounted to € 3.7 million including STIP over 2019 (2018: € 5.5 million). The table below shows the amounts which the respective member of the Board of Management (i) received/was entitled to in 2019 (base salary, STIP, benefits allowance, relocation costs) and (ii) received/was entitled to in 2019 by way of vesting (LTIP, special incentive).

Thousands of euros

Year

Base salary

STIP

LTIP

Benefits allowance

Special share award

Other compensation

Relocation

Total

          

T. de Ruiter*

2019

600

284

555

200

 

500

 

2,139

 

2018

594

256

1,040

200

1,697

500

 

4,287

E. van Rhede van der Kloot

2019

398

160

283

150

   

991

 

2018

382

133

555

138

   

1,208

O. Rigaud**

2019

275

151

 

100

  

30

556

 

2018

        

Total

2019

1,273

595

838

450

 

500

30

3,686

Total

2018

976

389

1,595

338

1,697

500

 

5,495

* CEO until 8 August 2019, thereafter Advisor to the Supervisory Board.

** As of 1 July 2019 in service

The ratio between the fixed remuneration (base salary and benefits allowance) versus the variable remuneration (STIP, LTIP, and other compensation) is for Tjerk de Ruiter 37% versus 63%, for Eddy van Rhede van der Kloot 55% versus 45%, and for Olivier Rigaud 67% versus 33%.  

The table below shows the remuneration costs based on the applicable IFRS standard and do not necessarily reflect the actual amounts paid.

 

IAS 24.17 category

Short-term employee benefits

Share-based payments

Post-employment benefits

Other long-term benefits

Termination benefits

Total

Thousands of euros

2019

Base salary***

STIP

LTIP

Pension benefits

Other benefits

Termination benefits

 

O. Rigaud **

410

151

135

   

696

E. van Rhede van der Kloot

558

160

428

   

1,146

Total Board of Management

968

311

563

   

1,842

 

T. de Ruiter *

811

784

875

   

2,470

Total former Board of Management

811

784

875

   

2,470

        

Total remuneration (former) Board of Management

1,779

1,095

1,438

   

4,312

 
 

IAS 24.17 category

Short-term employee benefits

Share-based payments

Post-employment benefits

Other long-term benefits

Termination benefits

Total

Thousands of euros

2018

Base salary***

STIP

LTIP

Pension benefits

Other benefits

Termination benefits

 

T. de Ruiter

804

756

245

   

1,805

E. van Rhede van der Kloot

530

133

125

   

788

Total Board of Management

1,334

889

370

   

2,593

* CEO until 8 August 2019, thereafter Advisor to the Supervisory Board.

** As of 1 July 2019 in service

*** Base salary also includes social security contributions and compensation, mainly allowances for expenses

The total remuneration for each (former) member of the Board of Management complies with the remuneration policy for the Board of Management, as it fits within the boundaries of this policy and no deviations from this policy have been applied. Members of the Board of Management are on the payroll of Corbion nv; they did not receive remuneration from a subsidiary or another company whose financials are consolidated by Corbion nv. Corbion does not grant loans, advances, or guarantees to members of the Board of Management. Corbion did not revise or claw-back any variable remuneration. No severance payment has been made to members of the Board of Management.

Internal pay ratios and five years performance overview

In line with good corporate governance practices regarding remuneration policies, Corbion measures on a yearly basis the internal pay ratios within the company. More specifically, Corbion has calculated the pay ratio of the Board of Management to the average company employee.  For the Board of Management, the total remuneration cost (based on IFRS) is used (this is change as previously the paid compensation was used). The average remuneration of all Corbion employees is calculated as the total remuneration of all Corbion employees on IFRS basis (see Note 5 to the consolidated financial statements) divided by the average number of Corbion employees on an FTE basis. The average number of FTEs is calculated on a monthly basis. The average remuneration of all Corbion employees in 2019 amounted to € 81,934 (2018: € 77,185).

For Olivier Rigaud (who was appointed as CEO as of 8 August 2019), the pay ratio (based on his annualized remuneration) to the average employee is 16.6 and for the CFO it is 14.0 (2018: 10.2). For Tjerk de Ruiter (CEO until 8 August 2019) the pay ratio to the average employee is 30.1 (2018: 23.4). When applying the former calculation method (which was based on actual amounts paid to the Board of Management), the pay ratio for Tjerk de Ruiter would be 29.9 (2018: 61.7) and for the CFO 13.8 (2018: 17.4).

The overview below shows, for the last five financial years, the total remuneration (based on IFRS) of the former CEO (given that the current CEO only started in August, information regarding the former CEO is used) and CFO, the average remuneration of all Corbion employees, the internal pay ratios, and the EBITDA and EPS of Corbion.

Name, position

2015

2016

2017

2018

2019

T. de Ruiter, (Former) CEO (A)

2,285

2,280 (0%)

2,273 (0%)

1,805 (-21%)

2,470 (37%)

E.E. Rhede van der Kloot, CFO (B)

787

896 (14%)

989 (10%)

788 (-20%)

1,146 (45%)

Average salary employee (C)

84

85 (1%)

82 (-3%)

77 (-6%)

82 (6%)

Internal pay ratio (A/C)

27.3

26.9

27.6

23.4

30.1

Internal pay ratio (B/C)

9.4

10.6

12

10.2

14

Adjusted EBITDA

150.3

170.1 (13%)

164.1 (-4%)

131.6 (-20%)

145.9 (11%)

EPS

1.3

1.74 (35%)

1.46 (-16%)

0.93 (-36%)

0.44 (-53%)

Shares in the capital of the company

As at 31 December 2019, Corbion had a capital interest of 0.71%, amounting to 423,202 shares. In 2019, Corbion has neither issued new shares nor repurchased shares for the LTIP programs for the Board of Management and (senior) management and there are no intentions for that in 2020.