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July 2014

CEO pay in the Eurotop 100


Insights on similarities and differences in CEO pay across Europe

Contents
Introduction, highlights and key pay trends

3-4

Regulatory and tax changes

5-9

Analysis of
Actual Total Direct Compensation (TDC)

1015

Pay for performance and analysis of


incentive design and shareholding guidelines

1621

Additional analysis and contact

2224

Appendices

2533

Our services

2 towerswatson.com

34

CEO pay in the Eurotop 100

Introduction
t There is much talk of pay convergence across
Europe but the differences in pay levels and
practices for the chief executives of the
Eurotop 100 are as interesting as the similarities.
t The Shareholders Rights Directive will bring
more commonality of reporting and voting on
board pay (whatever the board structure
unitary or dual) for all companies incorporated in
European Union member states.
t Many institutional shareholders have regional if
not global reach and are calling for the similar
policies and practices in the jurisdictions in
which their investee companies operate in
search of the holy grail of alignment of interest.
t Nevertheless, while the components of pay
and some of their features may be similar, the
mix of pay continues to differ across Europe
and regulatory intervention in some markets is
driving more difference.
t Our 2014 report the second we have
published - provides a snapshot of
compensation levels, incentive design practices
and emerging remuneration trends for CEOs in
the Eurotop 100.
t We summarise key pay trends and
recent corporate governance developments
(with specific focus on the Shareholders
Rights Directive) as well as an analysis of
CEO remuneration levels and incentive design
practices observed in the last financial year in a
selection of markets.
t Our analysis covers 95 companies within
the Eurotop 100 which had published their
remuneration reports as at 10 June 2014.
Since our last report published in 2013, three
companies have joined the index (Associated
British Foods, Continental and Credit Agricole)
and three companies have left the index
(Centrica, Rolls-Royce and Tenaris).
The median market capitalisation of the
Eurotop100 companies increased by 19.5% from
36,144 million to 43,210 million.
t This list and composition of companies
is included in the appendix together with
details of the LTI valuation methodology
supporting our analysis.
t If you have any questions or would like to
know more, please contact your usual
Towers Watson consultant.

Pay at a glance
CEO pay remains stable
Base salary
t The median base salary level for the
last financial year was approximately
1.277 million for the CEO. We observe
limited change compared to last year of
1.279 million.
t The majority (60%) of companies did not
increase base salary levels for the CEO in
the last financial year.
Annual bonus
t The median actual bonus received for
performance in the last financial year was
115% of base salary for the CEO, similar to
the level reported in the previous year (111%).
t Median target and maximum bonus
opportunity levels for the CEO, where
disclosed, were 100% and 180%
respectively for the last financial year and
remain unchanged from the previous year.
t Deferral of bonus continued to be prevalent.
Getting on for half (43%) of companies
required the executive to compulsorily defer
bonus, typically, 50% of bonus paid.
t Profit/ income, non-financial and individual
measures continued to be the most
prevalent performance measures on shortterm incentive plans.
Long-term incentives
t Most companies made awards of
performance shares with relative TSR being
the most common performance metric
attached to long-term incentive plans.
t For awards granted in the last financial year,
the median long-term incentive expected
value for the CEO was 135% of base salary.
Actual Total Direct Compensation (TDC)
t The median actual TDC level for the
last financial year was approximately
5.4 million for the CEO, a slight increase
from 5.1 million reported last year.
Shareholding guidelines
t Almost half of companies have shareholding
policies. At median, the guideline level was
275% of base salary for the CEO (unchanged).

CEO pay in the Eurotop 100 3

CEO pay in the Eurotop 100

Key pay trends for selected countries


Pay levels remain stable, but incentives have been adjusted to create stronger alignment
with business strategy and shareholders.
France - CAC40
Base pay

Short-term
incentives

Long-term
incentives

4 towerswatson.com

Germany - DAX

UK - FTSE 100

Netherlands - AEX

Spain - IBEX 35

r;FSPCBTFQBZ
increase at median

r;FSPCBTFQBZ
increase at median

r.FEJBOCBTFQBZ
increase of 2.5%

r;FSPCBTFQBZ
increase at median

r;FSPCBTFQBZ
increase at median

r-FWFMTSFNBJO
stable
r'FXDPNQBOJFT
have increased
maximum
opportunity levels
r*ODSFBTFEGPDVTPO
financial metrics
r*NQMFNFOUBUJPOPG
CSR metrics

r-FWFMTSFNBJO
stable
r4USFOHUIFOJOH
of rules and
performance
conditions/metrics
r*ODSFBTFE
introduction of caps
on overall variable
compensation, as
well as lower STI
maximum pay out
opportunities
r*ODSFBTJOHVTFPG
clawback provisions

r-FWFMTSFNBJO
stable
r*ODSFBTFE
prevalence of malus
and/or clawback
provisions

r-FWFMTSFNBJO
stable
r$PNQBOJFTTUBSUJOH
to consider design
changes
r*ODSFBTJOHVTFPG
clawback provisions
r*ODSFBTJOHVTF
of non-financial
measures

r-FWFMTSFNBJO
stable
r-JNJUFEDIBOHFT
to design
r'PSNBMJTBUJPOPG
qualitative factors
r/FXNFUSJDTBOE
performance scales

r-FWFMTTUBCMFJO
terms of number of
shares but higher in
terms of face value
r*OUSPEVDUJPOPG
supplementary
performance
conditions
r*ODSFBTJOHTUSFUDI
in performance
conditions
r7FIJDMFNJYDIBOHFT
towards shares or
cash-based plans

r-FWFMTSFNBJO
stable
r'VSUIFS
implementation of
4-year performance
periods
r/FXQFSGPSNBODF
metrics
r*ODSFBTFE
introduction of caps
on overall variable
compensation

r-FWFMTSFNBJO
stable
r%FDMJOFPGTIBSF
matching plans
r*ODSFBTFE
prevalence of
extended holding
periods

r-FWFMTSFNBJO
stable
r.PSFTUSJOHFOU
performance
conditions
r%FDSFBTFE
weighting on
TSR or change
in measurement
methodology
r'VSUIFS
implementation
of qualitative
performance
criteria

r-FWFMTSFNBJO
stable
rPGDPNQBOJFT
have implemented
changes to plan
design
r*ODMVTJPOPG543
conditions mixed
with operational
metrics
r.PSFTIBSFCBTFE
plans

Regulatory and tax changes

Regulatory change continues across Europe


The focus is on improved disclosure and increased shareholder power.

General industry: disclosure and voting reforms proposed


Financial services: share-based and pay caps

Increased disclosure and


binding vote on policy
Financial services: 20% variable
pay cap for all FS employees

Changes on disclosure, pay


limits and differentials

Disclosure, voting
and fiscal changes

Cap on CEO pay for


state-owned companies

Pay practice restrictions; binding


votes on fixed and variable pay

Improved disclosure
and binding vote on
policy proposed

Cap on CEO/Chairman pay for


state-owned companies

CEO pay in the Eurotop 100 5

Regulatory and tax changes

Regulatory and tax changes by country


France

r%JTDMPTF
standardised tables
for: pay realised,
showing minimum,
target and
maximum pay-out
levels

Disclosure

Say on pay

Pay caps

Tax

Other

6 towerswatson.com

Germany

r/POCJOEJOH
shareholder votes
on remuneration
awarded to the
CEO and other
corporate officers
(mandataires
sociaux and
administrateurs)

r$BQPG 
p.a. on base pay
and bonus of
corporate officers
of state-controlled
businesses

UK

Netherlands

r/FXSFQPSUJOH
framework

r5ISFFZFBS 
forward-looking
binding vote on
remuneration
policy and annual,
advisory vote on
all remuneration
realised over
the year

r$PNQBOJFTTIPVME
define absolute pay
caps for short- and
long-term and total
compensation

Spain
r/FXUFNQMBUFT
have to be used
for remuneration
reports

r.BOEBUPSZ
discussion of
remuneration
policy during AGM
binding vote on
policy changes
already in place

r1SPQPTFE
binding vote on
remuneration
policy at least
every three years
r4IBSFIPMEFS
approval of
maximum total
remuneration as
well as of fixed
and variable
remuneration

r$BQPOHBJO
on share price
increase as a result
of a corporate
events - applicable
to shares received
as compensation

r$BQPOOBODJBM
entities that
have received
money from the
Government

r-FHBM
implementation of
clawback and test
of reasonableness
r-JNJUBUJPOPG
(tax facilitated)
pension accrual
(as per 2015)

r1SPQPTBMUPSFEVDF
NEDs appointment
to four years
r$PNCJOFE$&0
Chairman to be
approved by two
thirds of the Board
r5BSHFUHFOEFS
balance

r4VQFSUBYPO
remuneration
package over 1m
with the employer
paying 50%, along
with social taxes
r$POTJEFSBUJPO
of relationship
between pay
development of
executive board vs.
staff generally

r$POTJEFSBUJPO
of relationship
between pay
development of
executive board vs.
staff generally

Regulatory and tax changes

EU Shareholders Rights Directive


Increasing shareholder information and rights to be applied in countries registered and
listed in an EU member-state.
t Aim: Increase shareholder information and rights, and encourage long-term shareholder
engagement as well as creating a better link between pay and performance.
t Timing: Subject to negotiation with the European Parliament and the European Council in early
2015. The final provisions may not be agreed until later in 2015.

Remuneration Policy

Remuneration Report

t A binding vote at least every three years


t Companies will only be able to pay
remuneration to directors in line with
the policy
t Policy to cover:
t Linkage to long-term interests
of the company
t Maximum amounts that can be awarded
and proportion of fixed and variable pay
t Details on each remuneration element
including performance criteria for
variable pay
t Main contract terms, including notice
periods and termination payments
t The ratio between average director and
average full time employee remuneration
t Decisionmaking process including
significant policy changes

t Annual advisory vote


t The report shall include:
t Total remuneration received by each
director; the amount by component;
proportion of fixed and variable; the
linkage to long-term performance and
how performance criteria were applied
t The relative change in director pay, share
price and employee pay over three years
t Information on any reclaim of
variable pay
t The Commission has been empowered
to provide standardised templates for
the report

CEO pay in the Eurotop 100 7

Regulatory and tax changes

EU Shareholders Rights Directive


Companies should consider the following based on experience from the new UK regime.

REVIEW

ACT

Business
Strategy
Alignment
Governance
Record

ENGAGE

VOTE

N
Historic
View

Lens
1

Lens
5

Lens
2

Lens
4
Stakeholder
View

DRAFT

Lens
3

E
S

Future
View

Review current
arrangements from
new perspectives

Amend policies,
practices, plans
as relevant

Draft report text


and design lay out

Engage investors,
directors and other
stakeholders

AGM

EU Shareholders Rights Directive


Good remuneration committee practices.

Pay and performance

1. Ensure the performance for which executives are


being rewarded is aligned with the companys
strategic objectives
2. Monitor total remuneration received by executives year by
year to understand its sensitivity to company performance

8 towerswatson.com

Long-term pay

3. Check whether the time horizons of executive


pay are aligned with the key time periods for
company performance

Disclosure

4. Ensure there is a clear narrative on (i) why executive pay is


structured as it is and (ii) how executives have earned the
remuneration received

Say on pay

5. Engage with key institutional investors so there are


no surprises

Differentials

6. Avoid executive pay decisions being made in isolation


by monitoring the relationship between the pay policies
and levels for executives and other key employee groups
to avoid

Termination

7. Regularly review the total costs of a termination of


each director

Governance

8. Robust decision-making processes

Regulatory and tax changes

CRD IV

AIFMD

UCITS V

2016/17

Implementation Schedule

2014

EU regulatory landscape for financial services


Focus on pay mix, variable pay ratio, deferrals and pay caps.

Solvency II

t Applies to regulated staff at EEA organisation (globally)


and non-EEA organisations local subsidiaries
t Defined quantitative and qualitative criteria for
identification of staff
t 1:1 fixed to variable ratio with possibility to increase to 1:2
t At least 40% of variable remuneration must be deferred
t Disclosure of the number of individuals earning more than
1 million
t EU based alternative investment (AI) funds marketed or
managed within the EU (regardless of fund location)
t Applicable to a defined list of staff without
qualification criteria
t No cap on incentive compensation
t At least 40% of variable remuneration should be deferred
for three to five years
t Incentive payments should be subject to ex-ante and
ex-post reviews
t EU and non EU organisations that market or manage
UCITS (collective securities funds) in the EU (regardless
of regulated staffs location)
t Applicable to a defined list of staff without
qualification criteria
t No cap on incentive compensation
t At least 40% of variable remuneration should be deferred
into the fund
t Disclosure of remuneration practices to all stakeholders
t There is likely to be requirement (based on the Level 2 text
now under preparation) for insurance companies to adopt a
written remuneration policy
t The fixed component shall constitute a sufficiently high
portion of the total remuneration (no formal cap)
t Deferral period of no less than 3 years
t Remuneration shall be clear, transparent and
governed effectively

CEO pay in the Eurotop 100 9

Analysis of Actual Total Direct Compensation (TDC)

Eurotop 100 CEO pay levels


The table below shows pay levels for the CEO in the Eurotop 100 for the last financial year.
Chief Executive Officer
Average

LQ

Median

UQ

1,451,686

1,150,000

1,277,285

1,505,818

Actual Bonus
(% of base)

128%

51%

115%

155%

Target Bonus
(% of base)

115%

76%

100%

135%

Maximum Bonus
(% of base)

205%

140%

180%

230%

Actual Total Cash

3,225,285

1,988,938

2,852,375

3,742,813

173%

58%

135%

241%

5,558,642

3,561,165

5,395,740

6,926,587

Base Salary

LTI Expected Value


(% of base)

Actual TDC

t Statistics are company weighted and independently arrayed


t Not all companies have disclosed target bonus, maximum bonus and LTI awards. The above
analysis is only based on information where disclosed
t The analysis of actual TDC includes only those incumbents that have served in position for
the full financial year
t Definitions for each of the elements in the table and details of our LTI valuation methodology
are included in the appendix

10 towerswatson.com

Analysis of Actual Total Direct Compensation (TDC)

CEO actual TDC levels by sector


CEO actual TDC levels are differentiated by sector and remain generally stable.

7,840
7,910

Health Care (n=6)

6,610
6,630

Consumer Goods/Services (n=23)

5,860
6,235

Oil and Gas (n=7)

4,800

Utilities (n=4)

4,715

5,210
4,995

Banks/Insurance (n=18)

5,280

Technology/Telecoms (n=6)

4,090

4,685
4,645

Basic Materials (n=5)

3,500

Industrials (n=7)

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

2,550

Median actual TDC (thousands)

Median actual TDC 2013

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.

Median actual TDC 2012

NB: Changes in the index and/or incumbent might


lead to higher deviations in year-to-year comparisons
as well as changes in variable pay levels.

CEO pay in the Eurotop 100 11

Analysis of Actual Total Direct Compensation (TDC)

CEO actual TDC levels by country


The highest pay levels are found in Switzerland, UK and Spain.

7,018 (n=7)
7,635 (n=8)

Switzerland

6,100 (n=17)
5,705 (n=21)

UK

6,071 (n=5)

Spain

7,215 (n=5)
5,720 (n=3)

Benelux

3,965 (n=5)
5,665 (n=15)
6,305 (n=15)

Germany

4,878 (n=2)
4,130 (n=4)

Italy

3,950 (n=16)
3,785 (n=14)

France

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

2,106 (n=7)
1,910 (n=7)

Nordics

Median actual TDC (thousands)

Median actual TDC in 2013

Median actual TDC in 2012

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.

12 towerswatson.com

NB: Changes in the index and/or incumbent might


lead to higher deviations in year-to-year comparisons
as well as changes in variable pay levels.

Analysis of Actual Total Direct Compensation (TDC)

Actual TDC (thousands)

CEO actual TDC versus market capitalisation


Market capitalisation has some influence on actual TDC levels.
16,000

14,000
y = 2594.7ln(x) - 22552
2

R = 0.24787

12,000

10,000

8,000

6,000

4,000

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

2,000

Market capitalisation (millions)

UK

Spain

Italy

Germany

France

Switzerland

Benelux

Nordics

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 5 June 2014 and sourced from Datastream.

CEO pay in the Eurotop 100 13

Analysis of Actual Total Direct Compensation (TDC)

Summary of median CEO actual TDC


Market capitalisation and pay are better correlated by sector than market.
Statistics by Sector (sorted by market cap)
Utilities

Banks/
Insurance

Consumer
Goods/
Services

Basic
Materials

Technology/
Telecoms

Oil & Gas

Health
Care

Median
market
capitalisation
(millions)

32,891

35,908

43,463

45,463

53,045

55,324

70,860

98,854

Median CEO
actual TDC
(thousands)

3,500

4,800

5,210

6,610

4,685

5,280

5,860

7,840

Median CEO actual TDC

Industrials

Health Care
Consumer
Goods/Ser.
Oil & Gas
Technology/
Telecoms

Banks/Ins.
Utilities

Basic
Materials

Industrials
Median Market Cap
Statistics by Country (sorted by market cap)

Median
market
capitalisation
(millions)

Median CEO actual TDC

Median CEO
actual TDC
(thousands)

Benelux

France

Italy

Nordics

Switzerland

UK

Germany

Spain

29,722

37,495

39,118

44,448

48,022

53,045

55,239

55,310

5,720

3,950

3,220

2,106

7,169

6,100

5,665

6,071

Switzerland
UK
Spain

Benelux

Germany
France
Italy
Nordics
Median Market Cap

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.

14 towerswatson.com

Analysis of Actual Total Direct Compensation (TDC)

100

57% 49%

27% 31%

52% 50%

50% 42%

35% 31%

38% 34%

18% 17%

17% 19%

90
37%

80

46%

19%

12%

48%

70

36%

45%

60

69%

25%

32%

64%

28%
30%

50

13%
22%

40

22%

22%
45%

23%

41%
38%

37%
33% 33%

30
20

25% 24%

26%

28%

34%

28% 28%

20%

Benelux

Base salary %

Germany

UK

Actual bonus %

Switzerland

France

Italy

Spain

2012

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

2013

2012

10

2013

CEO average pay mix by country


Incentive pay is most significant in the German, UK and Swiss companies.

Nordics

LTI expected value %

CEO pay in the Eurotop 100 15

Pay for performance and analysis of incentive design and shareholding guidelines

STI performance measures


Profit/income continues to be the most prevalent measure on STI plans.
STI performance measures % of 86 companies
59%

Profit/Income Measure
52%

Other Non-Financial Measure

49%

Individual
38%

Other Financial Measure


Sales/Revenue

31%

Cashflow

31%
24%

EPS
Operating Margin

19%

Other Return on Measure

19%
15%

Health & Safety


10%

Customer Service

8%

Return on Capital Employed


Dividend Growth

5%

TSR

5%
3%

EVA/Company Value Measure

2%

Net Asset Value

1%

Share Price
0%

10%

20%

91 out of the 95 Eurotop companies analysed


operate an STI plan. The above analysis is based
on 86 out of the 91 Eurotop companies that have
disclosed performance measures for the primary STI
plan in operation.

16 towerswatson.com

These cover
a wide range
of strategic
measures.

30%

40%

50%

60%

70%

Pay for performance and analysis of incentive design and shareholding guidelines

Actual bonus (% tile rank)

Change in actual bonus levels vs. change in performance


Bonus pay outs in most companies vary with changes in operating income but some are
outside the corridor.
120

100

80

60

40

20

0
0

20

40

60

80

100

120

Operating income (% tile rank)

UK

Spain

Italy

Germany

France

Switzerland

Benelux

Nordics

The above analysis of actual bonus changes includes


only those CEOs that have served in position for
the full financial year in 2012 and 2013. Operating
income figures for 2012 and 2013 are sourced
from Datastream.

CEO pay in the Eurotop 100 17

Pay for performance and analysis of incentive design and shareholding guidelines

Long-term incentive design


Consistent with last year, most companies operate at least one LTI plan with more than
one performance measure to be met for awards to vest.
Number of LTI plans in operation % of 95 companies

Many companies in
Switzerland and
Benelux operate 2
or more plans

17% No plan

16 companies do
not operate an
LTI plan

52% One plan

24% Two plans

7% Three or more plans

Number of performance measures on LTI plans % of 116 plans

These include
restricted shares,
share matching plans,
stock options and plans
with pre-grant
performance conditions.

26% None
15% Three measures

21% One measure


9% Four measures

The above analysis is based on 79 out of the 95


Eurotop companies that operate an LTI plan for
executives. A total of 116 LTI plans are operated
across the 79 companies.

18 towerswatson.com

27% Two measures


2% Six measures

Pay for performance and analysis of incentive design and shareholding guidelines

Changes in long-term incentive design


Performance share plans continue to be the most common LTI vehicle.

LTI plan types in operation % of 79 companies


90

80
78%
70

60

50
These are
most common
in UK, Switzerland
and Nordics.

40

30

20

These are most


common in France
and Switzerland.

These are most


common in
Germany and Italy.

23%
19%

Typically operated
in Switzerland,
Nordic and Benelux.

18%

10

11%

0
Performance
shares/units

Share matching
plans

Stock options/
units

Long-term
cash

Restricted shares/
units

The above analysis is based on 79 out of


the 95 Eurotop companies that operate an
LTI plan for executives.

CEO pay in the Eurotop 100 19

Pay for performance and analysis of incentive design and shareholding guidelines

Top 3 LTI plan types per country


Combination of vehicles are country-specific and often driven by accounting and taxation
rules or corporate governance requirements.
LTI plans sorted by prevalence
Country

Restricted shares/units
Benelux

Performance shares/units

Share matching plans


Stock option/units

France

Performance shares/units

Stock option/units

Long-term cash

Share matching plans

Stock option/units

Performance shares/units
Germany
Long-term cash
Italy

Long-term cash

Performance shares/units

Performance shares/units
Nordics

Restricted shares/units

Stock option/units

Share matching plans


Spain

Performance shares/units

Switzerland

Performance shares/units

While share
matching plans are
gaining prevalence
in Germany, they are
declining in the UK.

Long-term cash
Share matching plans

Restricted shares/units

Stock option/units

Long-term cash
Restricted shares/units

UK

Performance shares/units

Share matching plans


Stock option/units

The above analysis is based on 79 out of the 95


Eurotop companies that operate an LTI plan for
executives. A total of 116 LTI plans are operated
across the 79 companies.

20 towerswatson.com

Pay for performance and analysis of incentive design and shareholding guidelines

Shareholding guidelines
Almost half of companies impose shareholding guidelines.
t Shareholding guidelines are most common in
UK and French Eurotop 100 companies.
t Guidelines are typically expressed as a
percentage of base salary. At median,

guideline levels are 275% of base salary for


the CEO.
t Where disclosed the time permitted to reach
the guideline is typically 5 years.

Prevalence of shareholding guidelines % of 95 companies

51% Yes

49% No/not disclosed

Prevalence of shareholding guidelines by country % of 48 companies


50

40

44%

30

Shareholding
guidelines are not
common in Spain.

27%
20

13%

10

8%
4%

0
UK

France

Switzerland

Germany

Nordics

2%
Italy

2%

0%

Benelux

Spain

CEO pay in the Eurotop 100 21

Additional analysis and contact

Our database covers over 1000 companies across 14 countries in Europe


We can 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).

Executive Directors
Compensation

Incentive Design and


Shareholding Guidelines

t Financial year and/or


forward-looking base
salary increases
t Actual and/or target total
direct compensation levels*
t Actual and/or target total
remuneration levels*
t Realised pay levels
t Analysis of realised pay
versus target/maximum
pay opportunity
t Analysis of pay mix*
t Pay differentials by sector
and/or country*
t Leverage analysis*
t Pay versus performance
analysis*

t Short-term incentive
performance measures and
relative weightings
t Short-term incentive
deferral analysis
t Long-term incentive vehicles
t Long-term incentive
performance measures,
relative weightings and
performance targets
t Long-term incentive
performance periods,
vesting arrangements and
holding periods
t Analysis of forward-looking
amendments to short and
long-term incentive plans
and details of new plans
t Analysis of shareholding
guidelines

Chairmens and
Non-Executive Directors
Compensation
t Base/fixed fee levels
t Chairmanship and
membership fees for board
committees (e.g. audit,
remuneration, nomination)
t Attendance fees and
travel allowances
t Other incentives
and benefits

Analysis can be conducted


by role e.g. CEO, CFO, COO**
* This analysis includes long-term incentive
expected values based on the Towers Watson
valuation methodology

22 towerswatson.com

** Note that in some countries a role-specific


analysis is not possible as only highest-paid executive
director is individually disclosed.

Additional analysis and contact

Our database covers constituents of the following indices in the


respective European countries

Belgium

BEL20

BELMID

France

CAC 40

SBF 80

Ireland

ISEQ 20

Italy

MIB 40

Germany

DAX 30

MDAX

SDAX

Nordics

OMX Sweden

OMX Denmark

OBX Norway

AEX

AMX

AScX

IBEX 35

IBEX Medium
Cap

SMI

SMI MID

FTSE 100

FTSE 250

Netherlands
Spain
Switzerland
UK

TecDAX

CEO pay in the Eurotop 100 23

Additional analysis and contact

Towers Watsons contacts


Country

Contact name

Email

Phone

UK and Ireland

Richard Belfield

richard.belfield@towerswatson.com

+44 20 7170 2147

Sonia Padda

sonia.padda@towerswatson.com

+44 20 7170 2927

Laurent Nguyen

laurent.nguyen@towerswatson.com

+33 1 53 93 13 14

Gerald Joliy

gerald.joliy@towerswatson.com

+33 1 53 93 13 38

Helmuth L. Uder

helmuth.uder@towerswatson.com

+49 89 51 657 4800

Stephanie Schmelter

stephanie.schmelter@towerswatson.com

+49 69 1505 5168

Hans Muench

hans.muench@towerswatson.com

+41 43 488 4466

Maike Wehage

maike.wehage@towerswatson.com

+41 43 488 4409

Bram van Oenen

bram.van.oenen@towerswatson.com

+31 88 543 3037

Sven Slavenburg

sven.slavenburg@towerswatson.com

+31 88 543 3183

Manuel Montecelos

manuel.montecelos@towerswatson.com

+34 91 590 3986

Cristina Martin

cristina.martin@towerswatson.com

+34 91 590 3087

Edoardo Cesarini

edoardo.cesarini@towerswatson.com

+39 06 367361

Leonardo Mansueto

leonardo.mansueto@towerswatson.com

+39 02 6378 0190

Anders Tapper

anders.tapper@towerswatson.com

+46 8 506 417 10

Mikael Ullen

mikael.ullen@towerswatson.com

+46 8 506 417 23

Bram van Oenen

bram.van.oenen@towerswatson.com

+31 88 543 3037

Noemie Tack

noemie.tack@towerswatson.com

+32 2 678 1511

France

Germany

Switzerland

Netherlands

Spain

Italy

Nordics

Belgium

24 towerswatson.com

Appendices

Eurotop 100 Company List


Company

Country

Market Capitalisation
( m)

Sector

A P MOLLER - MAERSK A/S

Nordics

40,521

Industrials

ABB LIMITED

Switzerland

39,880

Industrials

AIR LIQUIDE

France

33,514

Basic Materials

AIRBUS GROUP

France

41,183

Industrials

"--*"/;

Germany

56,492

Banks/Insurance

ANGLO AMERICAN

UK

25,096

Basic Materials

"/)&64&3#64$)*/#&7

Benelux

129,801

Consumer Goods/Services

ASML HOLDING

Benelux

28,436

Technology/Telecoms

ASSOCIATED BRITISH FOODS

UK

29,679

Consumer Goods/Services

"453";&/&$"

UK

67,523

Health Care

ATLAS COPCO AB

Nordics

25,840

Industrials

AXA

France

43,717

Banks/Insurance

#"/$0#*-#"07*;$":""3(&/5"3*" Spain

55,310

Banks/Insurance

BANCO SANTANDER

Spain

88,712

Banks/Insurance

#"3$-":4

UK

48,981

Banks/Insurance

BASF

Germany

78,328

Basic Materials

#":&3

Germany

87,301

Basic Materials

BG GROUP

UK

51,300

Oil & Gas

BHP BILLITON*

UK

127,951

Basic Materials

BMW

Germany

58,752

Consumer Goods/Services

BNP PARIBAS

France

64,126

Banks/Insurance

BP

UK

112,846

Oil & Gas

BRITISH AMERICAN TOBACCO

UK

82,186

Consumer Goods/Services

BT GROUP

UK

38,718

Technology/Telecoms

CHRISTIAN DIOR*

France

27,205

Consumer Goods/Services

CONTINENTAL

Germany

34,721

Consumer Goods/Services

CREDIT AGRICOLE

France

28,893

Banks/Insurance

CREDIT SUISSE

Switzerland

35,165

Banks/Insurance

DAIMLER

Germany

74,235

Consumer Goods/Services

DANONE

France

34,932

Consumer Goods/Services

DEUTSCHE BANK

Germany

30,366

Banks/Insurance

DEUTSCHE POST

Germany

32,891

Industrials

DEUTSCHE TELEKOM

Germany

55,239

Technology/Telecoms

DIAGEO*

UK

58,914

Consumer Goods/Services

BHP Billiton, Christian Dior and Diageo have


been excluded from the analysis as the 2013/14
remuneration report was not published at the time of
this analysis.
Market capitalisation figures are as at 5 June 2014
and sourced from Datastream.
CEO pay in the Eurotop 100 25

Appendices

Eurotop 100 Company List


Company

Country

Market Capitalisation
( m)

Sector

E ON

Germany

28,586

Utilities

ELECTRICITE DE FRANCE

France

47,449

Utilities

ENEL

Italy

39,118

Utilities

ENI

Italy

67,668

Oil & Gas

ERICSSON B

Nordics

29,904

Technology/Telecoms

(%'46&;

France

49,523

Utilities

"44*$63";*0/*(&/&3"-*

Italy

25,829

Banks/Insurance

GLAXOSMITHKLINE

UK

94,403

Health Care

GLENCORE XSTRATA*

UK

53,045

Basic Materials

).)&//&4."63*5;"#

Nordics

51,945

Consumer Goods/Services

HEINEKEN

Benelux

29,722

Consumer Goods/Services

)&/,&-"($0.1"/:,(""

Germany

34,625

Consumer Goods/Services

HERMES INTERNATIONAL

France

27,448

Consumer Goods/Services

HSBC HOLDINGS

UK

146,125

Banks/Insurance

IBERDROLA

Spain

33,665

Utilities

IMPERIAL TOBACCO GROUP

UK

31,571

Consumer Goods/Services

INDITEX

Spain

65,792

Consumer Goods/Services

ING GROEP

Benelux

40,175

Banks/Insurance

INTESA SANPAOLO

Italy

40,011

Banks/Insurance

KONINKLIJKE PHILIPS
ELECTRONICS NA

Benelux

22,190

Industrials

LINDE

Germany

28,881

Basic Materials

--0:%4#"/,*/((3061

UK

68,508

Banks/Insurance

LOREAL

France

77,677

Consumer Goods/Services

-7.)

France

73,826

Consumer Goods/Services

.6/$)&/&336&$,7&34*$)&36/(4
GESELLSCHAFT

Germany

27,803

Banks/Insurance

NATIONAL GRID

UK

38,150

Utilities

NESTLE

Switzerland

185,549

Consumer Goods/Services

NORDEA BANK

Nordics

44,448

Banks/Insurance

/07"35*4

Switzerland

175,672

Health Care

/070/03%*4,

Nordics

83,762

Health Care

ORANGE

France

31,641

Technology/Telecoms

PERNOD-RICARD

France

23,516

Consumer Goods/Services

Market capitalisation figures are as at 5 June 2014


and sourced from Datastream.

26 towerswatson.com

Appendices

Eurotop 100 Company List


Company

Country

Market Capitalisation
( m)

Sector

PRUDENTIAL

UK

43,210

Banks/Insurance

RECKITT BENCKISER

UK

45,463

Consumer Goods/Services

3&140-:1'

Spain

26,636

Oil & Gas

COMPAGNIE FINANCIERE RICHEMONT Switzerland

39,811

Consumer Goods/Services

RIO TINTO

UK

72,038

Basic Materials

ROCHE HOLDING

Switzerland

188,873

Health Care

30:"-#"/,0'4$05-"/%(3061

UK

47,278

Banks/Insurance

30:"-%65$)4)&--

UK

186,655

Oil & Gas

SABMILLER*

UK

64,342

Consumer Goods/Services

SANOFI

France

103,305

Health Care

SAP

Germany

68,280

Technology/Telecoms

SCHNEIDER ELECTRIC

France

40,058

Industrials

SIEMENS

Germany

86,250

Industrials

SOCIETE GENERALE

France

33,573

Banks/Insurance

STANDARD CHARTERED

UK

40,552

Banks/Insurance

STATOIL

Nordics

70,860

Oil & Gas

SWISS RE

Switzerland

23,806

Banks/Insurance

4:/(&/5"

Switzerland

26,555

Basic Materials

TELEFONICA

Spain

55,409

Technology/Telecoms

TELENOR

Nordics

26,926

Technology/Telecoms

TELIASONERA

Nordics

23,338

Technology/Telecoms

TESCO

UK

29,308

Consumer Goods/Services

THE SWATCH GROUP

Switzerland

23,553

Consumer Goods/Services

TOTAL

France

120,263

Oil & Gas

UBS

Switzerland

56,233

Banks/Insurance

UNICREDIT

Italy

38,129

Banks/Insurance

6/*-&7&3

UK

91,994

Consumer Goods/Services

7*/$*

France

32,998

Industrials

7*7&/%*

France

25,953

Consumer Goods/Services

70%"'0/&(3061

UK

66,702

Technology/Telecoms

70-,48"(&/

Germany

88,696

Consumer Goods/Services

70-70

Nordics

22,720

Industrials

;63*$)*/463"/$&(3061

Switzerland

32,483

Banks/Insurance

SABMiller has been excluded from the analysis as the


2013/14 remuneration report was not published at the
time of this analysis.
Market capitalisation figures are as at 5 June 2014 and
sourced from Datastream.

CEO pay in the Eurotop 100 27

Appendices

Composition of the Eurotop 100


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

Composition by country

20% France

16% Germany

5% Italy

6% Spain

11% Switzerland

27% UK

10% Nordics

5% Benelux

Composition by industry

9% Basic Materials

28% Consumer Goods/Services

6% Health Care

10% Industrials

7% Oil and Gas

10% Technology/Telecoms

6% Utilities

24% Banks/Insurance

Market capitalisation ( m)

Revenues ( m)

Lower Quartile

30,969

17,028

Median

43,210

32,031

Upper Quartile

68,394

58,707

Market capitalisation figures are as at 5 June 2014


and sourced from Datastream. Revenue figures
are sourced from annual reports and Datastream.

28 towerswatson.com

Statistics only include those 95 Eurotop companies


that published annual reports until June, 10. Revenue
figures exclude financial institutions.

Appendices

Points to consider when interpreting the analysis


t As a result we have excluded 19 CEOs from the
analysis of actual TDC. These are listed on the
slide overleaf with reasons for exclusion.
t :FBSPOZFBSBOBMZTFTNBZCFJNQBDUFE
by changes to the Eurotop 100 index
and incumbents.
t Actual TDC derived using the Towers Watson
-5*7BMVBUJPONFUIPEPMPHZXJMMEJGGFSGSPNUIF
figures disclosed by the companies in their
remuneration reports.
t Compensation data is presented in Euros.
The exchange rates used to convert data are
outlined below:

t The analysis covers a total of 95 companies that


have published the remuneration report as at 10
June 2014.
t Due to the differing regulatory and governance
environments across countries, disclosures on
compensation arrangements differ widely, in
particular with respect to long-term incentive
awards. As such we are unable to derive the
actual TDC figures for all executives covered
in the Eurotop 100.
t Furthermore, the analyses of actual TDC includes
only those incumbents that have served in
position for the full financial year.

2013 average conversion rates to Euros


EUR

CHF

GBP

USD

AUD

HKD

SEK

DKK

NOK

0.8125

1.1777

0.7533

0.727

0.097

0.1156

0.1341

0.1283

CEO pay in the Eurotop 100 29

Appendices

CEOs that were excluded from analysis of actual TDC

30 towerswatson.com

Company

Incumbent

Reason for exclusion

ABB Limited

Ulrich Spiesshofer

New appointment, data pro-rated

Anglo American

Mark Cutifani

New appointment, data pro-rated

AP Moller - Maersk

Nils S. Andersen

Data needed to derive actual TDC


not disclosed

ASML Holding

Peter T.F.M. Wennink

New appointment, data pro-rated

Assicurazioni Generali

Mario Greco

New appointment, data pro-rated

Banco Santander

Javier Marn Romano

New appointment, data pro-rated

BT Group

Ian Livingston

New appointment, data pro-rated

EDF

Henri Proglio

Only eligible for base in 2013.

GDF Suez

Grard Mestrallet

Data needed to derive actual TDC not


disclosed

Hermes International

Patrick Thomas

Data not comparable; remuneration


package based on percentage of
groups consolidated income before
tax and revenues

ING Groep

Ralph A.J.G. Hamers

New appointment, data pro-rated

Intesa Sanpaolo

Carlo Messina

New appointment, data pro-rated

Rio Tinto

Tom Albanese

New appointment, data pro-rated

Royal Bank of Scotland Group

Ross McEwan

New appointment, data pro-rated

Siemens

Joe Kaeser

New appointment, data pro-rated

Swiss Re

Michel M. Lis

Data needed to derive actual


TDC not disclosed

Syngenta

Michael Mack

Data needed to derive actual


TDC not disclosed

Telenor

Jon Fredrik Baksaas

Data needed to derive actual


TDC not disclosed

Teliasonera

Johan Dennelind

New appointment, data pro-rated

Appendices

Definition of elements covered by this report


Pay element

Definition

Base salary

The annual base salary received for the last financial year, as reported
in the emoluments table

Base salary % increase

The 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 cash

The 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)

CEO pay in the Eurotop 100 31

Appendices

Towers Watsons LTI valuation methodology


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 longterm cash awards.

Stock options
t 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.
t Our valuations are based on an expected life
approach when computing the binomial value of
the option. This expected life is taken as the midpoint 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).
t Where applicable, the relevant performance
condition discount factor is determined by the
type of the applicable condition:
t Relative Total Shareholder Return tests:
A country-specific discount is applied to the
binomial lattice value.
t 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.
t 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.

32 towerswatson.com

Performance/restricted shares
t The value of performance / restricted shares
represents the face value of shares (i.e. 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.
t Where applicable, the relevant performance
condition discount factor is determined by the
type of the applicable condition:
t Relative Total Shareholder Return tests:
We consider the awards 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 companys
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.
t 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.
t 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.
t 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.

Appendices

Deferred bonus matching shares

Input assumptions

t 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 above).
t 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.
t 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.

t 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.

Co-investment plans
t 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 above).

Long-term cash bonus


t 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.

Share price volatility


t Share price volatility assumptions have been
calculated based on the average actual volatility
experienced by each company over the threeyear period to 1 January 2013. 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
t Dividend yield assumptions have been calculated
based on the average actual dividend yield for
each company over the one-year period to
1 January 2013. 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
t 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 2013.

Other award types


t 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.

CEO pay in the Eurotop 100 33

Our services

Our services
Towers Watson is a
full service consulting
company, providing a
comprehensive array of
services in the areas of
talent and rewards, benefits,
and risk and financial
services. Our Executive
Compensation consulting
services include:
Towers Watsons Executive Compensation services
Policy

Analysis

Communication

t Executive pay philosophy


and structure
t Aligning pay with strategy and culture
t Annual bonus and long-term
incentive plan design
t Performance measure selection
and calibration
t Executive pensions
t Share ownership guidelines
t Recruitment and termination
t IPO and transaction
related awards

t Total executive pay


benchmarking
t Pay scenario analysis
t Realised pay analysis
t The dynamics of pay and
risk reviews
t IFRS2 valuations
t Total shareholder return
performance monitoring
t Global pay trends

t Directors Remuneration
Reports
t Assistance on investor
consultations
t Total reward statements
t Training and materials for
non-executive directors

Many clients retain Towers Watson for a broad


spectrum of services to gain the benefits that come
from a deep consulting relationship. Others use our
services selectively to meet specific business needs.
However you prefer to work with a consultant, Towers
Watsons flexible clients-first approach can work for you.

34 towerswatson.com

The remuneration landscape


is constantly changing we
can use our insight to identify
features of your remuneration
packages, which may not be
compliant with future best
practice, and proactively
address these.

About Towers Watson


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

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Towers Watson is represented in the UK by Towers Watson Limited.


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