Remuneration Committee

Following the appointment of Dr. Kirby as a Remuneration Committee member in September 2016, it now consists of four members and is chaired by Ms. Baldauf. Other members of the Remuneration Committee are Mr. Verwaayen and Mr. Burgmans. The Remuneration Committee held three meetings in 2016. The attendance record of the members can be seen in the Supervisory Board attendance chart.

Review of 2015 management performance

The work of the Remuneration Committee during the first quarter focused on performance for the year 2015 and the individual performance reviews of the Board of Management members and other members of the Executive Committee. The Remuneration Committee assessed the adequacy of the peer group used for benchmarking purposes. Ahead of his nomination for reappointment at the 2016 AGM, the Remuneration Committee gave particular attention to assessing the performance of the CEO during 2015 and prior years. The performance of the CFO and the other members of the Executive Committee were also reviewed for the year 2015.

Revision of Remuneration Policy

During 2016, the Remuneration Committee’s review of the Remuneration Policy resulted in a proposed amendment. The Remuneration Committee proposed to the AGM 2016 the addition of revenue growth to the current list of financial metrics from which the Supervisory Board may choose to determine performance for the purpose of short-term incentives (STI). At the same time, the proposal was made to increase the number of metrics which the Supervisory Board may choose, from three to four metrics. These amendments were considered to align well with the next phase of the corporate strategy and reflected the Remuneration Committee’s comprehensive approach to assessing performance.

Following support from the full Supervisory Board, the proposed revisions to the remuneration policy were subsequently submitted to, and adopted by, the 2016 AGM. More details and information on the remuneration policy, together with the current benchmark peer group, can be found in the Remuneration report of this Report 2016.

Review of 2016 management base salaries

The reappointment of the CEO was also a focus area for the Remuneration Committee in its assessment of base salaries. The Remuneration Committee provided recommendations on the CEO base salary ahead of his reappointment. The base salary will continue to be assessed in light of market conditions, the reward structures of peer group companies and the CEO’s performance. In addition, the Remuneration Committee considered the pay ratios within the company and how these compare with peer group companies. The Remuneration Committee reviewed the base salaries of the CFO and the other members of the Executive Committee. Forward-looking target ranges for variable remuneration of the Board of Management were discussed and proposals for the remuneration of Executive Committee members were reviewed and discussed with the CEO. Information on the remuneration of the Board of Management and the Supervisory Board can be found in the Remuneration report and in Note 22 to the Consolidated financial statements.

Remuneration Committee evaluation

The Remuneration Committee’s evaluation of performance and effectiveness forms part of the overall Supervisory Board evaluation undertaken during 2016. Once every three years (unless it is decided to do so more frequently), this evaluation takes the form of an independent external assessment of the Remuneration Committee’s effectiveness and performance, facilitated by a specialist consultant.

In 2016, it was decided that the Remuneration Committee, together with the Supervisory Board, should undergo this external evaluation with regard to the year 2015. This is the second year in a row in which the evaluation was undertaken externally. The external assessment provided a follow-up to the findings of the external assessment undertaken during 2015 with regard to the year 2014. As with the process that was adopted for the Supervisory Board as a whole, the evaluation consisted of a questionnaire, followed by a personal interview with an external consultant. Results of the evaluation were subsequently reviewed by the Remuneration Committee and the Supervisory Board.

The 2016 evaluation of the performance and effectiveness of the Remuneration Committee found that the Remuneration Committee is operating effectively and had improved in regard to areas such as inter-committee communication and the dynamics of committee discussions. The evaluation also highlighted the need to ensure that the focus on inter-committee dynamics is maintained in the future.