Note 5: Employee benefits

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Salaries, wages and other employee benefits in operating income

In € millions

2016*

2017

*

Represented to present the Specialty Chemicals business as discontinued operations.

Salaries and wages

(1,467)

(1,515)

Post-retirement cost

(35)

(126)

Other social charges

(292)

(294)

Total

(1,794)

(1,935)

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Average number of employees

Average number during the year

2016*

2017

*

Represented to present the Specialty Chemicals business as discontinued operations.

Decorative Paints

14,800

14,700

Performance Coatings

19,300

19,800

Corporate and other

2,100

1,700

Total

36,200

36,200

The average number of employees working outside the Netherlands was 33,600 (2016: 33,300).

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Employees

At year-end

2016*

2017

*

Represented to present the Specialty Chemicals business as discontinued operations.

Decorative Paints

14,700

14,400

Performance Coatings

19,700

19,900

Corporate and other

1,900

1,400

Total

36,300

35,700

At year-end 2017, the number of employees decreased by 2% to 35,700 people (year-end 2016: 36,300 people).

Share-based compensation

Share-based compensation relates to the equity-settled performance-related share plan, as well as the share-matching plan. Charges recognized in the 2017 statement of income for share-based compensation amounted to €21.7 million and are included in salaries and wages (2016: €15.0 million).

Performance-related share plan

Under the performance-related share plan, a number of conditional shares are granted to the members of the Board of Management, members of the Executive Committee and executives each year. The number of participants of the performance-related share plan at year-end 2017 was 348 (2016: 355).

The shares of the series 2014-2016 have vested and were delivered to the participants in 2017.

The 2015 conditional grant of shares is linked for 35 percent to the relative performance of the company compared with the peer group, 35 percent to the performance of the company and the remaining 30 percent to the ranking of the company in the RobecoSAM benchmark.

The conditional shares of the 2015-2017 series vested as follows:

  • Our TSR performance over the period 2015-2017 resulted in a fifth position within the ranking of the peer group companies. This resulted in a vesting of 75 percent for this part of the long-term incentive
  • Our ROI performance at the end of 2017 resulted in a vesting of 73 percent for this part of the long-term incentive
  • The average position in the RobecoSAM benchmark resulted in a vesting of 100 percent for this part of the long-term incentive

As a result, the conditional shares of the 2015-2017 series vested for 81.80 percent (series 2014-2016: 66.49 percent), including dividend shares of 13.27 percent, the final vesting percentage amounted to 92.65 percent (series 2014-2016: 71.56 percent).

The share price of a common AkzoNobel share at year-end amounted to €73.02 (2016: €59.39). For further details on our performance-related share plan, refer to the Remuneration report.

Fair value of performance-related shares

The fair value of the performance-related shares was for 35 percent based on a market condition (TSR) and for 65 percent based on non-market based performance conditions (ROI and RobecoSAM).

The part of the award is valued applying a Monte Carlo simulation model and the other part is valued based on the share price at grant date.

The parameters applied for the fair value calculations are: share price at grant date (opening of first trading date from grant date), expected volatility (based on the share price development of the past three years of AkzoNobel), and risk-free interest rate (based on a Dutch zero-coupon government bond).

Share-matching plan

The members of the Board of Management and the members of the Executive Committee are eligible to participate in the share-matching plan. Under certain conditions, members who invest part of their short-term incentive in AkzoNobel shares may have such shares matched by the company. The investment in Akzo Nobel N.V. shares in 2017 resulted in a total of 13,380 granted potential matching shares. During 2017, 6,205 potential matching shares were matched, and 4,130 were forfeited, leading to a total of 12,825 potential matching shares at December 31, 2017.

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Fair value of matching shares

The fair value of the matching shares (€72.56) was based on the share price on the investment date, discounted for expected dividends over the holding period (2016: €59.43).

The parameters applied for the fair value calculations are: share price at purchase date of voluntary investment (April 19, 2017): €78.53; expected dividend yield: 2.60 percent.

For an overview of the matching shares outstanding for the members of the Board of Management as of December 31, 2017, we refer to Note 23.

TSR (total shareholder return)

Compares the performance of different companies’ stocks and shares over time. Combines share price appreciation and dividends paid to show the total return to shareholders. The relative TSR position reflects the market perception of overall performance relative to a reference group.

ROI (return on investment)

This is a key profitability measure and is calculated as EBIT as a percentage of average invested capital.

TSR (total shareholder return)

Compares the performance of different companies’ stocks and shares over time. Combines share price appreciation and dividends paid to show the total return to shareholders. The relative TSR position reflects the market perception of overall performance relative to a reference group.

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