Remuneration report

Dear stakeholders

On behalf of the Remuneration Committee, I’m pleased to introduce our 2022 Remuneration report. We received feedback from shareholders and proxy voting agencies on the voted down Remuneration report of 2021 at the AGM in 2022, which listed specific concerns and suggestions for what AkzoNobel can improve.

The feedback we received included the following:

  • The performance on Short-Term Incentive (STI) metrics was not sufficiently detailed
  • More details were requested regarding the non-financial metrics in the incentive plans
  • For the 2019-2021 Long-Term Incentive (LTI) plan, the Supervisory Board used discretionary power to evaluate performance against the target of 20%, as communicated in early 2020 in context of the Grow & Deliver strategy, whereas the ROI target communicated at the start of the performance period was 25%

We’ve taken this feedback into account by detailing the information on Short-Term Incentives, by providing more information on the non-financial objectives and by applying no discretion in 2022. This was despite unforeseeable events, such as the war in Ukraine, which rapidly impacted the likeliness of realizing these targets.

2022 presented us with a volatile business climate, with the continued impact of the COVID-19 pandemic, the geo-political consequences of the war in Ukraine, shortages and significant price increases in raw materials and freight.

After a strong first quarter, this climate had a severe impact on the results of the company, with profit warnings in the second and third financial quarters of the year. Therefore, we could not deliver on objectives set in more auspicious times.

All components of the financial metrics of the 2022 STI for the Board of Management ended well below the 0% threshold and delivered no pay-out on the financial metrics of the plan for the CEO and CFO.

In 2022, STI compensation was limited to only the non-financial objectives, with details provided in the section on STI, keeping in mind that some of these objectives will be directional (“improve significantly”), as they address components (for example, pricing and cost actions) that can only be evaluated in the context of evolving market conditions.

The achievement on the Long-Term Incentive metrics was below threshold for both applicable metrics – and ROI – and, as a result, no shares that had been conditionally granted under the 2020-2022 Long-Term Incentive plan will vest for the Board of Management.

For 2023, we have set challenging, but realistic, targets in order to strike a better balance between our commitment to stakeholders and our ability to reward and retain.

Dick Sluimers
Chair of the Remuneration Committee

ROI (return on investment)

ROI is adjusted operating income of the last 12 months 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.