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Remuneration policy for the Management Board

General

The remuneration policy is based on the principle that the remuneration must be in line with market practices and must enable Alliander to recruit and retain qualified and expert Management Board members. In addition, the remuneration policy must support the achievement of the company's short- and long-term objectives. The applicable remuneration policy was adopted by the General Meeting of Shareholders in May 2004 and was last amended in April 2006.

The Dutch Public and Semi-Public Sector Executives' Pay (Standards) Act (Wet normering bezoldiging topfunctionarissen publieke en semipublieke sectorWNT1)) took effect on 1 January 2013. The Act is designed to moderate the remuneration of senior executives within the public and semi-public sector and caps their remuneration at 130% of a minister's remuneration. On 1 January 2015, the Reduction of Maximum Remuneration Act WNT (Wet verlaging bezoldigingsmaximum WNTWNT2) took effect, reducing the maximum remuneration to 100% of a minister's remuneration.

The WNT is applicable to the network operators Liander and Endinet. Alliander does not fall within the scope of the WNT. In mid-May 2014, Ms I.D. Thijssen was appointed as a member of the Management Board. In this capacity she carries general responsibility for the management of Alliander. In addition, she is responsible for the business and operational management of the network operator Liander. In this latter capacity, Ms Thijssen is a senior executive of Liander within the meaning of the WNT. Her remuneration package is in conformity with the WNT.

The Supervisory Board is responsible for the implementation of the remuneration policy for the Management Board and is acutely aware of the evolving perceptions within society regarding remuneration in the public and semi-public sector. Accordingly, the remuneration cap of 130% of a minister's remuneration was introduced with effect from 1 January 2013 for the entire company, despite the fact that Alliander does not fall within the WNT. Messrs P.C. Molengraaf and M.R. van Lieshout, both members of the Management Board, have also committed on a voluntary basis to a salary reduction to the capped remuneration level, on the understanding that existing contracts will be respected in parallel with the statutory transitional periods.

Partly in response to Parliamentary questions that were prompted by a press publication, the WNT Supervision Unit of the Ministry of the Interior initiated a further investigation. The Dutch House of Representatives was informed of the final conclusions. Minister Plasterk confirmed that the network company Alliander and its Management Board do not fall within the WNT. The network operator Liander is subject to the WNT.

The Supervisory Board understands the prevailing political and social views on remuneration. The Board finds the remuneration cap of 130% of a minister's remuneration an acceptable limit and expects this level of remuneration to be sufficient to maintain the quality of the company's management. This is of vital importance in the light of the radical changes that the company faces as a consequence of the energy transition. The Supervisory Board is promoting the introduction of a sector-wide remuneration code with different categories in order to create a level playing field and ensure that all companies can compete with their peers on equal terms in the relevant labour market in terms of technological developments, complexity and required knowledge.

Procedure

The Supervisory Board draws up the remuneration policy for the members of the Management Board, based on advice from the Selection, Appointment and Remuneration Committee. The General Meeting of Shareholders of Alliander adopts the remuneration policy. Within the set remuneration policy, the Supervisory Board, again acting on the advice of the Selection, Appointment and Remuneration Committee, sets the actual remuneration package for each individual Management Board member. The variable part of the income is determined each year.

At the beginning of the year, the Supervisory Board sets the objectives and the accompanying weightings for the variable remuneration. The specific objectives are determined annually in a scorecard and must be challenging, measurable and controllable. The set criteria for the short- and long-term variable remuneration are derived from the most important objectives used to manage the company. The short-term objectives are linked to the performance indicators as defined in the year plan and included in the corporate dashboard. The long-term objectives are related to Alliander's long-term interests as defined in the long-term business plan. In the case of some objectives (customer satisfaction and electricity outage duration), the scores are compared with those of other network operators in the Netherlands. Progress is monitored throughout the year. After the Supervisory Board has assessed the performance of the past year, it establishes the extent to which the members of the Management Board have achieved their objectives. Prior to determining the level of the variable remuneration, the Internal Audit Department verifies the realisation of the scorecard.

If less than the agreed minimum level is achieved for an objective on the scorecard, no variable remuneration whatsoever is paid out for that objective. If the agreed maximum level for an objective on the scorecard is exceeded, the score will be capped at the maximum agreed for that objective. Both the short- and the long-term variable remuneration of the Management Board members will never exceed 100% of the maximum percentage of 30% of the annual gross base salary, including holiday allowance. The entire variable remuneration is subject to a ’claw back clause’. This means that variable remuneration awarded on the basis of incorrect financial or other information may be clawed back. The Supervisory Board also has the discretionary power to adjust a variable remuneration component awarded in any prior reporting year if, in its opinion, this component would yield unfair or unreasonable results due to exceptional circumstances during the year under review.

The variable remuneration is paid out after the General Meeting of Shareholders has formally adopted the financial statements for the year for which the objectives were set.

Remuneration components

The total remuneration package for the Management Board members consists of the following components:

  • a. annual gross base salary;
  • b. short-term variable remuneration;
  • c. long-term variable remuneration;
  • d. pension benefits;
  • e. social security charges and other benefits.

a. Annual gross base salary

Management Board members receive an annual gross base salary, including holiday allowance. The annual gross base salary is adjusted each year in line with the periodic salary increases for employees, as laid down in the collective labour agreement for network companies.2

b. Short-term variable remuneration

The short-term variable remuneration (one year) is aimed at achieving objectives within the current year. The short-term variable remuneration is capped at 30% of the annual gross base salary. Of the short-term variable remuneration, 60% relates to social aspects.

It has been decided that the short-term variable remuneration will be paid out for the last time for the 2015 financial year. The partial incorporation of the short-term variable remuneration into the salary will start on 1 January 2017. 70% of the maximum short-term variable remuneration will be incorporated into the annual gross base salary. This forms part of the total remuneration and will be reduced on a voluntary basis.

c. Long-term variable remuneration

The long-term variable remuneration is aimed at achieving objectives over a three-year period. The scheme is also intended as a means of retaining the individuals concerned. The long-term variable remuneration is capped at 30% of the annual gross base salary. Of the long-term variable remuneration, 75% relates to social aspects.

The award of long-term variable remuneration was terminated on 1 January 2015 without a transitional arrangement, on the understanding that the 2013-2015 and 2014-2016 periods are the last periods for which the long-term variable remuneration will be awarded and paid out.

d. Pension benefits

The members of the Management Board participate in the pension scheme of Stichting Pensioenfonds ABP as referred to in the collective labour agreement for network companies and applicable to all employees of Alliander. Since 1 January 2004, this has consisted entirely of an average pay scheme. In accordance with current practice in the energy sector, pension entitlement is accrued on the annual gross base salary, and members of the Management Board pay an individual contribution to participate in the scheme.

Effective from 1 January 2015, the maximum pensionable salary is €100,000. This entails that no further pension is accrued over the part of the salary that exceeds €100,000. The Supervisory Board has decided to extend the application of Alliander's pension contribution release arrangement, as applicable to the employees of Alliander, to the members of the Management Board by incorporating this released pension contribution into the salary.

e. Social security charges and other benefits

In addition to the social security charges and contributions that are normally paid by the company, Management Board members are entitled to an employer's contribution to the premium for the group health insurance plan, contributions to the personal employee benefits budget, an expense allowance3 and the use of a company car. In addition, the company has arranged accident and liability insurance for the benefit of the Management Board members. The company does not provide loans, advances or guarantees to members of the Management Board.

A restrictive policy is in place for positions outside the company. The Supervisory Board chairman must approve any supervisory board memberships at listed or other companies, while other significant positions outside the company must be reported in writing to the chairman of the Supervisory Board. Any remuneration received for other positions held pursuant to membership of Alliander's Management Board accrues wholly to the company. Any remuneration for other positions that are not held pursuant to membership of Alliander's Management Board accrues to the Management Board member concerned, who is also liable for any resulting tax consequences.

Other principles

Term of appointment

All members of the Management Board are employed by Alliander N.V. on the basis of an indefinite contract of employment.

Notice period and severance policy

Notice periods of three months for the Management Board members and six months for the company have been agreed with the Management Board members. If the company terminates a Management Board member's employment contract, it is company policy to award a severance payment equal to at least one year's salary, based on the relevant provisions in the individual employment contracts4. Under certain conditions, this one-off payment is also made if a member of the Management Board resigns and cannot be reasonably required to continue the employment contract. Relevant examples include a change of control of the company or an irreconcilable difference of opinion on company policy.

Implementation of remuneration policy for the Management Board in 2015

a. Annual gross base salary

The Alliander employees covered by the collective labour agreement for network companies received a structural salary increase of 0.8% with effect from 1 November 2015 and a one-off increase of 0.7% (the latter increase is restricted to the income up to €100,000). The same arrangements applied to the members of the Management Board. In the 2015 calendar year, the base salary of Mr Molengraaf amounted to €250,922 including 8% holiday allowance. The base salary of Mr Van Lieshout over the same period amounted to €235,745 including 8% holiday allowance, and the base salary of Ms Thijssen amounted to €208,109 including 8% holiday allowance. The main reason for the increases in the base annual salaries for 2015 compared to the previous year is that, effective from 2015, it is no longer possible to accrue pension over the portion of the salary above €100,000. This part of the pension accrual has therefore been incorporated into the base salary effective from 2015.

b. Short-term variable remuneration

Compared to the short-term variable remuneration for 2014, the Key Performance Indicator (KPI) ‘Realised energy savings’ has been replaced with the KPI ‘Realisation of planned mart meter offering’.

Objectives for and realisation of short-term variable remuneration 2015

  

Weighting

Realised in 2015 *)

1.

Financial objectives

  
 

Net income after tax (NIAT)

20%

99%

 

Net operating expenditure (OPEX)

10%

110%

 

Progress on the 25 most important Asset Management Plan projects

10%

110%

 

Subtotal

40%

 
    

2.

Customer-related objectives

  
 

Customer satisfaction in consumer market

10%

107%

 

Customer satisfaction in business market

10%

91%

 

Realisation of planned smart meter offering

10%

110%

 

Subtotal

30%

 
    

3.

CSR objectives

  
 

Employees at a distance from the labour market

10%

103%

 

Employee survey

10%

93%

 

Women in leadership positions

10%

110%

 

Subtotal

30%

 
 

Total

100%

 
 

Realisation rate

 

100%

Based on the realisation of the objectives, the short-term variable remuneration for 2015 for Messrs Molengraaf and Van Lieshout was set at 100% of the maximum percentage of 30% of the annual gross base salary.

c. Long-term variable remuneration

The objectives for the 2013–2015 period remained unchanged compared to the objectives for 2012-2014.

Objectives for and realisation of long-term variable remuneration 2013-2015

 

Weighting

Realised in 2015 *)

Return on invested capital (ROIC)

25%

100%

Frequency of accidents (LTIF)

25%

105%

Electricity outage duration compared to national average

25%

92%

Socially responsible procurement (SRP)

25%

93%

Total

100%

 

Realisation rate

 

98%

Based on the realisation of the objectives, the long-term variable remuneration for 2013-2015 for Messrs Molengraaf and Van Lieshout was set at 98% of 30% of the annual gross base salary5.

The Supervisory Board made no use of its discretionary power to adjust the short- and long-term term variable remuneration for 2015. The Supervisory Board also had no cause in 2015 to consider using its power to claw back variable remuneration paid in respect of previous years.

d. Pension benefits

Pension costs relate to payments of standard pension contributions, which are based on the annual gross pensionable salary. As contractually agreed, variable remuneration is not pensionable. The total pension contributions paid in the year under review for Mr Molengraaf, Mr Van Lieshout and Ms Thijssen were, respectively, €18,882, €18,465 and €17,617.

e. Social security charges and other benefits

In 2015, the total amount of social security charges and contributions, the employer's contribution towards the premium for the health insurance plan, contributions to the personal employee benefits budget and the expense allowance6 amounted to €25,180 for Mr Molengraaf, €24,896 for Mr Van Lieshout and €10,990 for Ms Thijssen.

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