Remuneration policy for the Executive Board

The remuneration policy was adopted by the General Meeting of Shareholders on 4 October 2017, as proposed by the Supervisory Board, with due account taken of the recommendation of the Remuneration, Selection and Appointment Committee.

Context of the remuneration policy

Gasunie has grown into an international gas infrastructure company. Gasunie operates in a converging European market and is not only active in regulated markets, but also develops non-regulated activities, thus creating value for its stakeholders. It creates value for the Dutch economy primarily by developing a strong ‘hub’ function in a liquid market; by enabling the throughput of significant gas flows; by enabling trade and competition between gas suppliers in the domestic gas market; by creating flexibility (through storage facilities); and by developing the role of gas and gas infrastructure in an efficient, reliable and sustainable energy supply. The transition to a more sustainable, CO2-neutral energy supply has taken off over the past several years. The role of fossil gas is gradually declining and new, often more integrated forms of energy are taking its place. This includes, for instance, biogas, heat grids, power-to-gas, hybrid heat pumps, LNG for transport purposes, etc. Carbon capture and storage has also returned to the political agenda. Gasunie is well-positioned to play a prominent role in these developments. The combination of traditional international gas transport and storage (both underground and in the form of LNG), the ongoing integration of the European gas market and the growing importance of sustainable activities and projects makes Gasunie very valuable for Dutch society and the Dutch economy. The members of the company’s Executive Board therefore bear a great responsibility.

Aims and principles underlying the remuneration policy

The aim of the remuneration policy is to attract, motivate and retain Executive Board members of the right quality and experience, both from within the company and in the form of proven talent from the market. The remuneration reflects the responsibility borne by the members of the Executive Board and is considered in the light of the applicable remuneration principles in the market (as explained below). Gasunie needs this management talent in order to achieve its essential strategic objectives in the context described above. This policy is implemented based on the following considerations:

  • In principle, having the State as a 100% shareholder, Gasunie applies the same criteria that are applied to the remuneration policy in state-owned companies. If the Supervisory Board feels that this may lead to unacceptable risks for the company, it will consult with the shareholder.
     
  • Gasunie bases remuneration packages for members of the Executive Board on a market comparison, based on a relevant reference group in the labour market. This group consists of public, semi-public, private and international companies that are sufficiently comparable to Gasunie, both in terms of size (number of employees, assets and revenues) and in terms of activities. The comparison mainly includes companies from the energy, distribution, installation, construction and engineering consultancy sectors.
     
  • The structure of the remuneration of members of the Executive Board is determined on the basis of market comparisons that also take into account the pay ratios within the company, thus creating a logically continuing salary line from the posts in the Executive Board to the posts under the Executive Board.
     
  • Application of the variable remuneration policy depends on the achievement of short and long-term targets with respect to operational and strategic performance.

Remuneration structure

The remuneration consists of:

  • a fixed component (basic annual salary);
  • a variable component, dependent on the attainment of both short and long-term targets, as specified on the following pages;
  • an employer’s contribution to the pension premium;
  • other secondary employment conditions.

Basic annual salary
When appointing members of the Executive Board, at the request of the shareholder, the Supervisory Board will limit the sum of the fixed and variable annual salary on appointment to a maximum of € 367,000 (2017 level) for the chair of the Executive Board. The basic annual salary is in line with the Ministry’s policy excluding the pension scheme and other benefits. The Supervisory Board decides on the level of annual salary increments. If the maximum salary has been reached, further growth is limited to the structural increments laid down in the collective labour agreement.

Variable remuneration
The variable remuneration is based on the remuneration policy that has been approved by the shareholder. The maximum variable remuneration is 20% of the basic annual salary. The targets that must be attained in order to qualify for variable remuneration are agreed annually. These must be ambitious and reflect the company's strategy focused on long-term value creation. The Supervisory Board is authorised to adjust the variable component within the limits mentioned above if it is likely to lead to unfair outcomes due to exceptional circumstances during the performance period. The Supervisory Board is also authorised to reclaim from members of the Executive Board a variable bonus that was awarded on the basis of inaccurate financial or other data or ‘incorrect conduct’.

The Supervisory Board has chosen performance criteria that relate to the implementation of Gasunieʼs strategic goals, both short and long-term. In defining the company’s strategy, the social function of Gasunieʼs activities and their effects on society are explicitly taken into account. Performance criteria have therefore also been defined, relating to safety and transport security.
As of 2017, the total variable remuneration of up to 20% of the basic annual salary has been divided into two elements. Both elements have a maximum total value of 10% of the basic annual salary. The first element consists of measures and actions required to achieve Gasunie’s strategy and business objectives in a safe, affordable and reliable way. These have been translated into specific and measurable targets with regard to safe, reliable, socially responsible, effective and profitable business. The second element consists of targets and themes that will genuinely take the company closer to achieving its long-term strategic objectives in terms of growth (internationally, energy transition and new services), operational excellence, organisational development and the positioning of gas and Gasunie. The realisation of the targets will be determined discretionarily.

Element 1 (10%)
The following targets were in effect for 2017:

Safety

  • 100% attained if the Total Reportable Frequency Index is no higher than 3.3
  • 50% attained if the TRFI* is no higher than 3.6
  • 0% attained if the TRFI is 3.7 or higher
2%

Safety

  • 100% attained at a maximum of 1 incident of pipeline damage
  • 50% attained at 2 incidents of pipeline damage
  • 0% attained at 3 or more incidents of pipeline damage
2%

Transport security

  • 100% attained in the event of no transport disruptions
  • 50% attained in the event of a maximum of 2 transport disruptions
  • 0% attained in the event of 3 or more transport disruptions
2%

Financial results

  • 100% attained in the event of an NOC of € 5 million or more under budget
  • 50% attained in the event of an NOC that is no more than € 5 million under budget
  • 0% attained in the event of an NOC at or over budget
2%

Financial results

  • 100% attained if the ROIC is 0.1% or more over budget
  • 50% attained if the ROIC is at or over budget
  • 0% attained if the ROIC is under budget
2%

*) For an explanation, see Definitions.

Element 2 (10%)
For this element, 4 themes have been identified that tie in with the management agenda as formulated in the business plan.

Growth 2.5%
Operational excellence 2.5%
Organisational development 2.5%
Positioning of gas and Gasunie 2.5%

Procedure
The targets for eligibility for variable remuneration are agreed at the start of the relevant year between the Supervisory Board and the members of the Executive Board, once the chair of the Executive Board has discussed a proposal to this end with the Remuneration, Selection and Appointment Committee.

In the following year, the extent to which those targets have been met is evaluated. The degree of attainment of Element 1 of the targets will be determined by the Supervisory Board, following a recommendation to that effect by the Remuneration, Selection and Appointment Committee on the basis of an assurance report from the external auditor. The degree to which Element 2 of the targets has been attained will be determined on a discretionary basis by the Supervisory Board, following a recommendation to that effect by the Remuneration, Selection and Appointment Committee.

Variable remuneration is paid out following the General Meeting of Shareholders’ approval of the annual accounts of the year for which the targets were set.

Pension
The members of the Executive Board fall under the same pension scheme as other staff. This is an average-pay scheme and members of the Executive Board owe a personal contribution.

Other secondary employment conditions
Gasunie has put together a package of secondary employment conditions for its Executive Board members, which also applies to other staff.

Other conditions

Term of office
Members of the Executive Board are appointed for a period of four years, with the possibility of extension by four years each time. The basic principle is that an individual may be appointed for a maximum of three four-year terms. The members of the Executive Board have an employment contract with Gasunie for the same duration as the term in office. Their employment contract therefore ends by operation of law if they are not reappointed.

Notice period
For members of the Executive Board, a notice period of three months applies for termination of the employment contract. For the company, a notice period of six months applies.

Severance pay
Compensation for dismissal for Executive Board members will be limited to a maximum of one year’s fixed salary, in accordance with the Corporate Governance Code, except where such a limitation is clearly unreasonable. This compensation also includes any transition compensation. In the event of an executive director not being reappointed, no severance pay is granted in principle. A proposal from the Supervisory Board to deviate from this principle requires the approval of the shareholder.

Change of control
Executive Board members are covered by a ‘change of control’ clause, which states that if they are forced to leave the company due to a merger with or the acquisition of the company by an external party, or in the event of a fundamental change in the nature, management or structure of the company that is beyond the control of the Executive Board, they will be awarded compensation up to a maximum of one year’s basic salary, regardless of which party terminates the employment contract.

Balanced composition
Diversity is an explicit area of attention for the Supervisory Board and the shareholder. With four men, the composition of the Executive Board is not in compliance with the balanced composition as mentioned in Article 2:166 of the Dutch Civil Code, which states that a balanced composition means that an Executive Board should contain at least 30% women. When new members need to be appointed, we aim to comply with this provision.

2017 remuneration package

Based on the policy outlined above, the Supervisory Board granted the following basic annual salaries and variable bonuses for members of the Executive Board active on 31 December 2017:

In euros

2017 basic annual salary

Variable remuneration (for performance in 2017)

Mr J.J. Fennema

303,018

42,423

Mr I.M. Oudejans

279,621

39,147

Mr U. Vermeulen

242,405

33,937

Mr B.J. Hoevers

200,000

9,333 1)

1) Concerns the variable remuneration relating to the period of office on the Executive Board

Pay ratio

The pay ratio, expressed as the ratio between the total remuneration of the highest paid employee and the median of the total remuneration of all other employees in the Netherlands, is 5.17. The total remuneration is based on the sum of the annual taxable pay and the pension costs (employer’s contribution). In calculating the median, only those employees are taken into account who were employed for the entire year.

Targets and achievements for variable remuneration (for performance in 2017)

Targets and achievements for variable remuneration (for performance in 2017)
    J.J. Fennema I.M. Oudejans U. Vermeulen B.J. Hoevers
  Maximum Realised Realised Realised Realised
           
1. Collective Gasunie targets          
1.a Safety (TRFI: 3.3 of less) 2.00% 2.00% 2.00% 2.00% 2.00%
1.b Safety (Pipeline damage incidents: 0 of 1) 2.00% 0.00% 0.00% 0.00% 0.00%
1.c Security of supply (Transport interruptions: 0) 2.00% 1.00% 1.00% 1.00% 1.00%
1.d Financial performance (NOC: within € 2 million from budget) 2.00% 2.00% 2.00% 2.00% 2.00%
1.e Financiial performance (ROIC: 0.1% or more above budget) 2.00% 0.00% 0.00% 0.00% 0.00%
Subtotal 10.00% 5.00% 5.00% 5.00% 5.00%
           
2. Targets aimed at long term strategic goals          
2.a Growth 2.50% 2.50% 2.50% 2.50% 2.50%
2.b Operational Excellence 2.50% 2.00% 2.00% 2.00% 2.00%
2.c Organisational development 2.50% 2.00% 2.00% 2.00% 2.00%
2.d Positioning of gas and Gasunie 2.50% 2.50% 2.50% 2.50% 2.50%
Subtotal 10.00% 9.00% 9.00% 9.00% 9.00%
           
Total 20.00% 14.00% 14.00% 14.00% 14.00%
Realisation percentage   70.00% 70.00% 70.00% 70.00%
           
Variable remuneration paid*   42,423 39,147 33,937 9,333

*) Concerns the variable remuneration relating to the period of office on the Executive Board

For the allocation of other remuneration package components in 2017, see note 22 to the consolidated financial statements.