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DANONE
REGISTRATION DOCUMENT 2015
Corporate Governance
6.3 Compensation and benefits of corporate officers and governance bodies
253
Principles of the executive compensation policy
Danone's executive compensation policy is based on the level of
responsibilities of the executive concerned and market practices.
This policy is built on collective principles applied by Danone to ap-
proximately 1,300 senior executives worldwide and to the corporate
officers. These principles entail breaking down compensation into
a fixed portion and a variable portion composed of three distinct
elements as described hereafter:
•
annual variable compensation;
•
multi-annual variable compensation;
•
long-term variable compensation.
Danone's compensation policy is based on simple, stable and
transparent principles. As such, multi-annual compensation in
the form of Group performance units was established in 2005, and
long-term variable compensation in the form of Group performance
shares in 2010. All performance conditions for these components of
multi-annual/long-termcompensation, as well as the review of their
achievement, have been set out clearly and precisely in Danone's
Registration Document for several years.
The compensation of the Company's corporate officers is determined
by the Board of Directors on the basis of recommendations made by
theNomination and CompensationCommittee as described hereafter.
Role of the Nomination and Compensation Committee
Danone's compensation policy is regularly reviewed by theNomination
and Compensation Committee. This Committee is composed entirely
of independent Directors, and is chaired by the Lead Independent
Director. The Nomination and Compensation Committee reviews
Danone's compensation policy annually. To do so, it relies on a
study conducted by a specialized firm whose objectivity has been
ensured and which takes into account practices in twomainmarkets
(France and International).
In its recommendations on the compensation of the corporate
officers and Executive Committee members, the Nomination and
Compensation Committee takes into account the balance between
the various components. For its recommendation on the over-
all compensation of the corporate officers, the Nomination and
Compensation Committee considers the advantage represented by
the potential benefit of a supplementary retirement plan.
The Committee reviews best market practices on the basis of (i)
a benchmark prepared by the aforementioned specialized firm,
including large international companies listed in France (CAC 40),
and (ii) a panel of eight international benchmarks in the food and
beverage sector. This panel is also used to set the performance
conditions for Group performance shares and the severance pay
of the corporate officers, and includes Unilever N.V., Nestlé S.A.,
PepsiCo Inc., The Coca-Cola Company, General Mills Inc., Kellogg
Company, The Kraft Heinz Company and Mondelez International
Inc. The Nomination and Compensation Committee ensures, in
particular, that:
•
multi-annual compensation subject to performance conditions
has sufficient weighting compared to the annual compensation to
motivate corporate officers to work in a long-term perspective;
•
performance conditions are both complementary and stable. In
addition, they enable to align shareholders' interests and those
of management, since they are largely based on Danone's objec-
tives communicated to the financial markets. In addition, these
performance conditions reflect best compensation practices,
namely “no payment below the median” as regards external
performance conditions; and
•
compensation-related performance criteria are sufficiently
stringent so as to reward long-term performance in line with
market expectations, and particularly to take into account the
“no payment under guidance” principle.
Principles applicable to annual compensation of executives
Fixed compensation
The fixed compensation of the corporate officers is reviewed after
relatively long periods and reflects the recipient's experience and
level of responsibility.
Annual variable compensation
Annual variable compensation is granted subject to performance
conditions. It is based on quantitative economic criteria and social
and managerial criteria, which are determined specifically and
objectively and described hereafter for (i) corporate officers, (ii)
Executive Committee members, and (iii) other senior executives.
Annual variable compensation conditions for the corporate
officers
The annual variable compensation of Emmanuel FABER, Chief
Executive Officer, was calculated on the basis of predetermined
performance conditions based on the following elements:
(i) a quantitative economic portion, calculated based on Danone's
objectives communicated to the financial markets, representing 60%
of the target, which may vary by 0% to 120%, made up, for 2015, of
the following elements:
•
for 25% of the target: organic growth in net sales, which may
vary by 0% to 50%;
•
for 25%of the target: margin growth, whichmay vary by 0% to 50%;
•
for 10% of the target: the generation of free cash flow in millions
of euros, which may vary by 0% to 20%;
(ii) a social and societal portion, calculated with reference to Danone's
objectives (work safety, employee training, skills development,
environmental parameters and societal initiatives), representing
20% of the target, which may vary by 0% to 40%, made up, for 2015,
of the following elements:
•
for 10% of the target: implementation of the 100,000 people
development plan;
•
for 10% of the target: achievement of the main objectives related
to the definition and start of implementation of the Danone 2020
transformational plan;