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DANONE
REGISTRATION DOCUMENT 2015
Corporate Governance
6.3 Compensation and benefits of corporate officers and governance bodies
256
Stability of performance conditions and consistency of the
composition of the panel of Danone's historical peers
The Board believes that consistency in the performance conditions
is one of the factors for long-term value creation. In that regard, a
performance criterion related to Danone's sales has been used for
all Danone Group performance share grants since their introduction.
In addition, the criterion related to Danone's operating margin
used since 2013 is one of the factors for long-term value creation.
Therefore, for the Group performance shares that will be granted in
2016, the performance conditions will include performance criteria
related to Danone's sales and Trading operating margin.
Moreover, with respect to the external performance criterion, the
composition of the panel of peers used for the performance condi-
tions of Group performance shares and for the severance pay of the
corporate officers has remained unchanged since 2007. However,
this panel had to be adjusted:
•
a first time in 2013, following the spin-off of one of its members,
Kraft Foods Group, Inc., which was replaced by the two companies
resulting from the spin-off that occurred in 2012, Kraft Foods
Group Inc. and Mondelez International Inc.; and
•
a second time in 2015, following the merger between Kraft Foods
Group Inc. and Heinz, which resulted in the replacement of Kraft
Foods Group Inc. by The Kraft Heinz Company.
Introduction of a single reference period of three years applicable to
all performance conditions
In 2013, the criterion related to the growth of Danone's sales was set
with a three-year reference period and the performance criterion
related to the operating margin with a two-year reference period.
At the time of the 2014 Group performance share grant, the Board
of Directors decided to align the reference period related to both
performance conditions to a single three-year period.
A single three-year reference period will again be proposed at the
time of the 2016 Group performance shares grant.
Group performance share continuous employment condition
Each grant is subject to a condition of continuous employment, which
applies to all Group performance share beneficiaries.
Therefore, a Group performance share beneficiary who leaves
Danone prior to the end of the vesting period cannot retain his/her
Group performance shares, which will then be canceled. By way
of exception, in statutory cases of early departure (including death
and disability categories two and three), and barring exceptions
approved by the Board of Directors, the Group performance share
plan regulations stipulate that the continuous employment and
performance conditions may be partially waived. In the event of the
employee's voluntary retirement (or statutory early retirement),
the continuous employment condition (but not the performance
conditions) may also be partially waived. However, in the specific
case where an employee retires (or takes statutory early retirement)
in the 12 months following a grant, the Group performance shares
thus granted are canceled.
In addition, the regulations for Group performance shares leave
open the possibility, for their beneficiaries, of waiving the continuous
employment and performance conditions in the event of a change
of control of the Company (a similar mechanism is applied to all
stock-option plans approved since 2003). Therefore, if a person or
group of people acting collectively (as defined in Article L. 233-10
of the French commercial code) acquires control of Danone (as
defined in Article L. 233-3 of the French commercial code), there
would be no more conditions (not even performance conditions) in
order to receive the Group performance shares at the end of the
vesting period.
Finally, if the continuous employment condition is not met for another
reason, the Board of Directors can decide to uphold a beneficiary's
rights to the Group performance shares, subject to fulfillment of
the performance conditions.
Definitive grant of Group performance shares
The grants of Group performance shares become final and Danone
shares are delivered to their beneficiaries after a vesting period
set by the Board of Directors. In accordance with the authorization
given by the Shareholders' Meeting, this vesting period may not be
less than three years.
In 2010, 2011 and 2012, the Board set up “3+2” plans (three-year
vesting period and two-year holding period) and “4+0” plans (four-
year vesting period and no holding period) depending on the social
security contributions regime of beneficiaries (i.e. “3 +2” for the
French regime and “4+0” for those of other countries). Since 2013,
the Board of Directors has only set up “4+0” plans.
Notwithstanding the provisions of Law No. 2015-990 of August 6,
2015 known as the Macron Law, which shortened the vesting period
for shares subject to performance conditions, Danone decided to
maintain a four-year vesting period.