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CEO pay in the Eurotop 100Insights on similarities and differences in CEO pay across Europe
July 2014
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Introduction, highlights and key pay trends 3-4
Regulatory and tax changes 5-9
Analysis of
Actual Total Direct Compensation (TDC) 1015
Pay for performance and analysis of
incentive design and shareholding guidelines 1621
Additional analysis and contact 2224
Appendices 2533
Our services 34
Contents
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CEO pay in the Eurotop 100 3
There is much talk of pay convergence across
Europe but the differences in pay levels andpractices for the chief executives of the
Eurotop 100 are as interesting as the similarities.
The Shareholders Rights Directive will bring
more commonality of reporting and voting on
board pay (whatever the board structure
unitary or dual) for all companies incorporated in
European Union member states.
Many institutional shareholders have regional if
not global reach and are calling for the similar
policies and practices in the jurisdictions in
which their investee companies operate in
search of the holy grail of alignment of interest.
Nevertheless, while the components of pay
and some of their features may be similar, the
mix of pay continues to differ across Europe
and regulatory intervention in some markets is
driving more difference.
Our 2014 report the second we have
published - provides a snapshot of
compensation levels, incentive design practices
and emerging remuneration trends for CEOs in
the Eurotop 100.
We summarise key pay trends and
recent corporate governance developments
(with specic focus on the ShareholdersRights Directive) as well as an analysis of
CEO remuneration levels and incentive design
practices observed in the last nancial year in a
selection of markets.
Our analysis covers 95 companies within
the Eurotop 100 which had published their
remuneration reports as at 10 June 2014.
Since our last report published in 2013, three
companies have joined the index (Associated
British Foods, Continental and Credit Agricole)
and three companies have left the index
(Centrica, Rolls-Royce and Tenaris).The median market capitalisation of the
Eurotop100 companies increased by 19.5% from
36,144 million to 43,210 million.
This list and composition of companies
is included in the appendix together with
details of the LTI valuation methodology
supporting our analysis.
If you have any questions or would like to
know more, please contact your usual
Towers Watson consultant.
Pay at a glanceCEO pay remains stable
Base salary
The median base salary level for the
last nancial year was approximately
1.277 million for the CEO. We observe
limited change compared to last year of
1.279 million.
The majority (60%) of companies did not
increase base salary levels for the CEO in
the last nancial year.
Annual bonus
The median actual bonus received for
performance in the last nancial year was
115% of base salary for the CEO, similar to
the level reported in the previous year (111%).
Median target and maximum bonus
opportunity levels for the CEO, where
disclosed, were 100% and 180%
respectively for the last nancial year and
remain unchanged from the previous year.
Deferral of bonus continued to be prevalent.
Getting on for half (43%) of companies
required the executive to compulsorily defer
bonus, typically, 50% of bonus paid. Prot/ income, non-nancial and individual
measures continued to be the most
prevalent performance measures on short-
term incentive plans.
Long-term incentives
Most companies made awards of
performance shares with relative TSR being
the most common performance metric
attached to long-term incentive plans.
For awards granted in the last nancial year,
the median long-term incentive expectedvalue for the CEO was 135% of base salary.
Actual Total Direct Compensation (TDC)
The median actual TDC level for the
last nancial year was approximately
5.4 million for the CEO, a slight increase
from 5.1 million reported last year.
Shareholding guidelines
Almost half of companies have shareholding
policies. At median, the guideline level was
275% of base salary for the CEO (unchanged).
Introduction
CEO pay in the Eurotop 100
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CEO pay in the Eurotop 100
Key pay trends for selected countries
Pay levels remain stable, but incentives have been adjusted to create stronger alignment
with business strategy and shareholders.
France - CAC40 Germany - DAX UK - FTSE 100 Netherlands - AEX Spain - IBEX 35
Base pay
increase at median
increase at median
increase of 2.5%
increase at median
increase at median
Short-term
incentives
stable
have increased
maximum
opportunity levels
nancial metrics
CSR metrics
stable
of rules and
performance
conditions/metrics
introduction of caps
on overall variable
compensation, as
well as lower STI
maximum pay out
opportunities
clawback provisions
stable
prevalence of malus
and/or clawback
provisions
stable
to consider design
changes
clawback provisions
of non-nancial
measures
stable
to design
qualitative factors
performance scales
Long-term
incentives
terms of number of
shares but higher in
terms of face value
supplementary
performance
conditions
in performance
conditions
towards shares or
cash-based plans
stable
implementation of
4-year performance
periods
metrics
introduction of caps
on overall variable
compensation
stable
matching plans
prevalence of
extended holding
periods
stable
performance
conditions
weighting on
TSR or change
in measurement
methodology
implementation
of qualitative
performancecriteria
stable
have implemented
changes to plan
design
conditions mixed
with operational
metrics
plans
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CEO pay in the Eurotop 100 5
Regulatory change continues across Europe
The focus is on improved disclosure and increased shareholder power.
General industry: disclosure and voting reforms proposed
Financial services: share-based and pay caps
Increased disclosure and
binding vote on policy
Disclosure, voting
and scal changes
Improved disclosure
and binding vote on
policy proposed
Pay practice restrictions; binding
votes on xed and variable pay
Cap on CEO/Chairman pay for
state-owned companies
Cap on CEO pay for
state-owned companies
Changes on disclosure, pay
limits and differentials
Financial services: 20% variable
pay cap for all FS employees
Regulatory and tax changes
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Regulatory and tax changes
France Germany UK Netherlands Spain
Disclosure
standardised tables
for: pay realised,
showing minimum,
target and
maximum pay-out
levels
framework
have to be used
for remuneration
reports
Say on pay
shareholder votes
on remuneration
awarded to the
CEO and other
corporate ofcers
(mandataires
sociaux and
administrateurs)
forward-looking
binding vote on
remuneration
policy and annual,
advisory vote on
all remuneration
realised over
the year
discussion of
remuneration
policy during AGM
binding vote on
policy changes
already in place
binding vote on
remuneration
policy at least
every three years
approval of
maximum total
remuneration as
well as of xed
and variable
remuneration
Pay caps
p.a. on base pay
and bonus of
corporate ofcers
of state-controlled
businesses
dene absolute pay
caps for short- and
long-term and total
compensation
on share price
increase as a result
of a corporate
events - applicable
to shares received
as compensation
entities that
have received
money from the
Government
Tax
remuneration
package over 1m
with the employer
paying 50%, along
with social taxes
Other
of relationship
between pay
development of
executive board vs.
staff generally
of relationship
between pay
development of
executive board vs.
staff generally
implementation of
clawback and test
of reasonableness
(tax facilitated)
pension accrual
(as per 2015)
NEDs appointment
to four years
Chairman to be
approved by two
thirds of the Board
balance
Regulatory and tax changes by country
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CEO pay in the Eurotop 100 7
Regulatory and tax changes
EU Shareholders Rights Directive
Increasing shareholder information and rights to be applied in countries registered and
listed in an EU member-state.
Aim: Increase shareholder information and rights, and encourage long-term shareholder
engagement as well as creating a better link between pay and performance.
Timing: Subject to negotiation with the European Parliament and the European Council in early
2015. The nal provisions may not be agreed until later in 2015.
Remuneration Policy Remuneration Report
A binding vote at least every three years
Companies will only be able to pay
remuneration to directors in line with
the policy
Policy to cover:
Linkage to long-term interests
of the company Maximum amounts that can be awarded
and proportion of xed and variable pay
Details on each remuneration element
including performance criteria for
variable pay
Main contract terms, including notice
periods and termination payments
The ratio between average director and
average full time employee remuneration
Decisionmaking process including
signicant policy changes
Annual advisory vote
The report shall include:
Total remuneration received by each
director; the amount by component;
proportion of xed and variable; the
linkage to long-term performance and
how performance criteria were applied The relative change in director pay, share
price and employee pay over three years
Information on any reclaim of
variable pay
The Commission has been empowered
to provide standardised templates for
the report
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Regulatory and tax changes
EU Shareholders Rights Directive
Good remuneration committee practices.
EU Shareholders Rights Directive
Companies should consider the following based on experience from the new UK regime.
REVIEW ACT ENGAGEDRAFT VOTE
Lens
1
Lens
2
Lens
5
Lens
4
Lens
3
Business
Strategy
Alignment
Historic
View
Governance
Record
Future
View
Stakeholder
View
Review current
arrangements from
new perspectives
Amend policies,
practices, plans
as relevant
Draft report text
and design lay out
Engage investors,
directors and other
stakeholders
AGM
N
S
EW
Pay and performance
Long-term pay
Disclosure
Say on pay
Differentials
Termination
Governance
1. Ensure the performance for which executives are
being rewarded is aligned with the companys
strategic objectives
2. Monitor totalremuneration received by executives year by
year to understand its sensitivity to company performance
3. Check whether the time horizons of executive
pay are aligned with the key time periods for
company performance
4. Ensure there is a clear narrative on (i) why executive pay is
structured as it is and (ii) how executives have earned the
remuneration received
5. Engage with key institutional investors so there are
no surprises
6. Avoid executive pay decisions being made in isolation
by monitoring the relationship between the pay policies
and levels for executives and other key employee groups
to avoid
7. Regularly review the total costs of a termination of
each director
8. Robust decision-making processes
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CEO pay in the Eurotop 100 9
Regulatory and tax changes
EU regulatory landscape for financial services
Focus on pay mix, variable pay ratio, deferrals and pay caps.
CRD IV
AIFMD
UCITS V
Solvency II
Applies to regulated staff at EEA organisation (globally)
and non-EEA organisations local subsidiaries Dened quantitative and qualitative criteria for
identication of staff
1:1 xed to variable ratio with possibility to increase to 1:2
At least 40% of variable remuneration must be deferred
Disclosure of the number of individuals earning more than
1 million
EU based alternative investment (AI) funds marketed or
managed within the EU(regardless of fund location)
Applicable to a dened list of staff without
qualication criteria
No cap on incentive compensation
At least 40% of variable remuneration should be deferred
for three to ve years
Incentive payments should be subject to ex-ante and
ex-post reviews
EU and non EU organisations that market or manage
UCITS (collective securities funds) in the EU(regardless
of regulated staffs location)
Applicable to a dened list of staff without
qualication criteria
No cap on incentive compensation
At least 40% of variable remuneration should be deferred
into the fund Disclosure of remuneration practices to all stakeholders
There is likely to be requirement (based on the Level 2 text
now under preparation) for insurance companiesto adopt a
written remuneration policy
The xed component shall constitute a sufciently high
portion of the total remuneration (no formal cap)
Deferral period of no less than 3 years
Remuneration shall be clear, transparent and
governed effectively
2016/17
ImplementationSchedule
2014
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Analysis of Actual Total Direct Compensation (TDC)
Eurotop 100 CEO pay levels
The table below shows pay levels for the CEO in the Eurotop 100 for the last nancial year.
Statistics are company weighted and independently arrayed
Not all companies have disclosed target bonus, maximum bonus and LTI awards. The above
analysis is only based on information where disclosed
The analysis of actual TDC includes only those incumbents that have served in position forthe full nancial year
Denitions for each of the elements in the table and details of our LTI valuation methodology
are included in the appendix
Chief Executive Officer
Average LQ Median UQ
Base Salary 1,451,686 1,150,000 1,277,285 1,505,818
Actual Bonus
(% of base)128% 51% 115% 155%
Target Bonus
(% of base)115% 76% 100% 135%
Maximum Bonus
(% of base)205% 140% 180% 230%
Actual Total Cash 3,225,285 1,988,938 2,852,375 3,742,813
LTI Expected Value
(% of base)173% 58% 135% 241%
Actual TDC 5,558,642 3,561,165 5,395,740 6,926,587
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CEO pay in the Eurotop 100 11
Analysis of Actual Total Direct Compensation (TDC)
CEO actual TDC levels by sector
CEO actual TDC levels are differentiated by sector and remain generally stable.
2,550
4,645
4,090
4,995
4,715
6,235
6,630
7,910
3,500
4,685
5,280
5,210
4,800
5,860
6,610
7,840
0
1,0
00
2,0
00
3,0
00
4,0
00
5,0
00
6,0
00
7,0
00
8,0
00
9,0
00
Industrials (n=7)
Basic Materials (n=5)
Technology/Telecoms (n=6)
Banks/Insurance (n=18)
Utilities (n=4)
Oil and Gas (n=7)
Consumer Goods/Services (n=23)
Health Care (n=6)
Median actual TDC (thousands)
Median actual TDC 2013 Median actual TDC 2012
The above analysis of actual TDC includes only those
CEOs that have served in position for the full nancial
year and where information is disclosed in order to
derive actual TDC.
NB: Changes in the index and/or incumbent might
lead to higher deviations in year-to-year comparisons
as well as changes in variable pay levels.
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Analysis of Actual Total Direct Compensation (TDC)
CEO actual TDC levels by country
The highest pay levels are found in Switzerland, UK and Spain.
1,910 (n=7)
3,785 (n=14)
4,130 (n=4)
6,305 (n=15)
3,965 (n=5)
7,215 (n=5)
5,705 (n=21)
7,635 (n=8)
2,106 (n=7)
3,950 (n=16)
4,878 (n=2)
5,665 (n=15)
5,720 (n=3)
6,071 (n=5)
6,100 (n=17)
7,018 (n=7)
Median actual TDC in 2013 Median actual TDC in 2012
Nordics
France
Italy
Germany
Benelux
Spain
UK
Switzerland
Median actual TDC (thousands)
0
1,
000
2,
000
3,
000
4,
000
5,
000
6,
000
7,
000
8,
000
9,
000
The above analysis of actual TDC includes only those
CEOs that have served in position for the full nancial
year and where information is disclosed in order toderive actual TDC.
NB: Changes in the index and/or incumbent might
lead to higher deviations in year-to-year comparisons
as well as changes in variable pay levels.
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CEO pay in the Eurotop 100 13
Analysis of Actual Total Direct Compensation (TDC)
CEO actual TDC versus market capitalisation
Market capitalisation has some influence on actual TDC levels.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
ActualTDC
(thousan
ds)
Market capitalisation (millions)
UK Spain Italy Germany
France Switzerland Benelux Nordics
y = 2594.7ln(x) - 22552
= 0.24787R2
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
The above analysis of actual TDC includes only those
CEOs that have served in position for the full nancial
year and where information is disclosed in order to
derive actual TDC. Market capitalisation gures are as
at 5 June 2014 and sourced from Datastream.
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Analysis of Actual Total Direct Compensation (TDC)
The above analysis of actual TDC includes only
those CEOs that have served in position for the full
nancial year and where information is disclosed in
order to derive actual TDC.
Summary of median CEO actual TDC
Market capitalisation and pay are better correlated by sector than market.
Statistics by Sector (sorted by market cap)
Industrials UtilitiesBanks/
Insurance
Consumer
Goods/
Services
Basic
Materials
Techno-
logy/
Telecoms
Oil & GasHealth
Care
Median
market
capitalisation
(millions)
32,891 35,908 43,463 45,463 53,045 55,324 70,860 98,854
Median CEO
actual TDC
(thousands)
3,500 4,800 5,210 6,610 4,685 5,280 5,860 7,840
Statistics by Country (sorted by market cap)
Benelux France Italy Nordics Switzerland UK Germany Spain
Median
market
capitalisation
(millions)
29,722 37,495 39,118 44,448 48,022 53,045 55,239 55,310
Median CEO
actual TDC
(thousands)
5,720 3,950 3,220 2,106 7,169 6,100 5,665 6,071
Industrials
Utilities
Banks/Ins.
ConsumerGoods/Ser.
BasicMaterials
Technology/Telecoms
Oil & Gas
Health Care
MedianCEOactualTDC
Median Market Cap
MedianCEO
actualTD
C
Median Market Cap
Benelux
France
Italy
Nordics
Switzerland
UK
Germany
Spain
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CEO pay in the Eurotop 100 15
Analysis of Actual Total Direct Compensation (TDC)
CEO average pay mix by country
Incentive pay is most significant in the German, UK and Swiss companies.
%
0
10
20
30
40
50
60
70
80
90
100
Base salary % Actual bonus % LTI expected value %
20%
38%
25%24%
26%28% 28% 28%
33% 33%34%
41%
45%
37%
64%
69%
23%
13%
48%
45%
22%
22% 22%
30%
32%
36%
28%
25%
37%46% 19%
12%
57% 49% 27% 31% 52% 50% 50% 42% 35% 31% 38% 34% 18% 17% 17% 19%
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
Benelux Germany UK Switzerland France Italy Spain Nordics
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Pay for performance and analysis of incentive design and shareholding guidelines
STI performance measures
Profit/income continues to be the most prevalent measure on STI plans.
STI performance measures % of 86 companies
These cover
a wide range
of strategic
measures.
0% 10% 20% 30% 40% 50% 60% 70%
1%
2%
3%
5%
5%
8%
10%
15%
19%
19%
24%
31%
31%
38%
49%
52%
59%
Share Price
Net Asset Value
EVA/Company Value Measure
TSR
Dividend Growth
Return on Capital Employed
Customer Service
Health & Safety
Other Return on Measure
Operating Margin
EPS
Cashow
Sales/Revenue
Other Financial Measure
Individual
Other Non-Financial Measure
Prot/Income Measure
91 out of the 95 Eurotop companies analysed
operate an STI plan. The above analysis is based
on 86 out of the 91 Eurotop companies that have
disclosed performance measures for the primary STI
plan in operation.
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CEO pay in the Eurotop 100 17
Pay for performance and analysis of incentive design and shareholding guidelines
Change in actual bonus levels vs. change in performance
Bonus pay outs in most companies vary with changes in operating income but some are
outside the corridor.
Actualbonus(%t
ilerank)
Operating income (% tile rank)
UK Spain Italy Germany
France Switzerland Benelux Nordics
20
40
60
80
100
120
0 20 40 60 80 100 120
0
The above analysis of actual bonus changes includes
only those CEOs that have served in position for
the full nancial year in 2012 and 2013. Operating
income gures for 2012 and 2013 are sourced
from Datastream.
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Pay for performance and analysis of incentive design and shareholding guidelines
Long-term incentive design
Consistent with last year, most companies operate at least one LTI plan with more than
one performance measure to be met for awards to vest.
Number of LTI plans in operation % of 95 companies
Number of performance measures on LTI plans % of 116 plans
17% No plan 52% One plan 24% Two plans 7% Three or more plans
16 companies do
not operate an
LTI plan
Many companies in
Switzerland and
Benelux operate 2
or more plans
26% None 21% One measure 27% Two measures
15% Three measures 9% Four measures 2% Six measures
These includerestricted shares,
share matching plans,
stock options and plans
with pre-grant
performance conditions.
The above analysis is based on 79 out of the 95
Eurotop companies that operate an LTI plan for
executives. A total of 116 LTI plans are operated
across the 79 companies.
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CEO pay in the Eurotop 100 19
Pay for performance and analysis of incentive design and shareholding guidelines
Changes in long-term incentive design
Performance share plans continue to be the most common LTI vehicle.
LTI plan types in operation % of 79 companies
%
Performance
shares/units
Share matching
plans
Stock options/
units
Long-term
cash
Restricted shares/
units
These are
most common
in UK, Switzerland
and Nordics.
These are most
common in France
and Switzerland.
These are most
common in
Germany and Italy. Typically operated
in Switzerland,
Nordic and Benelux.
78%
23%
19% 18%
11%
0
10
20
30
40
50
60
70
80
90
The above analysis is based on 79 out of
the 95 Eurotop companies that operate an
LTI plan for executives.
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Pay for performance and analysis of incentive design and shareholding guidelines
The above analysis is based on 79 out of the 95
Eurotop companies that operate an LTI plan for
executives. A total of 116 LTI plans are operated
across the 79 companies.
Top 3 LTI plan types per country
Combination of vehicles are country-specific and often driven by accounting and taxation
rules or corporate governance requirements.
LTI plans sorted by prevalence
Country 1 2 3
Benelux Performance shares/units
Restricted shares/units
Share matching plans
Stock option/units
France Performance shares/units Stock option/units Long-term cash
Germany
Performance shares/units
Share matching plans Stock option/units
Long-term cash
Italy Long-term cash Performance shares/units
Nordics
Performance shares/units
Stock option/unitsRestricted shares/units
Share matching plans
Spain Performance shares/units Long-term cash
Switzerland Performance shares/units
Share matching plans Restricted shares/units
Stock option/units Long-term cash
UK Performance shares/units Share matching plans
Restricted shares/units
Stock option/units
While share
matching plans are
gaining prevalence
in Germany, they are
declining in the UK.
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CEO pay in the Eurotop 100 21
Pay for performance and analysis of incentive design and shareholding guidelines
Shareholding guidelines
Almost half of companies impose shareholding guidelines.
Prevalence of shareholding guidelines % of 95 companies
Prevalence of shareholding guidelines by country % of 48 companies
51% Yes 49% No/not disclosed
0
10
20
30
40
50
UK Germany BeneluxSwitzerland Italy SpainNordicsFrance
%
44%
27%
13%
8%
4%2% 2% 0%
Shareholding guidelines are most common in
UK and French Eurotop 100 companies. Guidelines are typically expressed as a
percentage of base salary. At median,
guideline levels are 275% of base salary for
the CEO. Where disclosed the time permitted to reach
the guideline is typically 5 years.
Shareholding
guidelines are not
common in Spain.
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Additional analysis and contact
Our database covers over 1000 companies across 14 countries in Europe
We can provide you with analysis for pan-European sectors or bespoke peer groups tailored to your specic
requirements on a line-by- line and/or aggregate basis (for example, by industry, by dif ferent markets and/or
by company size).
Analysis can be conducted
by role e.g. CEO, CFO, COO**
Executive Directors
Compensation
Chairmens and
Non-Executive Directors
Compensation
Incentive Design and
Shareholding Guidelines
Financial year and/or
forward-looking base
salary increases
Actual and/or target total
direct compensation levels*
Actual and/or target total
remuneration levels* Realised pay levels
Analysis of realised pay
versus target/maximum
pay opportunity
Analysis of pay mix*
Pay differentials by sector
and/or country*
Leverage analysis*
Pay versus performance
analysis*
Base/xed fee levels
Chairmanship and
membership fees for board
committees (e.g. audit,
remuneration, nomination)
Attendance fees and
travel allowances Other incentives
and benets
Short-term incentive
performance measures and
relative weightings
Short-term incentive
deferral analysis
Long-term incentive vehicles
Long-term incentiveperformance measures,
relative weightings and
performance targets
Long-term incentive
performance periods,
vesting arrangements and
holding periods
Analysis of forward-looking
amendments to short and
long-term incentive plans
and details of new plans
Analysis of shareholdingguidelines
* This analysis includes long-term incentive
expected values based on the Towers Watson
valuation methodology
** Note that in some countries a role-specic
analysis is not possible as only highest-paid executive
director is individually disclosed.
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CEO pay in the Eurotop 100 23
Additional analysis and contact
Our database covers constituents of the following indices in the
respective European countries
Belgium BEL20 BELMID
France CAC 40 SBF 80
Ireland ISEQ 20
Italy MIB 40
Germany DAX 30 MDAX SDAX TecDAX
Nordics OMX Sweden OMX Denmark OBX Norway
Netherlands AEX AMX AScX
Spain IBEX 35IBEX Medium
Cap
Switzerland SMI SMI MID
UK FTSE 100 FTSE 250
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Additional analysis and contact
Towers Watsons contacts
Country Contact name Email Phone
UK and Ireland Richard Beleld [email protected] +44 20 7170 2147
Sonia Padda [email protected] +44 20 7170 2927
France Laurent Nguyen [email protected] +33 1 53 93 13 14
Gerald Joliy [email protected] +33 1 53 93 13 38
Germany Helmuth L. Uder [email protected] +49 89 51 657 4800
Stephanie Schmelter [email protected] +49 69 1505 5168
Switzerland Hans Muench [email protected] +41 43 488 4466
Maike Wehage [email protected] +41 43 488 4409
Netherlands Bram van Oenen [email protected] +31 88 543 3037
Sven Slavenburg [email protected] +31 88 543 3183
Spain Manuel Montecelos [email protected] +34 91 590 3986
Cristina Martin [email protected] +34 91 590 3087
Italy Edoardo Cesarini [email protected] +39 06 367361
Leonardo Mansueto [email protected] +39 02 6378 0190
Nordics Anders Tapper [email protected] +46 8 506 417 10
Mikael Ullen [email protected] +46 8 506 417 23
Belgium Bram van Oenen [email protected] +31 88 543 3037
Noemie Tack [email protected] +32 2 678 1511
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CEO pay in the Eurotop 100 25
Appendices
Eurotop 100 Company List
BHP Billiton, Christian Dior and Diageo have
been excluded from the analysis as the 2013/14
remuneration report was not published at the time of
this analysis.
Market capitalisation gures are as at 5 June 2014
and sourced from Datastream.
Company CountryMarket Capitalisation
(m)Sector
A P MOLLER - MAERSK A/S Nordics 40,521 Industrials
ABB LIMITED Switzerland 39,880 Industrials
AIR LIQUIDE France 33,514 Basic Materials
AIRBUS GROUP France 41,183 Industrials
Germany 56,492 Banks/Insurance
ANGLO AMERICAN UK 25,096 Basic Materials
Benelux 129,801 Consumer Goods/Services
ASML HOLDING Benelux 28,436 Technology/Telecoms
ASSOCIATED BRITISH FOODS UK 29,679 Consumer Goods/Services
UK 67,523 Health Care
ATLAS COPCO AB Nordics 25,840 Industrials
AXA France 43,717 Banks/Insurance
Spain 55,310 Banks/Insurance
BANCO SANTANDER Spain 88,712 Banks/Insurance
UK 48,981 Banks/Insurance
BASF Germany 78,328 Basic Materials
Germany 87,301 Basic Materials
BG GROUP UK 51,300 Oil & Gas
BHP BILLITON* UK 127,951 Basic Materials
BMW Germany 58,752 Consumer Goods/Services
BNP PARIBAS France 64,126 Banks/Insurance
BP UK 112,846 Oil & Gas
BRITISH AMERICAN TOBACCO UK 82,186 Consumer Goods/Services
BT GROUP UK 38,718 Technology/Telecoms
CHRISTIAN DIOR* France 27,205 Consumer Goods/Services
CONTINENTAL Germany 34,721 Consumer Goods/Services
CREDIT AGRICOLE France 28,893 Banks/Insurance
CREDIT SUISSE Switzerland 35,165 Banks/Insurance
DAIMLER Germany 74,235 Consumer Goods/Services
DANONE France 34,932 Consumer Goods/Services
DEUTSCHE BANK Germany 30,366 Banks/Insurance
DEUTSCHE POST Germany 32,891 Industrials
DEUTSCHE TELEKOM Germany 55,239 Technology/Telecoms
DIAGEO* UK 58,914 Consumer Goods/Services
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Appendices
Eurotop 100 Company List
Market capitalisation gures are as at 5 June 2014
and sourced from Datastream.
Company CountryMarket Capitalisation
(m)Sector
E ON Germany 28,586 Utilities
ELECTRICITE DE FRANCE France 47,449 Utilities
ENEL Italy 39,118 Utilities
ENI Italy 67,668 Oil & Gas
ERICSSON B Nordics 29,904 Technology/Telecoms
France 49,523 Utilities
Italy 25,829 Banks/Insurance
GLAXOSMITHKLINE UK 94,403 Health Care
GLENCORE XSTRATA* UK 53,045 Basic Materials
Nordics 51,945 Consumer Goods/Services
HEINEKEN Benelux 29,722 Consumer Goods/Services
Germany 34,625 Consumer Goods/Services
HERMES INTERNATIONAL France 27,448 Consumer Goods/Services
HSBC HOLDINGS UK 146,125 Banks/Insurance
IBERDROLA Spain 33,665 Utilities
IMPERIAL TOBACCO GROUP UK 31,571 Consumer Goods/Services
INDITEX Spain 65,792 Consumer Goods/Services
ING GROEP Benelux 40,175 Banks/Insurance
INTESA SANPAOLO Italy 40,011 Banks/Insurance
KONINKLIJKE PHILIPS
ELECTRONICS NABenelux 22,190 Industrials
LINDE Germany 28,881 Basic Materials
UK 68,508 Banks/Insurance
LOREAL France 77,677 Consumer Goods/Services
France 73,826 Consumer Goods/Services
GESELLSCHAFTGermany 27,803 Banks/Insurance
NATIONAL GRID UK 38,150 Utilities
NESTLE Switzerland 185,549 Consumer Goods/Services
NORDEA BANK Nordics 44,448 Banks/Insurance
Switzerland 175,672 Health Care
Nordics 83,762 Health Care
ORANGE France 31,641 Technology/Telecoms
PERNOD-RICARD France 23,516 Consumer Goods/Services
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CEO pay in the Eurotop 100 27
Appendices
Eurotop 100 Company List
SABMiller has been excluded from the analysis as the
2013/14 remuneration report was not published at the
time of this analysis.
Market capitalisation gures are as at 5 June 2014 and
sourced from Datastream.
Company CountryMarket Capitalisation
(m)Sector
PRUDENTIAL UK 43,210 Banks/Insurance
RECKITT BENCKISER UK 45,463 Consumer Goods/Services
Spain 26,636 Oil & Gas
COMPAGNIE FINANCIERE RICHEMONT Switzerland 39,811 Consumer Goods/Services
RIO TINTO UK 72,038 Basic Materials
ROCHE HOLDING Switzerland 188,873 Health Care
UK 47,278 Banks/Insurance
UK 186,655 Oil & Gas
SABMILLER* UK 64,342 Consumer Goods/Services
SANOFI France 103,305 Health Care
SAP Germany 68,280 Technology/Telecoms
SCHNEIDER ELECTRIC France 40,058 Industrials
SIEMENS Germany 86,250 Industrials
SOCIETE GENERALE France 33,573 Banks/Insurance
STANDARD CHARTERED UK 40,552 Banks/Insurance
STATOIL Nordics 70,860 Oil & Gas
SWISS RE Switzerland 23,806 Banks/Insurance
Switzerland 26,555 Basic Materials
TELEFONICA Spain 55,409 Technology/Telecoms
TELENOR Nordics 26,926 Technology/Telecoms
TELIASONERA Nordics 23,338 Technology/Telecoms
TESCO UK 29,308 Consumer Goods/Services
THE SWATCH GROUP Switzerland 23,553 Consumer Goods/Services
TOTAL France 120,263 Oil & Gas
UBS Switzerland 56,233 Banks/Insurance
UNICREDIT Italy 38,129 Banks/Insurance
UK 91,994 Consumer Goods/Services
France 32,998 Industrials
France 25,953 Consumer Goods/Services
UK 66,702 Technology/Telecoms
Germany 88,696 Consumer Goods/Services
Nordics 22,720 Industrials
Switzerland 32,483 Banks/Insurance
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Appendices
Composition of the Eurotop 100
The majority of constituents in the Eurotop 100 are headquartered in UK, France and Germany.
A broad array of sectors are represented.
Composition by country
Composition by industry
27% UK
6% Spain 5% Italy 16% Germany 20% France
11% Switzerland 5% Benelux 10% Nordics
10% Technology/Telecoms
10% Industrials 6% Health Care 28% Consumer Goods/Services 9% Basic Materials
7% Oil and Gas 24% Banks/Insurance 6% Utilities
Market capitalisation gures are as at 5 June 2014
and sourced from Datastream. Revenue gures
are sourced from annual reports and Datastream.
Statistics only include those 95 Eurotop companies
that published annual reports until June, 10. Revenue
gures exclude nancial institutions.
Market capitalisation (m) Revenues (m)
Lower Quartile 30,969 17,028
Median 43,210 32,031
Upper Quartile 68,394 58,707
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CEO pay in the Eurotop 100 29
Appendices
Points to consider when interpreting the analysis
The analysis covers a total of 95 companies that
have published the remuneration report as at 10
June 2014.
Due to the differing regulatory and governance
environments across countries, disclosures on
compensation arrangements differ widely, in
particular with respect to long-term incentive
awards. As such we are unable to derive the
actual TDC gures for all executives covered
in the Eurotop 100.
Furthermore, the analyses of actual TDC includes
only those incumbents that have served in
position for the full nancial year.
As a result we have excluded 19 CEOs from the
analysis of actual TDC. These are listed on the
slide overleaf with reasons for exclusion.
by changes to the Eurotop 100 index
and incumbents.
Actual TDC derived using the Towers Watson
gures disclosed by the companies in their
remuneration reports.
Compensation data is presented in Euros.
The exchange rates used to convert data are
outlined below:
2013 average conversion rates to Euros
EURCHF GBP USD AUD HKD SEK DKK NOK
0.8125 1.1777 0.7533 0.727 0.097 0.1156 0.1341 0.1283
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Appendices
CEOs that were excluded from analysis of actual TDC
Company Incumbent Reason for exclusion
ABB Limited Ulrich Spiesshofer New appointment, data pro-rated
Anglo American Mark Cutifani New appointment, data pro-rated
AP Moller - Maersk Nils S. AndersenData needed to derive actual TDC
not disclosed
ASML Holding Peter T.F.M. Wennink New appointment, data pro-rated
Assicurazioni Generali Mario Greco New appointment, data pro-rated
Banco Santander Javier Marn Romano New appointment, data pro-rated
BT Group Ian Livingston New appointment, data pro-rated
EDF Henri Proglio Only eligible for base in 2013.
GDF Suez Grard MestralletData needed to derive actual TDC not
disclosed
Hermes International Patrick Thomas
Data not comparable; remuneration
package based on percentage of
groups consolidated income before
tax and revenues
ING Groep Ralph A.J.G. Hamers New appointment, data pro-rated
Intesa Sanpaolo Carlo Messina New appointment, data pro-rated
Rio Tinto Tom Albanese New appointment, data pro-rated
Royal Bank of Scotland Group Ross McEwan New appointment, data pro-rated
Siemens Joe Kaeser New appointment, data pro-rated
Swiss Re Michel M. LisData needed to derive actual
TDC not disclosed
Syngenta Michael MackData needed to derive actual
TDC not disclosed
Telenor Jon Fredrik BaksaasData needed to derive actual
TDC not disclosed
Teliasonera Johan Dennelind New appointment, data pro-rated
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CEO pay in the Eurotop 100 31
Appendices
Pay element Definition
Base salaryThe annual base salary received for the last nancial year, as reported
in the emoluments table
Base salary % increaseThe percent increase in the annual base salary reported for the last
nancial year
Actual bonusThe total annual bonus earned for the last nancial year (including
bonus deferred without additional performance conditions)
Actual bonus (% of base)Actual bonus (as dened above) expressed as a percent of annual base
salary received for the last nancial year
Target bonus (% of base)
The percent of annual base salary paid as an annual bonus/incentive
for target/on-budget or expected performance under the annual bonus/
incentive plan in operation for the lastnancial year
(including deferrals)
Maximum bonus (% of base)
The maximum percent of annual base salary paid as an annual bonus/
incentive under the annual bonus/incentive plan in operation for the
last nancial year (including deferrals)
Actual total cash
The sum of base salary (as dened above), actual bonus (as dened
above) and amount received under a prot sharing plan. The analysis
excludes fees received for membership of board
LTI expected value
The total expected value of all forms of long-term incentives awarded
in the last nancial year (including deferred bonuses with an additional
performance condition), calculated at the time of grant using the
Towers Watson LTI valuation methodology
LTI expected value (% of base)The LTI expected value (as dened above) expressed as a percent of
annual base salary received for the last nancial year
Actual total direct compensation (TDC)The sum of actual total cash (as dened above) and LTI expected value
(as dened above)
Definition of elements covered by this report
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Appendices
In general terms, the reported LTI value represents
the fair/expected value of an award as at thedate of grant, taking into account the specic
characteristics of the vehicle awarded (for example,
share price volatility, dividend yield) and any
applicable performance vesting conditions. The
reported value represents the sum of the values of
all types of LTI award made to an individual in the
year, including performance/restricted shares, stock
options, deferred bonus matching shares and long-
term cash awards.
Stock options
The value of stock options is calculated usinga binomial lattice model, based on a number of
input assumptions (as set out below). A discount
is then applied to this value to take account of any
applicable performance vesting conditions.
Our valuations are based on an expected life
approach when computing the binomial value of
the option. This expected life is taken as the mid-
point between the vesting period and the term of
the option (for example, for an option with a 3 year
vesting period and a 10 year life, the expected life
is 6.5 years).
Where applicable, the relevant per formance
condition discount factor is determined by the
type of the applicable condition:
Relative Total Shareholder Return tests:
A country-specic discount is applied to the
binomial lattice value.
Absolute share price/Total Shareholder Return
tests: We value such awards by incorporating
the absolute share price target into the binomial
valuation model. For absolute TSR tests,
an equivalent absolute share price target is
calculated using a company specic dividend
yield assumption.
Internal/non-market tests:We apply a singlediscount factor to take account of such
performance conditions. This discount factor is
country-specic, based on our experience of the
average proportion of shares that might typically
be expected to vest, based on typical local
performance condition calibration.
Performance/restricted shares
The value of performance / restricted shares
represents the face value of shares (i.e. the
number of shares multiplied by share price) as
at the date of grant, less the value of dividends
paid during the vesting period if participants do
not receive the benet of these, with a discount
applied to take any applicable performance
vesting conditions into account.
Where applicable, the relevant performance
condition discount factor is determined by the
type of the applicable condition:
Relative Total Shareholder Return tests:
We consider the awards specic vestingschedule and calculate the expected
proportion of shares due to vest, assuming
that all percentile ranks are equally likely to
be achieved. We apply an uplift factor to this
value to take into account the strong correlation
between relative TSR performance and share
price growth. This adjustment factor is 20% if
the comparator group is made up of selected
sector peers, 25% if the company uses a broad
index. For tests comparing the companys
TSR performance to that of an index, we apply
the above methodology, assuming that the
condition is calibrated such that threshold
vesting is achieved for the equivalent of median
performance, and maximum vesting achieved for
the equivalent of upper quartile performance.
Absolute share price/Total Shareholder Return
tests:We value such awards as nil-cost
options with the performance condition
incorporated into the binomial valuation model
as described above.
Internal/non-market tests: We apply a single
discount factor to take account of such
performance conditions. This discount factor is
country-specic, based on our experience of the
average proportion of shares that might typically
be expected to vest, based on typical local
performance condition calibration.
Where there is no dened maximum award size
and awards are expressed as a target number
of shares with the potential for the actual
vesting number to be higher or lower based on
performance levels, the value is more simply the
face value of this target number of shares as at
the date of grant.
Towers Watsons LTI valuation methodology
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CEO pay in the Eurotop 100 33
Appendices
Deferred bonus matching shares
We assume that executives seek to maximise
their reward opportunity and will therefore elect to
defer the maximum amount of bonus allowable.
Deferred bonus matching share awards are then
valued as performance share awards (see above).
Please note that deferrals not subject to further
performance conditions are included as part of
the annual bonus and are not valued as part of
long-term incentives.
Some plans have a feature (sometimes known as
malus) under which deferred shares can be clawed
back in the event of a downturn in business
performance. Typically, this malus condition is only
likely to be applied in extreme circumstances and
we do not take this into account in the valuation.
However, in cases where a malus condition can
be considered a true long-term performancecondition, the deferred award is valued as
performance shares and included in long-term
incentive value.
Co-investment plans
Similar to deferred bonus matching plans, we
assume that executives seek to maximise their
reward opportunity and will therefore elect to
co-invest the maximum amount. Co-investment
matching share awards are then valued as
performance share awards (see above).
Long-term cash bonus
Consistent with other types of long-term incentive
award, long-term cash bonuses are valued at date
of grant (not payout). The value represents the
target/expected payout level.
Other award types
For complex or unusual plan types which do
not t into the categories described above, a
bespoke valuation will be applied, using consistent
principles and assumption setting methodology.
Input assumptions
In order to calculate values for long-term incentive
awards, it is necessary to make a number of input
assumptions. These assumptions are based on a
consistent approach for all companies in order to
result in valuations which can be compared on a
like for like basis. The principal assumptions and
the methodology to derive them are set out below.
Share price volatility
Share price volatility assumptions have been
calculated based on the average actual volatility
experienced by each company over the three-
year period to 1 January 2013. Where this
historic average is likely to be unrepresentative
of future volatility levels (for example, a business
restructuring), an assumption based on more
detailed analysis is used.
Dividend yield
Dividend yield assumptions have been calculated
based on the average actual dividend yield for
each company over the one-year period to
1 January 2013. Where this historic average is
likely to be unrepresentative of future dividend
yield levels, an assumption based on more
detailed analysis is used.
Risk-free rate
Risk-free rate assumptions have been calculated
based on the yield on a zero-coupon government
bond for the country in which the company is listed
over the vesting period/expected share option
term as at 1 January 2013.
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Our services
Our services
Towers Watson is a
full service consulting
company, providing a
comprehensive array of
services in the areas oftalent and rewards, benefits,
and risk and financial
services. Our Executive
Compensation consulting
services include:
Policy Analysis Communication
Executive pay philosophy
and structure
Aligning pay with strategy and culture
Annual bonus and long-term
incentive plan design
Performance measure selection
and calibration
Executive pensions
Share ownership guidelines
Recruitment and termination
IPO and transaction
related awards
Total executive pay
benchmarking
Pay scenario analysis
Realised pay analysis
The dynamics of pay and
risk reviews
IFRS2 valuations
Total shareholder return
performance monitoring
Global pay trends
Directors Remuneration
Reports
Assistance on investor
consultations
Total reward statements
Training and materials for
non-executive directors
Many clients retain Towers Watson for a broad
spectrum of services to gain the benets that come
from a deep consulting relationship. Others use our
services selectively to meet specic business needs.
However you prefer to work with a consultant, Towers
Watsons exible clients-rst approach can work for you.
The remuneration landscape
is constantly changing we
can use our insight to identify
features of your remuneration
packages, which may not be
compliant with future best
practice, and proactivelyaddress these.
Towers Watsons Executive Compensation services
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