At Novozymes, our executives work to promote the long-term interests of our shareholders, and the remuneration of the Board of Directors and Executive Leadership Team supports this objective. A new incentive program has been established.
Novozymes’ remuneration policy for managers and other employees is designed to encourage strong performance and support value creation. Remuneration consists of a base salary, pension contributions, bonus and stock-based incentive programs. These components are linked to the employee’s individual performance and to the level of achievement of Novozymes’ financial, social and environmental targets.
The remuneration policy aims to provide both managers and other employees with a competitive financial package, which we review against external benchmarks.
|DKK million||Executive Leadership Team||Board of Directors||Total||Executive Leadership Team||Board of Directors||Total|
|Salaries and other short-term benefits||38||7||45||40||7||47|
|Defined contribution plans||9||-||9||9||-||9|
|Expensed stock-based incentive programs||36||-||36||34||-||34|
|* Severance pay of DKK 62 million has not been included in the remuneration figures.|
Changes in the Executive Leadership Team
In February 2016, Novozymes announced a change in the organizational structure. As part of the reorganization, Novozymes appointed former Vice President of Sales Tina Sejersgård Fanø as Executive Vice President (EVP), Agriculture & BioenergyBioenergy comes in the form of liquid fuels, electricity, heat and steam, and is produced from primary crops or biomass such as sugarcane, grains, agricultural residues, algae and household waste. In liquid forms, it is typically used to replace gasoline and diesel in transportation., former Vice President of Sales Anders Lund as EVP, Household Care & Technical, and former EVP, Business Operations, Andrew Fordyce transferred into the role of EVP, Food & Beverages.
Furthermore, Per Falholt, former EVP, R&D, stepped down from the Executive Leadership Team. He continues to support Novozymes in a consulting role on technology scouting. Thomas Nagy, former EVP, Supply Operations, has left Novozymes. Per Falholt and Thomas Nagy will continue to receive salary and bonuses during the notice period (12 months) as well as termination compensation (24 months), totaling DKK 40.7 million. Furthermore, they will participate in the stock-based incentive program during the notice period, the fair value of which is DKK 21.3 million. The severance packages were fully expensed in 2016.
Remuneration paid to individual members of the Board of Directors
|DKK ‘000||Board of Directors||Audit Committee||Total||Board of Directors||Audit Committee||Total|
|Jørgen Buhl Rasmussen||917||208||1,125||500||-||500|
|Anders Hentze Knudsen||500||-||500||500||-||500|
|Lars Bo Køppler||500||-||500||500||-||500|
|Lena Bech Holskov||500||-||500||500||-||500|
|* Joined on February 25, 2015.|
|** Resigned on February 24, 2016.|
The disclosed remuneration for board members does not include minor mandatory social security contributions paid by Novozymes.
The following members of the current Board of Directors hold shares of stock in Novozymes A/S
|Shares of stock||Shares of stock at Jan. 1, 2016||Purchased during the year||Sold during the year||Shares of stock at Dec. 31, 2016||Market value DKK million|
|Anders Hentze Knudsen||356||-||-||356||0.1|
|Lena Bech Holskov||270||-||-||270||0.1|
|Jørgen Buhl Rasmussen||2,000||-||-||2,000||0.5|
|Board of Directors||3,706||-||-||3,706||0.9|
Members of the Board of Directors are not granted stock options or stock awards. However, employee-elected members hold a limited number of stock options in Novozymes A/S due to Group-wide employee stock option programs.
Board of Directors
The remuneration of the Board of Directors comprises a fixed fee and is not incentive based. This ensures that the Board pursues the company’s long-term interests without taking into consideration what this may mean in terms of the value of incentive-based remuneration.
The Board of Directors assesses the fees paid to the Board annually, based on recommendations from the Chairmanship. In making its recommendations, the Chairmanship is guided by relevant benchmarks, including Novozymes’ peers in Denmark and the rest of Europe.
The Board of Directors’ remuneration for the year is approved at the Annual Shareholders’ Meeting.
Board members receive a fixed base fee, while the Chairman and the Vice Chairman receive a fee that is three times and two times the base fee respectively. The Chairman and other members of the Audit Committee also receive one base fee and half a base fee respectively.
The fixed base fee was DKK 500,000 in 2016, unchanged from 2015.
Executive Leadership Team
The Board of Directors seeks to incentivize the Executive Leadership Team to ensure the continued positive development of Novozymes and, as a result, good value creation for Novozymes’ shareholders. The Board finds that the best results are achieved when a relatively high proportion of an executive’s total remuneration is dependent on that executive achieving their individual targets and Novozymes’ financial, social and environmental targets being met.
The Executive Leadership Team’s remuneration comprises a base salary, pension contributions, a cash bonus scheme, stock-based incentive programs and other benefits (car, phone, etc.). Compared with Novozymes’ peers, the variable part of the total remuneration (cash bonus and stock-based programs) is relatively large. This is because the Board of Directors sets the base salary for members of the Executive Leadership Team at a level slightly below the average for a sample of comparable Danish companies. In 2016, the ratio of the CEO’s remuneration to the median employee’s remuneration was 46, which is below the average ratio of 55 for the 800+ companies assessed by RobecoSAM in 2015.
In 2016, a 2.5% salary increase was awarded to the members of the Executive Leadership Team with the exception of Thomas Videbæk, who received a 15% salary increase to reflect his increased organizational responsibilities due to his appointment as COO following the reorganization in February 2016.
The Executive Leadership Team has a defined pension contribution scheme, with the pension contribution representing between 25% and 30% of the base salary and the cash bonus.
The maximum annual cash bonus is equivalent to five months’ fixed base salary plus pension contributions.
The amount of the cash bonus is dependent on the degree of fulfillment of 1) individual targets agreed with the CEO (the Chairman for the CEO), not exceeding three months’ salary and 2) the company’s operational targets for financial, social and environmental performance, not exceeding two months’ salary.
For 2016, the cash bonus based on individual targets was 25% of the maximum bonus for individual targets, for all members of the Executive Leadership Team. The cash bonus related to Novozymes’ operational targets was 50% of the maximum bonus for operational targets.
Remuneration paid to individual members of the Executive Leadership Team
|DKK million||Salary||Cash bonus||Contribution-based pension||Expensed incentive programs||Total remuneration|
|Peder Holk Nielsen||8.2||1.1||2.4||9.1||20.8|
|Benny D. Loft||4.8||0.6||1.2||6.1||12.7|
|Tina Sejersgård Fanø*||3.8||0.6||1.0||3.1||8.5|
|Total remuneration 2016||33.5||4.3||8.7||35.7||82.2|
|Peder Holk Nielsen||7.9||2.1||2.6||7.8||20.4|
|Benny D. Loft||4.6||1.4||1.4||5.2||12.6|
|Total remuneration 2015||31.3||8.1||9.4||33.9||82.7|
* Non-registered member of Executive Leadership Team. Joined on February 8, 2016.
** Resigned on February 8, 2016.
*** Non-registered member of Executive Leadership Team as of February 8, 2016.
|The following members of the current Executive Leadership Team hold shares of stock in Novozymes A/S|
|Shares of stock||Shares of stock at Jan. 1, 2016||Change in Management||Purchased during the year||Sold during the year||Shares of stock at Dec. 31, 2016||Market value DKK million|
|Peder Holk Nielsen||82,188||-||-||82,188||20.0|
|Benny D. Loft||2,260||-||-||2,260||0.6|
|Tina Sejersgård Fanø||-||748||1,365||-||2,113||0.5|
|Executive Leadership Team||84,448||894||8,005||(4,602)||88,745||21.6|
|The following members of the current Executive Leadership Team hold stock options in Novozymes A/S|
|Stock options||Options at Jan. 1, 2016||Change in Management||Additions during the year||Exercised during the year||Options at Dec. 31, 2016||Market value DKK million|
|Peder Holk Nielsen||376,281||119,355||-||495,636||31.1|
|Benny D. Loft||170,044||79,570||-||249,614||8.5|
|Tina Sejersgård Fanø||-||55,266||54,835||(12,385)||97,716||4.1|
|Executive Leadership Team||891,904||95,798||467,927||(12,385)||1,443,244||64.9|
|The following members of the Executive Leadership Team hold stock awards in Novozymes A/S|
|Stock awards||Awards at Jan. 1, 2016||Change in Management||Additions during the year||Released during the year||Awards at Dec. 31, 2016||Market value DKK million|
|Tina Sejersgård Fanø||-||5,998||-||(1,365)||4,633||1.1|
|Executive Leadership Team||2,411||13,126||-||(5,814)||9,723||2.3|
An incentive program covering the period 2014-2016 was established for the Executive Leadership Team in 2014. The general purpose of the program was to ensure that the members of the Executive Leadership Team were incentivized in such a way that there was a focus on long-term growth and earnings at Novozymes, in order to ensure that shareholders’ interests were best met. The new members of the Executive Leadership Team have been included in the program as of their appointment.
The incentive program offered a combination of stock and stock options, with half of the incentive program allocated in stock and half in stock options. The stock options have been granted annually, while the stock will be allocated in January 2017.
The amount of the incentive program was based on achievement of cumulative targets for economic profit over the three-year period. The accumulated economic profit generated in the three-year period was DKK 6.1 billion, exceeding the DKK 5.5 billion target and resulting in the full program being awarded. The intrinsic value, DKK 57 million, does not exceed the maximum value clause.
As a result of this program, 451,883 stock options were granted to the Executive Leadership Team in 2016, 463,749 in 2015 and 641,735 in 2014. Furthermore, 215,974 shares will be released in January 2017. The number of shares does not include shares that will be released to Per Falholt and Thomas Nagy.
The fair value of the program on the grant date was DKK 134 million, which is expensed over a six-year period, starting in 2014. DKK 36 million was expensed in 2016.
In 2016, Tina Sejersgård Fanø and Anders Lund had also participated in the Senior Leadership Program prior to their promotion and as a consequence have been granted 7,632 and 8,412 stock options respectively. Furthermore, they will have 7,199 and 7,102 shares respectively released in January 2017.
The members of the Executive Leadership Team have contracts of employment containing standard conditions for executive officers of Danish listed companies, including the periods of notice that both parties are required to give and noncompetition clauses. If an executive officer’s contract of employment is terminated by the company without any misconduct on the part of the executive officer, the executive officer has the right to compensation, which, depending on the circumstances, may amount to a maximum of two years’ base salary and pension contributions.
New incentive program for the Executive Leadership Team
A new three-year incentive program for the Executive Leadership Team covering the period 2017-2019 has been established. The program complies with the General guidelines for remuneration of the Board of Directors and Executive Management of Novozymes A/S approved at Novozymes’ Annual Shareholders’ Meeting.
Like the previous program, the new program is an equal stock and stock option program. Awards will depend on accumulated economic profit generated as well as average organic sales growthSales growth from existing business, excluding sales from acquiring new businesses, measured in local currency. during the period:
The stock is allocated in January 2017 and released in January 2020 in accordance with the level of target achievement, while the stock option program is a three-year incentive program with annual allocations. The allocations for 2017-2019 will be adjusted in January 2020 in relation to the level of target achievement. The awarded stock options have a vesting period of four years, after which there is an exercise period of five years.
For the Executive Leadership Team, the value of the three-year program is approximately DKK 162 million as of January 1, 2017. The value of the program corresponds to the aggregated annual remuneration of the Executive Leadership Team in 2017-2019 (base salary, pension contributions and maximum cash bonus).
The incentive program includes a maximum clause that gives the Board of Directors the option to reduce the number of stock and stock options that are allocated. The reduction can be implemented if the intrinsic value of the stock and stock options for the Executive Leadership Team totals more than DKK 324 million on the date on which the Annual Report for 2019 is approved in January 2020.
The remuneration of Novozymes’ senior leadership is in line with the general remuneration policy.
A three-year incentive program covering 2014-2016 was established for senior leadership below executive level that largely followed the same mechanisms as the program for the Executive Leadership Team described above. Further information on the incentive program for this employee group can be found in Note 6.2 to the consolidated financial statements, which also includes an overview of outstanding stock options.
New incentive programs for the Senior Leadership Team and directors covering the period 2017-2019 has been established. The program for the Senior Leadership Team largely follows the same mechanisms as the program for the Executive Leadership Team.
The new program for directors is a stock option program that includes the same targets for sales and economic profit as the other programs. Furthermore, there are awards linked to annual EBITEarnings before interest and tax. and sustainability targets.