2014 CEO Pay in the Eurotop 100

8/9/2019 2014 CEO Pay in the Eurotop 100

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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

2 towerswatson.com


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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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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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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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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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Good remuneration committee practices.


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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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 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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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



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 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



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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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 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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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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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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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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20 towerswatson.com


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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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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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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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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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



and sourced from Datastream.


(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


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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Appendices


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.


(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 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


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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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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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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32 towerswatson.com

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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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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34 towerswatson.com

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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Documents

2014 CEO Pay in the Eurotop 100