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CEO pay landscape in the Eurotop 100Detailed insights into regulatory developments and CEO pay levels and structures

The executive compensation landscape for European listed companies is changing. Are you prepared?

The requirements of the Shareholder Rights Directive, the increasing influence of voting guidance services, the pressure on companies to deliver growth and return to shareholders, as well as attracting and retaining the right senior leaders all present increasing challenges for the decision makers on executive pay.

Is our remuneration system competitive enough? Do we meet regulatory requirements? Are our variable remuneration systems and their underlying objectives set to deliver a sustainable pay-for-performance story? What is the best way to communicate our remuneration approach to shareholders? Sometimes it will not be possible to find a solution that meets the expectations of all stakeholders.

Nevertheless, to know what is expected, to be prepared for internal as well as external discussions and to find the right balance is key. The best way to get prepared is to start with some reliable facts. Our fifth report on the CEO pay landscape in the Eurotop 100 companies covers both, as it provides detailed insights into the European regulatory landscape, especially the impact of the Shareholders Rights Directive and an analysis on CEO pay levels and structures.

We hope that you enjoy reading the brochure and that it offers interesting insights for the future development of senior executive remuneration and the role of the Compensation Committee in your business.

Yours sincerely,

Hazel Rees, Practice Lead Executive Compensation Great Britain

Sven Slavenburg, Practice Lead Executive Compensation Western Europe

CEO pay landscape in the Eurotop 100Detailed insights into regulatory developments and CEO pay levels and structures

ContentIntroduction and highlights 2016 ....................................................................................4

Overview of the executive compensation landscape ........................... 7

Analysis of actual total direct compensation ............................................... 15

Incentive design ...............................................................................................................................23

Additional analysis ........................................................................................................................28

Information on data sample ................................................................................................ 31

Information on methodology ............................................................................................40

CEO pay landscape in the Eurotop 100 3

Content

Introduction and highlights 2016

4 willistowerswatson.com

�� Our 2017 report – the fifth we have published – covers 94 companies within the Eurotop 100 which had published their remuneration reports as at June 30, 2017.

�� Since our last report five companies have joined the index (CRH, LafargeHolcim, Kering, Safran, Standard Chartered) and five companies have left the index (Ericsson, Fresenius Medical Care, Luxottica Group, Telenor, Vivendi).

�� Please find a complete list of all Eurotop 100 companies as well as a list with all companies that had to be excluded in the actual total direct compensation analysis at the end of this report.

�� The median market capitalization of the complete Eurotop 100 increased by 18 % from € 39.3 billion to € 46.4 billion.

�� The analysis reveals that the CEO actual bonus as well as actual total direct compensation levels slightly decreased compared to the previous year.

Highlights 2016

126 % of base was the median actual bonus received, higher compared to the median target bonus opportunity (100 %) for performance in the last financial year (2015: 144 % actual and 100 % target).

5.4 million Euro is the median actual TDC level for the financial year 2016 (2015: 5.8 million).

163 % is the median long-term incentive expected value for awards granted in 2016 (2015: 163 %).

Annual bonus Long-term incentive

Total direct compensation

67 % of companies have shareholding policies (2015: 49 %). At median, the guideline level remains 300 % of base salary for the CEO.

Shareholding guidelines

Profit/income, indi-vidual & non-financial measures continue to be the most prevalent performance measures on STI plans.

68 %58 % 51 %

of companies require the executive to compulsorily defer bonus – typically 50 % of bonus paid.

50 %

TSR is the most common performance metric attached to long-term incen-tive plans (used in 59 % of LTI plans).

1,402million Euro was the median base

salary level for the CEO in 2016.

Compared to previous year

the median did not significantly

increase.

58 %of 65 companies

with the same CEO in position

for 2015 and 2016 increased

base salary levels. Among

the 65 companies the

average base salary change

was 8.5 %.

Base salary

188 % of base was the median maximum bonus opportunity level for the CEO – where disclosed (2015: 198 %).


Introduction and highlights 2016


Overview of the executive compensation landscape


�� While the key external factors shaping executive compensation landscape mostly remain the same, the Shareholder Rights Directive (SRD) will cause not only a fresh breeze, but also some significant changes throughout Europe with new disclosure requirements and increasing influence of shareholders as well as proxy advisors.

�� We are also seeing an increasing focus on pay fairness, which has largely been driven by public opinion. In this context, the discussion is not only focused on CEO pay ratios, but also on gender pay reporting and boards taking into consideration the views and interests of employees.

�� Whilst the SRD is unlikely to influence UK governance which is already at a relatively high standard, further proposed changes initiated by the UK Prime Minister will increase disclosure (pay ratio), requires consideration of employee views via changes to the corporate governance code for listed companies, and seek to establish a voluntary code for large private companies.

Regulatory Developments across Europe

Say-on-Pay

Pay-for- Performance

Alignment

Shareholder Rights Directive

Brexit

Long-term Focus

Proxy Advisor

Pay Caps

Pay Fairness

Comprehensive & Transparent

Disclosure



Recommended binding vote on policy and binding vote on incentive-based pay (no change). A trend towards more pay transparency and simplicity.

Binding vote on policy and variable pay (no change). No notable revisions to corporate governance code or increased disclosure in recent years.

Changes on disclosure, companies to define individual pay limits, women on boards, long-term variable pay shall be essentially forward-looking.

Cap on CEO pay for state-owned companies. Financial Services: 50 % variable pay cap. Revised company law and corporate governance code expected.

Pay practice restrictions; binding votes on fixed and variable pay.

Increasing pressure from regulators to obtain more detailed disclosure – stock exchange asking for improvement in 2017.

Financial Services: 20 % variable pay caps; General Industry: cap on LTI proceeds in CIC. New corporate governance code with a focus on simplification and disclosure of internal pay relativities.

Strict regulation on executive pay. New requirements recently announced include disclosure of pay ratios, strengthened consideration of employee views, publication of a list of companies who achieve < 80 % vote on pay resolutions. Corporate governance code to be revised, and a new code established for private companies.

New regulation introducing binding Say-on-Pay vote every year on both the policy (from 2017) and the elements granted (from 2018); Women on boards regulation.

Binding vote on policy, advisory vote on remuneration report, very high compliance rates on corporate governance code standards.



�� The SRD is a binding regulation that will cover all companies registered and listed in a EU member state.

�� The focus of the revised SRD is to strengthen shareholders’ engagement in large European

companies, to create a better link between pay and performance and to increase transparency.

�� The financial crisis revealed that shareholders in many cases supported managers' excessive short-term risk taking. The SRD is intended to address

this issue and contribute to the sustainability of companies, which will result in growth and job creation.

Shareholder Rights Directive (SRD)

2017Year of SRD approval

2018Year of implementation

2019Year of finalization and first adoptions

April/May June June Q4Q4 Q2 Q4

European Council adopted the directive on 3 April. At 20 May the directive was published in the EU Official Journal.

Discussions on remuneration with member states may start.

The Commission will likely publicly consult on guidelines during the 12 months leading up to the member states’ deadline.

In countries with fast implementation annual reports for financial year 2018 may already comply with the new rules.

It is expected that annual reports for financial year 2019 will comply with the new rules.

Membership states have to bring the local regulations into force by 10 June.

20 days after the publica-tion the SRD entered into force. The two year im-plementation clock started ticking at 10 June.

24 months implementation period



Implications of the SRD for Executive Remuneration

Remuneration Policy Remuneration Report

�� Will be subject to a binding vote at least every fourth year, or if any material changes emerge

�� Member states could decide to keep the vote advisory

�� Shall clearly explain how it contributes to the business strategy, long-term interests and sustainability

�� Any payments made to directors must be in accordance with the approved policy

�� Application of the policy in exceptional circumstances must be specified

�� Shall describe the different remuneration elements and their relative weight

�� Must in detail describe a varied set of KPIs for variable remuneration, and how KPIs are measured

�� Shall specify information on clawback possibilities and deferral periods

�� Must, for all share-based remuneration, specify how it contributes to fulfill the policy objectives

�� Vesting periods as well as retention rules should be defined

�� Indicates main terms of contracts, or arrangements, with directors

�� Shall be subject to an annual advisory vote* at the AGM. Consideration of the outcome should be included in next year’s report

�� Shall provide a detailed and clear overview of individual directors’ remuneration in the last financial year

�� Both new hires and leavers are to be included

�� Shall provide the following information for each director:

�� Total remuneration and mix of fixed and variable constituents

�� Details on how the pay structure comply with the policy and how performance criteria were applied

�� Five financial years development of: Annual director remuneration changes, average other employee (FTE) remuneration changes and company performance

�� Main conditions for any granted share-based remuneration (including amount, timeframes and, if applied, exercise price & rights)

�� Information on clawback possibilities

�� Will help shareholders assess the link between pay and performance

�� Any deviations from the policy should be addressed and explained

�� Minimum standardization requirements regarding format to be outlined by a set of guidelines specified by the Commission

* For small- and medium-sized companies, member states may provide the alternative of a discussion at the AGM rather than a vote.



The current disclosure practices show that the impact of the SRD will vary by country, but the need for en-hancements exists generally throughout Europe.

The UK disclosures won’t be impacted by the directive, as they are already close to SRD requirements.

Country

Current Disclosure Practice Impact of SRD on

disclosure practices

Individual disclosure of executive director pay

Remuneration report / standardized tables

FY / FL dataTarget achievement rate / description of

achieved performance

Detailed description of incentive schemes

Belgium CEO onlyStructured report, but no standardized tables

Remuneration paid for FY and proposed policy changes for next 3 years

Rarely disclosed Usually quite detailed High

DenmarkSome companies disclose individually

No formal remuneration report structure and no standardized tables

Remuneration paid for FY, no forward looking information

Sometimes disclosed Usually not very detailed High

FranceSometimes CEO only, due to board structure

Standardized report and tables for remuneration paid

Remuneration paid for FY and sometimes proposed policy changes for next year

Sometimes disclosed in full detail

Usually quite detailed Low

GermanyStandardized tables for granted and paid remuneration


Rarely disclosed Usually quite detailed Medium

Nether-lands

Structured report, but no standardized tables


Pressure for improvement

Usually quite detailed Low

ItalyStructured report and standardized-pay tables, although definition of pay elements not always clear

Remuneration paid for FY and proposed policy or implementation changes for next year

Rarely disclosedUsually detailed but with room for improvement

Medium

SpainSometimes CEO only, due to board structure

Structured report and standardized tables

Remuneration paid for FY and proposed policy changes for next year

Rarely disclosed Usually quite detailed Medium

Sweden CEO onlyNo formal remuneration report structure and no standardized tables

Remuneration paid and policy for FY and policy for next year (in AGM minutes)

Sometimes disclosed Usually not very detailed High

Switzer-land

Highest paid onlyNo formal remuneration report structure and no standardized tables


Sometimes disclosedUsually quite detailed with room for improvement

Low

UKStandardized pay table (single figure) with defined elements. Remuneration report is fairly structured

Remuneration paid for FY and proposed policy or implementation changes for next year

Usually good / full disclosure

Usually quite detailedVery close

to SRD

Current disclosure practice and impact of SRD



Say-on-Pay votes are not yet best practice in all European countries and influence of proxy advisors like ISS differs. In general a relation between ISS

recommendations and approval rates can be observed, however, sometimes the remuneration system or the report might actually be of poor quality. The following

analysis is based on companies listed in the respective top index.

Country

Current Say-on-Pay practice Influence of proxy advisors

ISS Recommendation FOR ISS Recommendation AGAINST

Binding Vote Advisory Vote NumberAverage

approval rateNumber

Average approval rate

Belgium –Annual vote on remuneration report each year (not on remuneration policy specifically)

High 7 93 % 10

75 %

DenmarkNon-annual binding vote on incentive-based pay (introduction and amendments)

Recommended vote on policy (introduction and amendments)

Low 16 ND 1 ND

FranceAnnual on policy (2017) and remuneration paid (2018)

On remuneration paid until 2017 (former regulation, applicable last time in 2017)

High 25 88 % 10

74 %

Germany –On shareholder request on remuneration policy (usually proactively in case of policy change)

Medium 2 89 % 6

59 %

Nether-lands

Introduction of new policy and significant changes of the existing policy

No advisory vote yet. However, the implementation of the remuneration policy is a discussion item at the AGM

Low 4 92 % 0 NA

ItalyFor banks – annual on policy and remuneration paid

For listed companies excluding banks – annual on remuneration policy

Medium 14 95 % 12

77 %

Spain Policy every three years Annual on remuneration paid Medium 23 90 % 11

72 %

SwedenAnnual on policy and on any share-related LTI plans

– Low 19 ND 10 ND

Switzer-land

Annual on aggregate compensation of Executive Committee

Best practice: advisory vote on compensation report, but no obligation to do so

Low 21 88 % 4

70 %

UK Policy every three years Annual on implementation / remuneration paid (proposal to make binding)

High 71 95 % 4

55 %

Impact on Say-on-Pay and influence of proxy advisors



�� Although the implementation clock just started ticking, everyone should be prepared and plan early to cope with new requirements as the directive will lead to:

�� Enhanced explanation of Pay-for-Performance processes

�� Development of new remuneration report structures

�� Preparation of detailed discussions in remuneration committees and supervisory board

�� Proactive communication with proxy advisors and institutional investors

Key takeaways based on experience with UK reporting regulations

� Plan early

� Engage all stakeholders in good time (HR, reward, finance, audit, cosec, legal, board)

� Engage shareholders and proxy advisors in good time

� Be prepared for changes during the drafting process

� It is an opportunity to improve communication and transparency. However, use caution regarding voluntary disclosures

� Don’t bury bad news

� Align your policy with share plan rules, service contracts, board meeting minutes, remember grandfathering clauses

So, maybe you want to consider the

following tips:



Analysis of actual total direct compensation


�� In contrast to last year where pay levels slightly increased, we observe stable median base salary and LTI expected value, but decreasing actual bonus payouts. The median actual total direct compensation level decreased from € 5.8 million by 6 % to € 5.4 million.

�� 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. In addition, the analysis only comprises those incumbents that have served in position for the full financial year.

�� Definitions of each of the pay elements in the table and details of our LTI valuation methodology are included in the end of this report.

Eurotop 100 CEO pay levels

Pay Element n*Chief Executive Officer

Average Lower Quartile Median Upper Quartile

Base Salary 80 € 1,592,245 € 1,200,000 € 1,401,500 € 1,921,691

Target Bonus (% of Base Salary) 76 108 % 80 % 100 % 125 %

Actual Bonus (% of Base Salary) 78 129 % 76 % 126 % 162 %

Maximum Bonus (% of Base Salary) 76 191 % 120 % 188 % 230 %

Actual Total Cash 80 € 3,535,558 € 2,438,821 € 3,356,315 € 4,334,274

LTI Expected Value (% of Base Salary) 65 205 % 96 % 163 % 257 %

Actual Total Direct Compensation 80 € 5,902,353 € 3,993,329 € 5,416,022 € 7,595,852

Revenues (millions)** 60 € 48,899 € 20,506 € 32,332 € 56,209

Employees** 80 120,075 57,426 99,522 141,608

Market Capitalization (millions)*** 80 € 64,742 € 37,137 € 47,181 € 78,704

* Indicates the number of companies that were contributing to the statistics.** Statistics of revenues, employees and market capitalizations include only those companies that have been part of the TDC analysis above.

*** Market capitalization as of 1 July 2017.



�� Movements in terms of ranking within the ten highest paid CEOs are minor. Most of the CEOs have been among the best paid or have been close to the top 10 in former years.

�� However, there have been some significant movements in actual TDC levels for some CEOs among the top 10: the actual TDC for the CEO of Reckitt Benckiser declined by 30 % as no bonus was paid out and the actual TDC for the CEO of SAP increased by 70 % due to a re-design of the overall compensation structure.

�� Among the bottom 10, companies smaller in size and those operating in regulated industries can be found. For those companies that have been among the bottom 10 in previous year changes are rather minor with limited downward or upward movements.

Top 10 and Bottom 10

Values in k €

Reckitt Benckiser

WPP UBS Group SAP Novartis Roche Holding Credit Suisse Group

Royal Dutch Shell

British American Tobacco

L’Oréal

12,072

14,420

10,787

13,256

10,628

12,298

10,288 9,817 9,439 9,313

Safran ENGIE Nordea Bank ING Groep Crédit Agricole Orange Investor H&M Glencore Statoil

1,9792,5101,8852,446

1,7932,042 1,557 1,415 1,308 1,176

n Top 10 n Bottom 10



�� Based on median actual TDC levels, Switzerland with four companies among the top 10 highest paid, remains in the leading position.

�� As in former years UK, Spain and Germany follow on ranks two to four, with stable median actual TDC levels for UK and Germany and a decrease in Spain.

�� Significant changes in Switzerland, Spain and Nordics are partly driven by index changes and/or changes in incumbents, i.e. CEOs that either could

not be included in 2015 or in 2016. Especially in countries with smaller data samples this might have a direct impact on median levels. However, in all three countries the changes in average actual TDC levels developed accordingly.

Median actual TDC analysis by country

Eurotop median 2016:5,416 k €

n 2016 n 2015

GermanySwitzerland ItalyUK FranceSpain Benelux

4,927(n=14)

5,061(n=13)

10,288(n=7)

8,764 (n=7)

4,028(n=4)

4,388(n=3)

7,393(n=23)

7,440(n=23)

4,322(n=18)

4,300(n=15)

7,183(n=4)

5,630(n=5)

3,998(n=5)

3,348(n=5)

1,799(n=6)

3,908(n=5)

Nordics

Values in thousands of EUR



�� All CEOs of Swiss Eurotop companies have actual TDC levels that are above the Eurotop median.

�� Especially in countries with a larger number of Eurotop companies the picture is more diverse, with companies paying below as well as above the Eurotop median.

�� In the UK 70 % of Eurotop CEOs have actual TDC levels above the Eurotop median, with the two highest paid CEOs of the Eurotop companies. However, due to the larger sample size also CEOs with lower actual TDC levels exist.

Deviation of actual TDC from Eurotop median by country

The analysis of actual TDC includes only those CEOs that have served in position for the full financial year and where information is disclosed in order to derive actual TDC. Changes in the index and/or incumbent might lead to higher deviations in year-to-year comparisons.

– 100 %

– 50 %

0 %

50 %

100 %

150 %

200 %

250 %

300 %

Spain

4 %

UK

37 %

Germany

– 7 %

France

– 20 %

Benelux

– 26 %

Italy

– 19 %

Nordics

– 67 %

The median of the Eurotop companies from UK lies 37 % above the Eurotop 100 median.

Switzerland

90 %

Eurotop median



�� Again the health care industry is leading in median actual TDC levels. All but one CEO received higher actual TDCs than the Eurotop median, however, this result is also driven by the small sample size, especially when compared to the consumer goods industry.

�� The consumer goods industry defends the second rank again this year, with four companies among the top 10 of the highest paid CEOs.

�� The change in median actual TDC level in the materials industry is based on movements in the data sample, whereas the decrease of median actual TDC in the utilities industry is based on decreases in actual TDC levels for the majority of the CEOs in this sample.

�� Please note that compared to previous reports we introduced new industry cuts for this year’s report. All illustrated data in this year’s report for 2015 and 2016 was analyzed based on identical new industry definitions.

Median actual TDC analysis by industry

4,261(n=6)

5,377(n=5)

7,743(n=8) 7,393

(n=9)

5,784(n=9)

5,152(n=8)

7,393(n=22)

7,250(n=22)

4,747(n=8)

4,939(n=7)

5,697(n=5)

5,578(n=5)

4,439(n=20)

4,792(n=15)

3,758(n=4)

4,612(n=4)

Eurotop median 2016:5,416 k €

n 2016 n 2015

MaterialsHealth Care Technology / Telecoms

Consumer Goods / Services

IndustrialsEnergy Financials Utilities

Values in thousands of EUR



�� In contrast to the analysis by country, the picture is a bit more diverse as high individual actual TDC levels can be found across the industries.

Deviation of actual TDC from Eurotop median by industry

– 100 %

– 50 %

0 %

50 %

100 %

150 %

200 %

250 %

300 %

Eurotop median

Health Care

43 %

Consumer Goods / Services

34 %

Technology / Telecoms

– 5 %

Energy

3 %

Financials

– 18 %

Materials

– 1 %

Industrials

– 12 %

Utilities

– 31 %

The median of the Eurotop companies operating in the Health Care industry lies 43 % above the Eurotop 100 median.

The analysis of actual TDC includes only those CEOs that have served in position for the full financial year and where information is disclosed in order to derive actual TDC. Changes in the index and/or incumbent might lead to higher deviations in year-to-year comparisons.



�� Incentive pay remains most significant in companies with high actual TDC levels. Consequently, CEOs of Eurotop companies in Switzerland and in the UK have the highest portion of long-term incentives in their pay mix.

�� In addition it needs to be considered that many of the Eurotop companies in Germany, Switzerland and in the UK also do have deferral schemes in place. Sometimes the deferral schemes also include additional perfor-mance conditions. These deferral schemes support a long-term orientation of total pay and are included in actual bonus payouts in the analysis.

�� This also needs to be considered with respect to the high actual bonus portion in Germany and in Spain. The data sample in Spain includes two financial services companies that do not operate a long-term incentive (LTI) plan, but have deferral schemes in place.

�� In Nordic countries a different pay structure is common with high base salaries and a very low portion of varia-ble compensation.

CEO average pay mix by country

The analysis of actual TDC includes only those CEOs that have served in position for the full financial year and where information is disclosed in order to derive actual TDC. Changes in the index and /or incumbent might lead to higher deviations in year-to-year comparisons.

11 %53 %36 %

37 % 49 % 14 %Spain

n Base Salary 2015 n Actual Bonus 2015 n Long-Term Incentives 2015n Base Salary 2016 n Actual Bonus 2016 n Long-Term Incentives 2016

UK46 %24 %30 %

27 % 26 % 47 %

Germany27 %41 %32 %

33 % 38 % 29 %

Switzerland38 %37 %25 %

France35 %35 %30 %

29 % 33 % 38 %

Benelux37 %26 %37 %

36 % 25 % 39 %

Italy26 %37 %37 %

41 % 44 % 15 %

Nordics20 %21 %59 %

46 % 34 % 20 %

25 % 38 % 37 %



Incentive design


�� Profit / income continues to be the most prevalent performance measure in STI plans. In general, the use of the different performance measures was stable over the last three years.

�� Across all regions the use of individual as well as non-financial performance measures has become common market practice to determine bonus payouts for the top cadre.

STI performance measures

95 out of the 97 Eurotop companies analyzed operate an STI plan. These companies operate a total of 98 STI plans; 88 companies disclosed details on the performance measures in use.

3 %TSR

8 %EVA / Company Value Measure

19 %EPS

15 %Operating Margin

45 %Cashflow

15 %Customer Service / Satisfaction

58 %Individual

3 %Dividend Growth

8 %ROCE

38 %Sales / Revenue

13 %Health & Safety

45 %Other Financial Measure

25 %Other Return on Measure

51 %Other Non-Financial Measure

68 %Profit / Income Measure

Prevalence of performance measures – % of 88 companies

– 5pp

– 6pp

+ 5pp

+ 9pp


Incentive design

�� The majority (60 %) of Eurotop companies focuses on one single long-term incentive plan. About 25 % have two and 2 % operate three different LTI plans. 13 % of Eurotop companies do not have any LTI plan in place.

�� Two thirds of the companies without LTI plans have bonus deferral schemes in place.

�� Performance shares / unit plans continue to be the most common LTI vehicle among Eurotop companies and are in general very often implemented across all European countries.

�� In countries like Germany and Sweden the LTI land-scape is more diverse. Long-term cash plans for ex-ample are common market practice in Germany and co-investment plans are often used in Sweden.

LTI plan types

The analysis is based on 84 out of the 97 Eurotop companies that operate an LTI plan for executives. A total of 112 LTI plans are operated across the 84 companies.

Prevalence of LTI plans – % of 84 companies

Performance shares / units

Stock Options / SAR Long-Term Cash Share matching

plansRestricted

shares / units

UK 25 2 3 1

France 20 2 3

Germany 5 4 6 2 2

Switzerland 9 1 2 3

Nordics 3 1 1 2 2

Spain 2 1

Italy 2 2 1

Benelux 3 2

85 %

18 % 15 % 14 %6 %

+ 7pp

– 8pp


Incentive design

�� The number of performance measures did increase over the past years. Especially a combination of three different performance measures gained in prevalence. Almost all LTI plans with three performance measures are performance share / unit plans.

�� TSR continues to be the most prevalent performance measure, but internal performance measures like profit, cash as well as return on measures start catching up.

�� LTI plans without performance measures are either matching plans or restricted share plans.

LTI performance measures

Number of performance measures – % of 104 plans

n None n 1 measure n 2 measuresn 3 measures n 4 measures n 5 measures

or more

11 %

5 % 8 %

17 %

31 %

29 %

– 11pp

– 5pp

+ 9pp

Performance measures – % of 96 plans

59 %TSR

26 %EPS

26 %Cash Measure

24 %Return on Measure

18 %Sales / Revenue / Turnover

16 %Other Financial Measure

15 %Other General Measure

6 %Other Operational Measure

17 %Market Measure

28 %Profit / Income Measure

+ 10pp

+ 8pp

+ 9pp

+ 5pp

The analysis on performance measures is based on 84 out of the 97 Eurotop companies that op-erate an LTI plan for executives. A total of 112 LTI plans are operated across the 84 companies. For two plans there are no details about performance

measures disclosed. Six plans have pre-grant conditions only – we have excluded those from the analysis.


Incentive design

�� Shareholding guidelines (SOG) are mainly used in UK, France and Switzerland.

�� 65 % of guidelines are expressed as a percentage of base salary. At median, guideline levels are 300 % of base salary for the CEO. 15 % of guidelines are defined as fixed number of shares.

�� Where disclosed, the time permitted to reach the guideline is typically five years.

Shareholding guidelines

Prevalence of Shareholding Guidelines – % of 98 companies

n Yes n No

67 %

33 %

UK

100 %

France

95 %

Switzerland

80 %

Benelux

40 %

Germany

33 %

Italy

33 %

Spain

27 %20 %

Nordics

All Eurotop 100 companies in the UK have SOG in place.

+ 19pp + 17pp + 10pp


Incentive design

Additional analysis


Our database covers over 1,000 companies across 14 countries in Europe

* This analysis includes long-term incentive expected values based on the Willis Towers Watson valuation methodology.** Note that in some countries a role-specific analysis is not possible as only highest-paid executive director is individually disclosed.

We can provide you with analysis for pan-European sectors or bespoke peer groups tailored to your specific requirements on a line-by-line and / or aggregate basis (for example by industry, by different markets and / or by company size).

Executive Directors’ Compensation

Incentive Design and Shareholding Guidelines

Chairman's and Non-Executive Directors’ Compensation

�� 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*

�� Short-term incentive performance measures and relative weightings

�� Short-term incentive deferral analysis

�� Long-term incentive vehicles

�� Long-term incentive performance 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 shareholding guidelines

�� Base / fixed fee levels

�� Chairmanship and membership fees for board committees (e.g. audit, remuneration, nomination)

�� Attendance fees and travel allowances

�� Other incentives and benefits

Analysis can be conducted by role, e.g. CEO, CFO, COO**


Additional analysis

Our database covers constituents of the following indices in the respective European countries

Ireland ISEQ 20

Italy MIB 40

Nordics OMX Sweden

UK FTSE 100 FTSE 250

Belgium BEL20 BELMID

France CAC 40 SBF 80

Spain IBEX 35 IBEX MID

Switzerland SMI SMI MID

Netherlands AEX AMX AScX

Germany DAX 30 MDAX SDAX TecDAX

+ all Eurotop 100 companies from Norway, Denmark and Finland.


Additional analysis

Information on data sample


Eurotop 100 – The sample

*** The current composition of the Eurotop 100 consists of 97 companies. The original Eurotop list consists of 102 constituents: BMW, Intesa Sanpaolo, Roche and Svenska Handelsbanken are listed twice (with different kinds of shares) and Christian Dior cannot be analyzed separately, due to its dependence to LVMH.

*** See appendix for details on CEOs that have been excluded from the analysis.*** Average exchange rates applied: 1 EUR = 1.09 CHF; = 0.82 GBP; = 1.11 USD; = 9.47 SEK; = 7.45 DKK; = 9.29 NOK.

of the 97* Eurotop 100 companies have published their annual report by June 30, 2017.

94CEOs have been part of the TDC analysis; 14 have been excluded because they have not been in office for the full financial year or due to insufficient disclosure.**

80All compensation levels are displayed in EURO. The data has been converted with average currency exchange rates for the year 2016.***

€

companies have left the index:

�� Luxottica Group

�� Fresenius Medical Care

�� Telenor A/S

�� Vivendi

�� Ericsson B

– 5companies have joined the index:

�� LafargeHolcim

�� Standard Chartered

�� Kering

�� Safran

�� CRH

+5



Eurotop 100 composition by country and industry – The analysis includes 97 companies from 11 countries

* Includes companies from Sweden, Norway, Denmark and Finland.** Includes companies from Belgium and the Netherlands.

About 65% of constituents in the Eurotop 100 are headquartered in UK, France and Germany.

4 %

5 %

8 %

9 %

9 %

10 %

27 %

27 %

Materials

Technology / Telecoms

Industrials

Utilities

Health Care

Energy

Financials

Consumer Goods

27 %

21 %

5 %**

10 %*

5 %

17 %

4 %

11 %



Eurotop 100 analysis by company data

Top 10 companies based on market capitalization

* According to market capitalization as of 1st July 2017, displayed in billion € (Top 10) and in million € (statistics).** Revenues are displayed in million €. Companies from financial industry are excluded from the revenue analysis.

LQ

Median

UQ

€ 17,314

€ 28,222

€ 51,978

Revenues **

Nestlé

237

192 191 187 172 161134

111 110 110

RocheRoyal Dutch Shell

AB InBev Unilever British American Tobacco

SAP LVMHNovartis HSBC

LQ

Median

UQ

€ 44,695

€ 89,126

€ 132,300

Employees

LQ

Median

UQ

€ 36,073

€ 46,424

€ 75,197

Market capitalization *



CEOs excluded from the TDC analysis

Incumbent Reason for exclusion

A.P. Møller-Mærsk Søren Skou Promoted during financial year and compensation not individually disclosed.

Atlas Copco Ronnie Leten Disclosed information not sufficient to calculate actual TDC.

AXA Thomas Buberl Promoted during financial year, data pro-rated.

BayerDr. Marijn Dekkers Leaver during financial year, data pro-rated.

Werner Baumann Promoted during financial year, data pro-rated.

BHP Billiton Annual report not published by the time of the analysis.

Compagnie Financière Richemont Richard Lepeu Disclosed information not sufficient to calculate actual TDC.

Danske Bank Thomas F. Borgen Disclosed information not sufficient to calculate actual TDC.

Diageo Annual report not published by the time of the analysis.

HenkelKasper Rorsted Leaver during financial year, data pro-rated.

Hans Van Bylen Promoted during financial year, data pro-rated.

LindeDr. rer. nat. Wolfgang Büchele Leaver during financial year, data pro-rated.

Prof. Dr. Aldo Belloni New Hire during financial year, data pro-rated.

Pernod Richard Annual report not published by the time of the analysis.

Rio TintoSam Walsh Leaver during financial year, data pro-rated.

Jean-Sébastien Jacques Promoted during financial year, data pro-rated.

Svenska HandelsbankenAnders Bouvin New Hire during financial year, data pro-rated.

Frank Vang-Jensen Leaver during financial year, data pro-rated.

Swiss Re Christian Mumenthaler Promoted during financial year, data pro-rated.

Syngenta J. Erik Fyrwald New Hire during financial year, data pro-rated.

UniCreditFederico Ghizzoni Leaver during financial year, data pro-rated.

Jean Pierre Mustier New Hire during financial year, data pro-rated.

Zurich Insurance Mario Greco New Hire during financial year, data pro-rated.



Eurotop 100 company list

* Excluded from the analysis. For more details, please refer to the section “CEOs excluded from the analysis”.

United Kingdom Market Cap (in mn €) Industry

Royal Dutch Shell 192,066 EnergyHSBC Holdings 160,569 FinancialsUnilever 133,703 Consumer StaplesBritish American Tobacco 110,709 Consumer StaplesBP 99,445 EnergyGlaxoSmithKline 90,384 Health CareRio Tinto* 76,296 MaterialsAstraZeneca 73,988 Health CareBHP Billiton* 71,251 MaterialsVodafone Group 65,994 Telecommunication ServicesDiageo* 64,835 Consumer StaplesReckitt Benckiser 62,301 Consumer StaplesLloyds Banking Group 54,057 FinancialsPrudential 51,600 FinancialsGlencore 46,589 MaterialsShire 43,472 Health CareBarclays 39,326 FinancialsImperial Brands 37,232 Consumer StaplesNational Grid 37,200 UtilitiesThe Royal Bank of Scotland Group 33,393 FinancialsBT Group 33,040 Telecommunication ServicesCompass Group 29,160 Consumer DiscretionaryStandard Chartered 29,072 FinancialsAssociated British Foods 26,344 Consumer StaplesCRH 25,896 MaterialsWPP 23,384 Consumer Discretionary





Benelux Market Cap (in mn €) Industry

AB InBev 187,008 Consumer StaplesING Groep 58,603 FinancialsASML Holding 49,056 Information TechnologyHeineken 48,497 Consumer StaplesPhilips 27,958 Industrials

France Market Cap (in mn €) Industry

LVMH 109,701 Consumer DiscretionaryTOTAL 107,785 EnergySanofi 102,355 Health CareL'Oréal 101,982 Consumer StaplesBNP Paribas 78,657 FinancialsAXA* 58,007 FinancialsAirbus 55,746 IndustrialsHermès 45,156 Consumer DiscretionaryVINCI 42,258 IndustrialsAir Liquide 41,870 MaterialsDanone 41,212 Consumer StaplesCrédit Agricole 40,041 FinancialsSociete Generale Group 37,672 FinancialsKering 37,656 Consumer DiscretionarySchneider Electric 37,442 IndustrialsOrange 36,948 Telecommunication ServicesSafran 33.358 IndustrialsENGIE 31.686 UtilitiesPernod Ricard* 30,979 Consumer StaplesRenault 23,124 Consumer Discretionary





Switzerland Market Cap (in mn €) Industry

Nestlé 236,524 Consumer StaplesRoche Holding 190,750 Health CareNovartis 171,953 Health CareUBS Group 55,190 FinancialsABB 46,971 IndustrialsCompagnie Financière Richemont* 40,823 Consumer DiscretionaryZurich Insurance* 38,386 FinancialsSyngenta* 37,461 MaterialsCredit Suisse Group 32,331 FinancialsLafargeHolcim 30,425 MaterialsSwiss Re* 26,584 Financials

Germany Market Cap (in mn €) Industry

SAP 110,078 Information TechnologySiemens 97,593 IndustrialsBayer* 93,693 Health CareAllianz 78,845 FinancialsBASF 75,234 MaterialsDeutsche Telekom 75,197 Telecommunication ServicesDaimler 67,793 Consumer DiscretionaryVolkswagen 67,564 Consumer DiscretionaryBMW 52,800 Consumer DiscretionaryHenkel* 48,581 Consumer StaplesDeutsche Post 40,500 IndustrialsContinental 37,859 Consumer DiscretionaryDeutsche Bank 32,199 FinancialsLinde* 30,897 MaterialsMünchener Rück 27,495 FinancialsFresenius Medical Care 25,938 Health Care





Spain Market Cap (in mn €) Industry

Industria de Diseño Textil 104,629 Consumer DiscretionaryBanco Santander 84,452 FinancialsBanco Bilbao Vizcaya Argentaria 48,413 FinancialsTelefónica 44,906 Telecommunication ServicesIberdrola 43,978 Utilities

Italy Market Cap (in mn €) Industry

Enel 47,722 UtilitiesEni 47,391 EnergyIntesa Sanpaolo 46,424 FinancialsUniCredit* 36,247 Financials

Nordics Market Cap (in mn €) Industry

Novo Nordisk 92,785 Health CareStatoil 47,462 EnergyNordea Bank 44,960 FinancialsAtlas Copco* 39,385 IndustrialsH&M 36,073 Consumer DiscretionaryA.P. Møller - Mærsk* 35,557 IndustrialsInvestor 31,930 FinancialsDanske Bank* 30,916 FinancialsNokia 30,327 Information TechnologySvenska Handelsbanken* 24,341 Financials



Information on methodology


By actual total direct compensation we mean …

The total expected value of all forms of long-term incentives awarded in the last financial year, calculated at the time of grant using the Willis Towers Watson LTI valuation methodology.

Long-term incentives (LTI)

The actual total annual bonus received in respect of the last financial year (including deferred bonus with and without performance conditions). Bonus

The base salary received in respect of the last financial year. Base salary

Actual total cash

Actual total direct compensation (TDC)



Willis Towers Watson LTI valuation methodology

In general terms, the reported LTI value represents the fair / expected value of an award as at the date of grant, taking into account the specific 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 using a binomial lattice model, based on a number of input assumptions (as set out in part 4). 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, we apply a discount factor to take into account any performance condition which must be achieved in order for the award to vest. This discount factor is country specific, based on our experience of the average proportion of an award that might typically be expected to vest, based on typical local performance condition calibration.

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.



Performance /restricted shares

�� The value of performance / restricted shares repre-sents 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 benefit of these), with a discount applied to take any applicable performance vesting conditions into account.

�� Where applicable, we apply a discount factor to take into account any performance condition which must be achieved in order for the award to vest. This discount factor is country specific, based on our experience of the average propor-tion of an award that might typically be expected to vest, based on typical local performance con-dition calibration.

Co-investment plans

�� Similar to deferred bonus matching plans, we as-sume that executives seek to maximize 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).

Deferred bonus matching shares

�� We assume that executives seek to maximize 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 part 2) – the face value used is the maximum match times the defer-ral applied to actual bonus earned in the year.

�� Please note that the deferrals are included as part of the annual bonus and are not valued as part of long-term incentives, whereas the matching shares are considered as long-term incentives.

Other award types

�� For complex or unusual plan types which do not fit 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 calcu-lated based on the average actual volatility experi-enced by each company over the three-year period to 1 January 2016. Where this historic average is likely to be unrepresentative of future volatility levels (for example, a business restructuring), an assump-tion 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 2016. Where this historic average is likely to be unrepre-sentative of future dividend yield levels, an assump-tion 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 2016.



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Willis Towers Watson serves as a best-in-class provider of practical advice, data resources and technical information to help clients develop and administer “best fit” compensation programs in the context of each organization’s business and reward strategy. We provide consulting services and customized information, including information and insights that may not otherwise be available

through public disclosures and generic surveys. We work collaboratively with management (both at headquarters and business units), boards of directors and compensation committees.

Legislation, regulations and the evolution of corporate governance have, in many cases, changed the executive compensation landscape and working relationships among management, the compensation committee and outside compensation advisors. We understand that there is no single model that works for every organization.

In light of each organization’s governance requirements and preferences, we can help define the right relationship structure to put the Willis Towers Watson difference to work for you.

Executive compensation consulting services



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developments. We found that each company approaches the design and governance of executive compensation programs in its own way. This is consistent with our

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Contact name Email Phone

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