Members of the Board of Directors are not granted stock options or stock awards. However, employee-elected members hold a limited number of stock options in Novozymes A/S due to Group-wide employee stock option programs.
Executive Leadership Team
The Board of Directors wishes to incentivize the Executive Leadership Team to ensure continued positive development of Novozymes and, as a result, good value creation for Novozymes’ shareholders. The Board finds that the best results are achieved when a relatively high proportion of an executive’s total remuneration is dependent on achievement of the executive’s individual targets and Novozymes’ financial, social and environmental targets.
The Executive Leadership Team’s remuneration comprises a base salary, pension, a cash bonus scheme, stock-based incentive programs and other benefits (car, telephone, etc.).
Compared with Novozymes’ peers, the variable part of the total remuneration (cash bonus and stock-based programs) is relatively large in relation to the base salary.
The Board of Directors has set the fixed base salary for members of the Executive Leadership Team at a level slightly below the average for a sample of comparable Danish companies. In 2015, the ratio between the CEO’s compensation and the median
employee’s compensation was 48, which is below the average ratio of 55 for the 800+ companies assessed by RobecoSAM in 2015.
The Executive Leadership Team has a defined contribution pension scheme, with the pension contribution representing between 25% and 30% of base salary and cash bonus. The maximum annual cash bonus is equivalent to five months’ fixed base salary plus pension and is dependent on achievement of individual targets and the company’s operational targets for financial, social and environmental performance.
An incentive program covering the period 2014-2016 has been established for the Executive Leadership Team. The program is a combination of stock and stock options, with half of the incentive program allocated in stock and half in stock options.
The stock options will be granted annually, while the stock will be allocated in January 2017. Achievement of a cumulative economic profit of DKK 5.0 billion over the three-year period will result in 80% of the program being awarded, while cumulative economic profit of DKK 5.5 billion or more over the three-year period is required for the full program to be awarded. If the economic profit for the period is below DKK 2.5 billion, no stock or stock options will be granted. Between these three points, stock and stock options will be granted proportionally.
The general purpose of the program is to ensure that the members of the Executive Leadership Team are incentivized in such a way that there is a focus on long-term growth and earnings at Novozymes, in order to ensure that shareholders’ interests are met as best possible.
As a result of this program, 641,735 stock options were granted to the Executive Leadership Team in 2014, and 463,749 in 2015. Stock options will also be awarded in 2016. Furthermore, 282,152 shares may be released in January 2017, and dividends from
these shares during the three-year period will be used to buy additional shares. Combined, these shares will give the maximum number of shares that can be released in January 2017.
As the incentive program is based on achievement of cumulative targets for economic profit in the three-year period, the final number of stock options and shares granted will not be known until the end of the program in January 2017. The fair value of the program on the grant date was DKK 134 million, which will be expensed over a six-year period assuming that the target is met and the maximum-value clause does not come into effect.
These assumptions were unchanged at year-end, and DKK 34 million was expensed in 2015.
Remuneration paid to individual members of the present Executive Leadership Team: