Remuneration report

The following remuneration report from the Supervisory Board describes how the remuneration policy was put into practice during the past financial year. The report includes summaries of information concerning remuneration received in 2016 and also contains a summary of the remuneration policy for the coming financial year and subsequent years. 


The Remuneration Committee is a permanent committee of the Supervisory Board and consists of at least two members of the Supervisory Board. The Remuneration Committee is subject to rules established by the Supervisory Board. At the end of the year under review it consisted of Mrs Mahieu (Chairwoman), Mr Elverding and Mr Noy. The composition of the Remuneration Committee is in line with the provisions of the Code. The Remuneration Committee met two times during the past financial year. The committee members consulted with each other a number of times outside the context of a formal meeting. 

Beginning 2016 the salaries were benchmarked against the labour market reference group by external remuneration advisers (Hay Group). Based on the results the Supervisory Board, based on a proposal by the Remuneration Committee, decided to adjust the salaries of the Executive Board per 1 January 2016. The salary of the CEO has been increased from €620,000 to €680,000 in order to bring him closer to the median of the reference group. The salaries of the other members of the Executive Board were adjusted from €470,000 to €480,000 in line with general salary increases.

A summary of the remuneration of the individual members of the Executive Board can be found in > tables 55 and 60. No other compensation was awarded to members of the Executive Board in the financial year other than the compensation indicated in > tables 55 and 60. 

Annual variable remuneration and long-term remuneration for the members of the Executive Board 
The members of the Executive Board were awarded 60 per cent annual variable remuneration in relation to the financial and non-financial targets from the short-term incentive plan. The targets related to performance on the Group’s financial priorities, measured by adjusted profit before tax, working capital and cash flow, to performance on safety, measured by IF, and strategy implementation. 

The conditional performance shares granted to the members of the Executive Board under the long-term incentive performance share plan in 2016 are stated in > table 60. 

The company has not awarded any options to members of the Executive Board, members of operating company management teams or employees. The remuneration of the Executive Board members is not affected by a change of control at the company. No loans were issued to members of the Executive Board. 

The Supervisory Board did not see any reason during the financial year to use its extraordinary powers to adjust or reclaim variable or long-term remuneration that had already been awarded. 

Remuneration of the Supervisory Board members 
The annual remuneration for the members of the Supervisory Board, in accordance with the policy adopted at the General Meeting on 7 May 2008, is €50,000 for the Chairman, €45,000 for the Vice-Chairman and €40,000 for the other members of the Board, with an additional remuneration of €5,000 for each member who is on one or more committees set up by the Supervisory Board. The Chairman and the other members of the Supervisory Board receive an annual fixed expenses allowance of €3,280 and €1,640 respectively. The remuneration and fixed expenses allowance are paid on a quarterly basis. 

As a policy the Company does not award any options or shares to members of the Supervisory Board. This was also the case in 2016. The remuneration of the Supervisory Board members is not affected by the company’s results, nor by any change of control at the company. No loans were issued to members of the Supervisory Board. 

Remuneration policy 

The Supervisory Board draws up the company’s remuneration policy based on advice from its Remuneration Committee. The General Meeting adopts the remuneration policy. Once the remuneration policy has been adopted, the Supervisory Board determines the remuneration for the individual members of the Executive Board, again on the basis of recommendations of its Remuneration Committee. The Remuneration Committee’s regulations are published on BAM’s website. The members of the Executive Board received remuneration in the past financial year in line with the remuneration policy adopted by the Annual General Meeting on 22 April 2015 after a review of the remuneration policy for the Executive Board in light of the Back in Shape programme and by taking into account developments in market best practices since the previous update. 

Design principles 
The remuneration policy is geared to attract and retain qualified people and motivating them to achieve Royal BAM Group’s objectives. Particular emphasis is placed on experience with the Group’s (international) activities and the necessary management qualities. In the design of the policy and in determining the remuneration levels of the members of the Executive Board, the Supervisory Board has benchmarked the several remuneration elements against market standards. Also the internal pay differentials have been taken into account, as well as scenario analyses which were used to determine possible outcomes of the variable remuneration elements, including the maximum value of the long-term incentive. The remuneration structure and elements take into account that risk-taking beyond the risk profile of the company should not be encouraged.

The policy is also aimed at stimulating profitable growth and long-term value creation, to motivate individuals and to increase the attractiveness of the company to highly qualified executives, including those from other industries, so as to interest them in Royal BAM Group as an employer. The remuneration level and structure are partly based on the development of results, as well as other developments that are relevant to the company, including non-financial indicators which are relevant for the company’s long-term objectives.

In order to achieve these design principles, remuneration is set at a competitive level for the relevant national general remuneration market for directors and other senior managers of large companies. The Supervisory Board will regularly review the remuneration package to ensure that it complies with the assumptions underlying the remuneration policy. The remuneration policy will also be evaluated regularly; changes in the policy will be put forward for adoption at the General Meeting.

Remuneration level
The Supervisory Board uses external benchmark information to assess market comparability of the remuneration levels. Remuneration levels are aimed at the median of a labour market reference group of sixteen companies as listed in > table 52. The reference group was selected based on industry, ownership structure, geographical business scope and size parameters. 

52 Reference group

The incentive levels are presented in the > table below:


53 Remuneration level


Remuneration package
The remuneration of the Executive Board consists of four elements:

a. Fixed remuneration;
b. Short-term incentive (STI);
c. Long-term incentive (LTI);
d. Post-employment benefits and other secondary conditions of employment.

Ad a. Fixed remuneration
The Supervisory Board determines the development of the annual fixed remuneration of the individual member of the Executive Board. The annual evaluation and change in fixed remuneration generally take place per 1 January of each year. The evaluation considers personal performance, the results of the past year, the extent to which the current fixed remuneration deviates from the benchmark and general changes in the market.

Ad b. Short-term incentive
To ensure continued alignment between the short-term incentive and BAM’s strategy, flexibility with respect to the STI metrics is important to enable adequate responses to the challenges the Group is facing. The Remuneration Committee annually selects two to three financial metrics for the STI of the members of the Executive Board. It also determines their relative weighting.

The financial metrics will be chosen from the following list:

1. (Adjusted) profit before tax 
2. Operational result (EBIT) 
3. Working capital 
4. Cash flow
5. Cash conversion
6. Cost reduction
7. Divestments

The selected metrics link remuneration with a focus on BAM’s financial priorities. As specific targets for each of the metrics may qualify as sensitive information, these will in principle not be disclosed.

Seventy per cent of the STI is based on financial criteria (as outlined above), the remaining thirty per cent is linked to non-financial performance targets. Performance incentive zones are defined for each of the targets. Pay-out gradually increases with performance, starting with a pay-out of 35 per cent of the target opportunity at threshold performance and potentially going up to 75 per cent pay-out at maximum performance per individual target. Below threshold there will be zero pay-out. The Supervisory Board sets the performance ranges (i.e. threshold, at target and maximum performance levels) and corresponding payout levels, with the constraint that the STI payout will not exceed 75 per cent of fixed remuneration. 

After the end of the financial year, the Remuneration Committee determines to what extent the performance targets have been met. The Supervisory Board, following a proposal from the Remuneration Committee, will decide upon the variable remuneration to be awarded over the past financial year.

In cases in which the variable remuneration is awarded on the basis of inaccurate (financial) data, the Supervisory Board has the right to adjust the variable remuneration accordingly, and the company is entitled to reclaim (any part of) the variable remuneration paid to a member of the Executive Board on the basis of incorrect (financial) information.

In the case of new awards of variable remuneration to members of the Executive Board, based on quantified performance criteria, the Supervisory Board has the right to amend the awards in relation to the level of previous years if it considers that this would otherwise lead to an unreasonable outcome.

The Supervisory Board also has the power to amend the existing conditional awards of variable remuneration based on quantifiable performance criteria if, in its opinion, applying the criteria without amendment would have an unreasonable and unintended outcome. These matters have been incorporated into the management agreements of the Executive Board.

Ad c. Long-term incentive
Executive Board members participate in a performance share plan. The performance shares are conditionally awarded subject to performance testing after three years. The number of performance shares at award date is calculated by dividing the award value by the average closing price of BAM Group shares on Euronext Amsterdam based on the five-day average closing price after AGM. The maximum value at the moment of vesting of the LTI is capped at 2.5 times the award value in order to avoid inappropriate payouts.

There are two financial performance measures, being total shareholder return and ROCE and one non-financial measure, being CDP ranking. Realised performance results in a vesting percentage for each of the three performance targets, each determining one third of the vesting of the conditionally granted shares. The TSR measure will also operate as a ‘circuit breaker’ for the vesting part linked to the other two criteria. When BAM Group ranks at the bottom two places of the TSR peer group, the other parts will not pay out regardless of the performance in this area.

Minimum share ownership requirements: for the CEO this amounts to hundred per cent of fixed remuneration and for the other members of the Executive Board this amounts to 75 per cent of fixed remuneration. In accordance with the code the three-year vesting period will be followed by a two-year lock-up period. Participants are not allowed to divest any shareholding until the two-year lock-up period has lapsed and the above minimum share ownership requirements are met, with the exception of any sale of shares during the lock-up period required to meet any tax obligations and social security premiums (including any other duties and levies) as a consequence of this performance share plan.

54 Long term incentive plan

TSR is defined as the share price increase, including dividends. TSR is measured over a three-year period based on a three-month average period before award and vesting date. The relative position within the peer group determines the vesting percentage. The TSR peer group comprises of Balfour Beatty, Boskalis, Carillion, Heijmans, Hochtief, Eiffage, Skanska, Strabag, Vinci, YIT (and BAM). The composition of the TSR peer group is being evaluated on a periodic basis, among other things, in light of corporate events.

Realised performance against those targets is assessed by using performance incentive zones. For excellent performance, the number of performance shares per individual target that may vest may amount to a maximum of 150 per cent of the ‘at target’ number of performance shares. This percentage may be reduced to zero (on a sliding scale) for non-achievement of the individual targets. The performance incentive zones are presented in the tables below.

The value of the performance shares – as the combined result of the number of performance shares that will vest and the share price at the moment of vesting – that will become unconditional to a participant will at vesting never exceed two and a half times the award value.

The authority to implement the long-term incentive plan is vested in the Supervisory Board. The Supervisory Board has the right to change or terminate the scheme at any time. If the Supervisory Board decides to terminate or make material changes to the long-term incentive plan, the next General Meeting will be asked to adopt a resolution to that effect. Upon a decision of the Supervisory Board, following a proposal from the Remuneration Committee, the company has the discretionary power to fully or partially reclaim from the participant who is member of the Executive Board the conditionally awarded performance shares as well as vested shares (or any benefit resulting therefrom) where those have been awarded on the basis of incorrect information concerning:

(i) The achievement of the performance conditions concerned or; 
(ii) Events or conditions on which the shares were conditionally awarded.


55 The performance incentive zones

In case of announcement of a public offer for shares in the company as referred to in Article 5 of the Takeover Decree (Besluit openbare biedingen Wft), the provisions of Article 2:135 (7) of the Civil Code shall apply. In accordance with this article, the company (based upon a resolution of the Supervisory Board, following a proposal of the Remuneration Committee) will reclaim from a member of the Executive Board payment in kind or in cash of any increase in value referred to therein.

At the discretionairy request of the Supervisory Board, the company’s independent auditor will check the calculations carried out and conclusions reached in connection with the long-term incentive plan, in which case the independent auditor’s assessment will be binding.

Ad d. Post-employment benefits and other secondary conditions of employment 
With respect to pensions, sector regulations are adopted wherever possible, with surplus schemes based on defined contributions and contributions from the participants. Members of the Executive Board are subject to a pension scheme and transitional arrangements as applicable within the Group from 1 January 2006 for all comparable employees following the introduction of the Act of Parliament concerning early retirement, pre-pension and life-course savings schemes (Wet VPL). The costs of trend-based indexation of underlying pension rights have been included in the pension contributions with effect from 2009. The company does not have any early retirement schemes. Due to the nature of the management services agreement no pension arrangements were made with regard to Mr Bax, who instead will receive a contribution for his personal pension arrangements.

As for all the other employees, the Group has a competitive package of secondary conditions of employment for the members of the Executive Board. This package includes such matters as healthcare and disability insurance, personal accident insurance, a car scheme and reimbursement of personal expenses. The Group does not give loans, warrants and the like to members of the Executive Board or to other employees, except for the arrangements set out below.

Current and former members of the Supervisory Board and current and former members of the Executive Board are covered by the indemnity, under the Articles of Association, against claims made against them in respect of actions or omissions in the performance of the duties of their position, unless said actions or omissions constituted wilful, deliberately reckless or seriously culpable conduct and/or consisted of traffic offences. This facility also applies to all employees and former employees of BAM. The company has taken out directors’ and officers’ liability insurance under standard market terms and conditions for the members of the Supervisory Board, the members of the Executive Board, the members of the operating company management teams and all other directors and officers in BAM.

Period of appointment and management services agreements
Members of the Executive Board are appointed for a period of four years. The members of the Executive Board have a notice period of six months for the company and three months for the members. The company regards a notice period of three months suitable for a member of the Executive Board.

The relationship between the members of the Executive Board and the company changed as of 1 January 2013 with the introduction of the Management and Supervision (Public and Private Companies) Act (Wet bestuur en toezicht). As such, the employment relationship between new members of the Executive Board and the company will not be classified as a contract of employment. As of the above-mentioned date, new Executive Board members are appointed by means of a management services agreement. This is the case for Mr Bax with whom a management services agreement has been negotiated. In the course of 2016, the employment contracts of the other members of the Executive Board were changed into management services agreements as well.

If the company terminates the management services agreement of a member of the Executive Board, the maximum severance payment will be one year’s fixed remuneration. 

The company has no other remuneration provisions, beyond the remuneration package mentioned above, nor are there any other rights to one-time payments.

Securities rules
The company has rules relating to the possession of and trading in securities. These rules are published on the company’s website and also include regulations for members of the Executive Board and the Supervisory Board relating to the possession of and trading in securities other than those issued by the company.

Remuneration policy for 2017 and subsequent years

The remuneration policy described above will remain in effect in the financial year 2017 and subsequent years. No material changes in the remuneration policy are planned in the coming period.

Supervisory Board 

Bunnik, the Netherlands, 20 February 2017 

Executive Board remuneration 

56 Fixed remuneration57 tm 59

60 tm 62