APC 2015 Annual Report Download - page 154

2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC152
CORPORATE GOVERNANCE
3INTERESTS AND COMPENSATION OFGROUP SENIOR MANAGEMENT
In 2015, this variable part of cash compensation for Executive
Committee members who are in charge of a business is determined
as follows:
–45% based on Group economic criteria component. These
criteria are based on organic sales growth (15%), adjusted
EBITA (15%) and cash conversion targets (15%);
–For 30%, a component comprising criteria that are in line with
the Schneider is On company program and onCSR , evaluated
among other things through customer satisfaction, services
development or simplifi cation, development and succession
plan of key talents as well as trends in Planet & Society
Barometer );
–25% based on the achievement of their measurable personal
goals.
In 2015, this variable part in cash for Executive Committee members
who are in charge of a business is determined as follows:
–80% based on the Group’s economic performance (operating
margin, organic growth, cash conversion ratio) and on their
respective business as well as on the completion of the
Schneider is On company program (customer satisfaction rate,
solutions development, employee development) andCSR ;
–20% based on the achievement of their measurable personal
goals;
• Align with shareholder interests.
To enable alignment with shareholders’ interests, grant of a long-term
incentive is contemplated which is entirely subject to performance
condition.
Performance shares represent more than 50% of compensation
package of executive offi cers and members of the Executive
Committee.
The level of achievement of the performance conditions is reviewed
by the Human Resources & CSR committee . Details of these
performance shares are set out on page 281 . In 2015, the criteria
selected are:
1. for 70%, a target operating margin of Adjusted EBITA for the
2015/2016 period;
2. for 15%, a level of achievement of the Planet& Society Barometer
targets at the end of 2016;
3. for 15%, a level of achievement of the ROCE for the 2015/2016
period.
Performance shares, which play a considerable role in retention,
are allocated based on the benchmark market and performance of
each benefi ciary.
In order to reinforce this alignment, for long-term incentives
implemented as of 2016, the period during which performance
conditions is appreciated is brought from two to three years
and four performance criteria are provided instead of three (see
chapter 8) :
1. a target operating margin of Adjusted EBITA for the 2016/2018
period (40%),
2. an objective of cash conversion rate for the 2016/2018 period
(25%),
3. a level of achievement of the Planet & Society Barometer at the
end of 2018 (25%),
4. a TSR objective linked to Schneider Electric ranking in a panel of
12companies by end of 2018 (20%),
7.2 Pension benefits
This section is included in the Chairman’s report to the board of
directors.
The Group’s Senior Management, subject to the French Social
Security system, excluding corporate offi cers, are covered by
the supplementary defi ned-contribution pension (article 83) plans
for employees and/or Group Senior Management. They are also
covered by a defi ned-contribution pension plan (article39), but this
plan was canceled in December 2015, with an effective date of
March23, 2016.
As a reminder, this plan comprised two schemes:
One scheme for members of the Executive Committee in offi ce
before July1, 2012 which provided for a pension supplement of
a maximum amount equal to 60% (1) of the difference between the
average reference salary (i.e., the average of the basic salary and
of the performance incentives during three calendar years prior to
retirement) plus the total benefi t amounts granted under external
plans (compulsory and other plans, where applicable). The pension
plus the additional pensions from defi ned-contribution plans could
not exceed 25% of the average reference salary. This scheme
also provided for, under the contingency section, (i) an annuity for
the spouse if the executive die s before the retirement age, and (ii)
entitlement to a supplementary pension from the executive’s sixtieth
birthday in the event of disability occurring during work activities.
A second scheme put in place in 2012, which provided for the
progressive acquisition of rights according to seniority of the
Executive Committee, to which was then added, if applicable,
rights acquired by virtue of seniority in the Group. The progressive
scale for acquiring rights enabled newcomers to the Group to
reach maximum rights after 15 years’ service. The new scheme
was contingent upon completing a career in the Company with the
same fl exibility introduced by Social Security administration in 2004.
Therefore, conditional assurance of an income was maintained in
case of board termination or redundancy, producing the same
effects as employee redundancy, after 55 years of age without
restarting an activity or for 2nd or 3rd category disability as defi ned
by Social Security without restarting an activity. In other cases, the
new plan included the provisions of the closed plan (fi rst scheme),
notably:
•a spouse’s pension if a senior executive die s before retirement
age, which is, however, limited to rights acquired by the date of
death;
•the pension supplement paid to a Senior Manager from the
retirement date after disability occurring during work activities.
Group Senior Managers, who are not covered under the French
Social Security system, are covered by pension plans in line with
local practices in their respective countries.
(1) The maximum amount is defi ned as follows: 50% if the number of years of service is less than or equal to fi ve years, plus 1% per year starting
in the sixth year of service for Senior Manager status.