Remuneration policy for the Board of Directors and the Board of Management of NKT A/S
1. Introduction
The remuneration policy of NKT Holding A/S for the Board of Directors and the Board of Management comprises principles for provision of remuneration and general guidelines for provision of incentive pay for the Board of Directors and the Board of Management, cf. Section 139 of the Danish Companies Act. The "Board of Management" refers to the executive board notified to the Danish Commerce and Companies Agency.
NKT Holding A/S uses provision of remuneration to the Board of Directors and provision of remuneration and incentive pay to the Board of Management with the object of ensuring coincidence of interest between the Company's Board of Directors, Board of Management and shareholders, and with the object of constantly maintaining the motivation of both Boards for achieving the targets set by the Company.
In accordance with section 139 of the Danish Companies Act the Board of Directors has formulated general guidelines for the Company's provision of incentive pay to the Board of Directors and the Board of Management and has submitted these guidelines for approval by the Company in general meeting.
2. Principles for remuneration of the Board of Directors and the Board of Management
Board of Directors
The Board of Directors considers the director's remuneration at frequent intervals based on recommendations from the Chairman of the Board. During the formulation of these recommendations the Chairman is guided by relevant comparisons with other large Danish companies. The directors' remuneration for the current year is approved as a separate item on the agenda at the general meeting. Proposals for changes to the directors' remuneration will be notified at the general meeting prior to adoption of the remuneration.
Each member of the Board of Directors receives a fixed annual fee. Ordinary Board members receive a fixed amount (basic fee), while the Chairman and Deputy Chairman receive multiples thereof: the Chairman receives 3.0 x the basic fee and the Deputy Chairman receives 1.5 x the basic fee.
Participation in the Audit Committee entitles Board members to an additional fee: The Chairman of the Audit Committee receives 2/3 x the basic fee and other members of the Audit Committee receive 1/3 x the basic fee.
Expenses such as travel and accommodation relating to Board meetings and relevant training are reimbursed.
The Board of Directors shall not receive any incentive pay.
Board of Management
Proposals concerning the remuneration to the Board of Management are submitted by the Remuneration Committee. Proposals for remuneration are dealt with and decided by the Board of Directors.
The remuneration of the Board of Management is considered annually in relation to that of other large Danish companies with international operations.
The remuneration package consists of a fixed basic salary, a short-term cash bonus, a long-term share-based incentive scheme, a pension and other benefits.
Fixed basic salary
The Board of Management's fixed basic salary consists of a fixed annual cash wage.
Incentive payment
Provision of incentive pay to the Board of Management takes place in accordance with the guidelines stated in section 3.
Pension
The pension contribution for the Board of Management comprises 15% of the fixed basic salary.
Other benefits
The Board of Management receives special non-monetary benefits such as company car, phone, etc. Expenses incurred by the Board of Management relating to travel, conferences, training etc. are reimbursed.
Severance pay
The period of notice for the Company's Chief Executive is 24 months. For other executives the period of notice is 12 months. In connection with significant changes in the Company's ownership structure the above notice periods are extended for a transitional period by 12 months. No other retirement benefit plans apply to the Company's Board of Management.
3. General guidelines on incentive pay for the Board of Directors and the Board of Management
NKT Holding A/S has utilized incentive pay for the Board of Management for a number of years, whereas the Board of Directors does not receive incentive pay. These guidelines on incentive pay therefore relate solely to the Board of Management.
Incentive programmes for the Board of Management may consist of pay by share options, warrants, phantom shares and bonus agreements.
The Company has hitherto utilized warrants and bonus agreements as incentive pay for the Board of Management.
Warrants
At the decision of the Board of Directors the Board of Management may annually be granted warrants with a value comprising up to 50% of the individual executive's fixed annual salary including pension. The value of the warrants granted is calculated using the Black & Scholes formula.
No consideration is payable for the warrants, and the warrants may be granted on terms entailing favourable taxation for the individual executive, the related costs not being tax-deductible for the Company.
The warrant conditions may prescribe that the warrants may be exercised for subscription of shares not earlier than three years and not later than six years after the date granted. The exercise price shall at least be equivalent to the average market price for the Company's shares in the month prior to date granted, unless the Board of Directors determines another exercise price which is responsible in market terms. It may be decided to add a hurdle rate to the exercise price for each year until exercise takes place. The Board of Directors may decide to compensate the warrant holders for disadvantage arising through changes in the Company's capital structure or resulting from submission of a purchase offer for the Company's shares.
Shares necessary for compliance with a warrant programme may be obtained by issue of new shares.
Bonus payments
An annual bonus may be paid to the individual executive subject to fulfillment of conditions, targets and terms stated in the bonus agreement.
The criteria for granting of bonus may be the achievement of specified sales or earnings targets or completion of special one-off tasks such as significant acquisitions or divestments etc.
On the basis of a bonus agreement an executive may each year receive a bonus payment corresponding to 15% of the fixed annual salary. Furthermore, the Board of Directors may in special cases decide to award an extraordinary additional bonus of up to 100% of the fixed salary. The value of the total yearly granted bonus will appear in the Company's Annual Report.
Specific agreements
Specific agreements on remuneration with the Board of Management or changes to existing agreements may only be entered into within the framework of the present guidelines. Agreements or changes thereto not falling within the framework of these guidelines must be approved by the General Meeting before becoming effective.
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These guidelines were submitted to and approved by the General Meeting on 23 March 2011.