1. The starting point for the company’s management remuneration policy
The Group Board of Schibsted ASA (“Schibsted”) views the employees as the Group’s most important resource and focuses on the Group offering competitive conditions in order to attract and retain skilled employees. The company’s human resource policy covers several factors, including the pay and pension conditions, working environment, various development programmes and more traditional employee benefits. The management remuneration policy is part of the company’s human resource policy.
2. Who is covered by the guidelines
The guidelines for determining the manager’s remuneration are decided on by the Group Board and apply to remuneration to managers. Schibsted’s Group CEO and Group management are directly covered by the guidelines. The guidelines are also normative for the remuneration of other senior managers and management groups in the Group’s core activities in Norway and abroad.
3. The period for which the declaration applies
The declaration applies for the coming financial year, cf section 6-16 a) (2) of the Norwegian Public Limited Companies Act. The Group Board will base its work on this declaration following discussions at the Annual General Meeting on 11 May 2012.
4. The main principles of the company’s management remuneration policy
The fixed salary of the Group’s managers is perceived to be moderate. This also forms the basis of the Group Board’s assessment of various additional benefits as parts of the managers’ total remuneration.
The Group’s further growth and profitability depend on the employees’ efforts to ensure the continuous development of the operations and improvement in profitability. To motivate managers to make such efforts, variable pay and other incentive schemes are linked to factors that the managers themselves can influence. These schemes must appear reasonable in relation to the Group’s results and value creation for the shareholders that year.
4.1. Fixed salary
The fixed salary (the gross annual salary before tax and before variable pay and other additional benefits have been calculated) is to be an important part of the manager’s salary.
The increase in fixed salaries is expected to be moderate in 2012.
4.2. Directors' fees
Employees do not receive directors’ fees for Board appointments they accept as part of their work for the Group. Employee representatives are not covered by this rule.
4.3. Benefits in kind and other special schemes
Senior executives will normally be given the benefits in kind that are common in comparable positions, i.e., telephone expenses, a laptop, free broadband connection and use, newspapers, a company car or car allowance and free parking. There are no special restrictions on the type of other benefits that can be agreed on.
The Group’s manager-loan scheme was wound up in 2006 and has not been offered to new managers since then. This scheme entitled managers to a loan of NOK 400,000-800,000 in return for a charge on the borrower’s home. Schibsted ASA has posted an unconditional guarantee of NOK 5m for the total loan portfolio, which currently represents approximately NOK 12m.
4.4. Variable pay and other incentive schemes
Guidelines have been established for the use of variable pay and other incentive schemes in the Group. The Group Board believes there is a need to be able to offer various incentive schemes in order to ensure long-term value creation and entrepreneurship. Such incentive schemes may consist of short-term incentives (normally annual) and long-term incentives (normally three-year).
4.4.1. Short-term incentives
Senior executives take part in an annual variable pay programme which is linked to the attainment of targets each year. Other Group employees may also take part in such schemes. The variable pay is limited to a maximum of six months’ salary for the Group CEO and varies from four to six months’ salary for other members of the Group management. For the top manager/editor in chief of larger units, the payment in one year is normally limited to four months’ salary. For other employees that take part in short-term incentive schemes, the limit is normally three months’ salary.
The variable pay is to be in two parts, one which is to be linked to financial criteria and another which is to be linked to strategic and operational criteria. These criteria form part of an overall assessment.
The payment of variable pay to senior executives for the 2011 financial year is shown in note 27 to the financial statements.
4.4.2. Long-term incentive schemes
The objective of having multi-year incentive schemes is to promote long-term value creation in the companies by contributing to key Group managers owning more of the Group so that the management and shareholders share the same interests.
Schibsted’s options programme was replaced by an annually revolving three-year performance-based share purchase programme (the ”LTI programme”) in 2010. The introduction of an LTI programme for a large group of managers means that we have common rules for the use of incentive schemes in much of the Group, both in and outside Norway. The use of the LTI programme in a lot of the Group also leads to administrative savings and creates greater predictability and equal treatment in the Group. The LTI programme provides settlement in Schibsted shares, mainly based on the performance and target attainment of the individual participant’s company during the three-year period. The ownership of Schibsted shares promotes common goals and contributes to greater cooperation between the companies.
Dedicated incentive programmes may still be relevant for select companies in the Group, especially in growth and start-up companies. Such programmes will also be long-term, but may contain elements of cash settlements in addition to settlements in Schibsted shares.
The main elements of the Schibsted LTI programme:
Schibsted's LTI programme is divided into three participation levels. Level 1 is for the Group CEO, Level 2 is for members of the Group management, while Level 3 is for selected key personnel in the Group as well as the managers/management groups in important subsidiaries. For each level, the participants are given a defined “Basic Amount” that is calculated as a percentage of their fixed salary. The Group Board has stipulated guidelines for the percentage to be allocated to the various participant levels in order to ensure that managers are flexible and mobile while also taking into account individual pay differences and variations in the compensation schemes of companies in and outside Norway.
One third of the Basic Amount (the ”Share Purchase Amount”) is to be awarded when the programme starts in the form of Schibsted shares and this has a lock-in period until the programme expires (3 years). If a level 1 or 2 participant leaves the company during the lock-in period, shares that were bought for the Share Purchase Amount are to be handed back. No corresponding restriction applies to level 3 participants.
The rest, i.e. 2/3 of the Basic Amount (the ”Performance Amount”) is linked to three-year performance criteria - profit targets. At the end of the three-year period, the participants receive settlement in Schibsted shares based on their goal attainment, and the number of shares is calculated based on the average price during the programme’s three-year period. The maximum settlement after three years will depend on the target achievement during the period. If the minimum target is not achieved during the three-year period, only the Share Purchase Amount will be paid at the end of the three-year programme.
The Group Board determines the allocation to the CEO. Other allocations are determined by the CEO within the programme’s frameworks and in compliance with the Board’s allocation guidelines. The CEO’s allocations are reported to the Board. Allocations under the programme take place subject to the approval of the Annual General Meeting that year and thus normally by the end of the first half of the individual start-up year.
Guidelines apply to the adjustment of the profit targets during the measurement period. The final outcome of the LTI programme is determined by the Group Board.
There is not normally any partial accrual if a participant leaves the company during the accrual period. An exception applies to the Share Purchase Amount for level 3 participants and in general if a participant leaves the company due to illness, death, early retirement, normal retirement or other special reasons. In such cases, the right to partial accrual is granted.
Level 1 and 2 participants will not be able to sell their shares in the market until further defined requirements as to the minimum ownership of Schibsted shares are met. The minimum ownership requirements vary depending on the allocation level. The minimum ownership requirements do not apply to level 3 participants.
The final cost of the LTI programme in an individual year depends, among other things, on the number of participants, the individual participant’s salary on the allocation date, share price developments and the target achievement during the three-year period. The cost of the LTI programme in 2012, with 66 participants, is estimated to be around NOK 38.6 million if the expected target achievement takes place, excluding employers’ contributions. If the maximum outcome is achieved, the cost is estimated to be around NOK 63.5 million (excluding employers’ contributions). If the goal attainment is below the minimum requirement, the cost of the programme will only relate to the Share Purchase Payment and equal around NOK 12.9 million (excluding employers' contributions).
In addition to the overall framework for the current LTI detailed above, in 2012 Schibsted will evaluate whether to introduce a bespoke version of the LTI programme for managers in companies within Schibsted Classified Media. The adaptations in the LTI programme may include defining other performance criteria, which has the potential of significantly increasing each participant's pay-out from the LTI programme. The goal of such a bespoke version of the LTI programme will be to ensure that Schibsted offers terms that are conducive to recruiting and retaining attractive managers in international communities in which there is stiff competition for workers.
5. Pension schemes
The Group Board regularly assesses the Group’s pension solutions to ensure that these are reasonable and well balanced. The pension solutions are assessed in light of the overall remuneration offered to Schibsted Group managers in the form of fixed salary, additional benefits, annual variable pay, participation in long-term incentive programmes and other benefits. The overall remuneration is to be competitive with that offered to managers in comparable jobs and functions in other companies with which the Schibsted Group wishes to compare itself.
The Group CEO and other senior executives in Norway are, like other employees, members of the Group’s company pension schemes, see note 21 to Schibsted’s consolidated financial statements.
The Group CEO and other senior executives in the Group have individual pension contracts which mainly entitle them to an early retirement pension from the age of 62 (early retirement pension) and thereafter a lifelong retirement pension as well as a disability pension, child pension and spouse/cohabitant pension in addition to those in the national insurance scheme. The pension costs linked to senior executives in Schibsted ASA are stated in note 27 to the financial statements. During 2012, the Group's pension scheme for new managers in Norway will be a defined-contribution scheme. This is considered to be in line with market developments and will over time contribute to reducing the Group's pension costs.
The Group’s senior executives who are based in Sweden mainly have defined contribution pension insurances which ensure them benefits in line with those of Norwegian senior executives as from the age of 62 years. The Group Board is of the opinion that the current schemes for senior executives based in Sweden are adapted to the market and these schemes will be continued in 2012 without any major changes.
The pension level and solution for senior executives outside Norway and Sweden are to be viewed in connection with the individual manager’s overall salary and employment conditions and are intended to be comparable to the overall solution for managers in Norway and Sweden. Local rules linked to pension legislation, social security rights, tax, etc., are taken into account when shaping the individual pension contracts.
6. Termination payment schemes
The Group CEO is entitled to a termination payment equal to 18 months’ salary in addition to the six-month period of notice. The other Group management and senior executives are normally entitled to termination payments equal to 6-18 months’ salary, depending on their job level. A prohibition against competition and scaling down provisions normally apply during the termination payment period.
7. The effects on the company and shareholders of agreements entered into or amended in 2011
The Board believes that the guidelines for share-based remuneration promote value creation in the company/Group and that the effects on the company and shareholders are positive.
Oslo, 16.th April 2012
The Board of Schibsted ASA