Annual Report 2011

Remuneration principles

2.3 Elements of the Executive Committee's compensation

2.3.1 Compensation programme 2011 for the Executive Committee

The compensation model includes fixed and variable elements, whereby for the determination of the variable part of the compensation, no other targets than the ones mentioned in the description of short- and long-term incentive plans are relevant:

  • base salary, taking into account market conditions for comparable functions and positions;
  • social charges, pension plan contributions, and fringe benefits;
  • short-term incentive plan, based on annual, ambitious and transparent performance objectives;
  • long-term incentive plan, including performance share awards based on ambitious internal and external performance objectives and restricted share unit awards.

Base salary: the annual base salary represents payment for due job performance and is determined by the Company, based on the findings of the benchmark studies (see section 1. “Determination of remuneration principles and compensation”), taking into account comparable functions and positions, considering amongst other elements, the number of employees reporting to the function, revenues generated under the function, additional responsibilities beyond the typical scope of the function. The base salary rewards employees for performing day-to-day responsibilities and reflects job characteristics, seniority, experience and skill sets. It is paid in cash, typically in monthly instalments, and is set according to local practice designed to provide the Company’s employees with fixed compensation to ensure an appropriate standard of living relative to that offered by reference companies. The annual base salary also serves as the basis for determining the variable compensation.

Social charges, pension plan contributions, and fringe benefits: social charges and pension plan contributions are awarded based on local regulations and practices. Fringe benefits include amongst other items car allowance for private use, car lease financed by the Company, membership fees, house allowance, relocation, education, health insurance, representation allowance, and tax equalisation payments (for one member of the Executive Committee).

Short-term incentive plan (STIP): the STIP is a cash incentive programme (annual bonus). For members of the Executive Committee with geographical responsibility, 35% of the STIP bonus base is related to the EVA of the Company and 65% is related to the EVA for the relevant financial year at geographical level. For the members of the Executive Committee who do not have direct responsibility for a specific geographical area, the entire STIP is based on the EVA of the Company for the relevant financial year. The STIP bonus base for members of the Executive Committee ranges between 60% (2010 programme: 50%) and 100% of the participant‘s base salary, and has been determined by the NCC upon proposal of the CEO and of the Chief Human Resources Officer taking into account the participant’s function and responsibilities. For 2011, the entitlement to the STIP based bonus is limited at 150% (2010 programme: 120%) of the STIP bonus base, resulting in a cap at 150% (2010 programme: 120%) of the base salary for the highest paid member of the Executive Committee.

Long-term incentive plan (LTIP): under the LTIP, performance share awards were granted in 2011 to members of the Executive Committee. Performance share awards contain an undertaking to deliver a number of Adecco S.A. shares to the participants of the plan after the end of the performance period (end of performance period for the 2011 awards: December 31, 2013), provided and to the extent that certain employment conditions and performance targets are met. In addition to the performance share awards, as a further component, restricted share unit awards (“RSU awards”) have been awarded in 2011.

The LTIP target bonus base amount is defined as a percentage of the participant’s base salary. Such percentage depends upon the participant’s function and responsibilities and has been determined by the NCC upon proposal of the CEO and of the Chief Human Resources Officer. For members of the Executive Committee, the percentage ranges between 60% (2010 programme: 45%) and 120% (2010 programme: 120%) of the participant’s base salary. 65% of the LTIP target bonus base is allocated to RSU awards and 35% to performance share awards, i.e. total shareholder return (“TSR”) awards. Of these 35%, half is allocated to relative TSR awards and half is allocated to absolute TSR awards. Furthermore, an additional 17.5% of the LTIP target bonus base is allocated to the additional TSR awards. Certain country specifications apply for participants in France.

The LTIP is subject to certain reclaim provisions in case benefits were acquired by involvement in fraudulent behaviour or intentional misconduct.

Performance share awards
In 2011 and in 2010, performance share awards granted consisted of relative TSR awards, absolute TSR awards, and additional TSR awards. The additional TSR awards will vest if relative and absolute TSR performance reach a certain level of achievement.

The performance targets relate to the change in Adecco S.A.’s shareholder value, measured as the total shareholder return taking into consideration reinvested dividends. At the end of the performance period, the performance is measured, determining whether and to which extent the performance targets have been achieved. Any TSR performance adjustments are at the discretion of the NCC. Upon approval of the NCC, the awards vest accordingly in favour of the respective participants, and all restrictions on the awards are lifted (for the awards granted in 2011: not before March 15, 2014). Those awards which do not vest, lapse immediately.

Participants who terminate their employment with the Company at their own will, and those who receive notice of termination for cause before the end of the performance period, will no longer be entitled to the vesting of the awards. In case of an involuntary termination without cause, a time-weighted pro rata portion of the unvested performance share awards will vest at the regular vesting date depending on the level of target achievement.

The maximum number of performance share awards under the LTIP that may vest in favour of the members of the Executive Committee after the end of the performance period is indicated in the table under section 3.5.2 “Share awards”.

Relative TSR awards measurement principles: the Adecco S.A. TSR over the performance period of approximately three years is compared with the weighted-average TSR of a predefined group of peers. The composition of the peer group is determined by the NCC and, for 2011, comprised the following companies: Alten, Altran Technologies, Assystem, Brunel International, CDI Corporation, Hays, Kelly Services, Kforce, Manpower Group, Meitec, Michael Page International, On Assignment, Pasona Group, Randstad Holding, Resources Connection, Robert Half International, Robert Walters, SFN Group (formerly Spherion Corporation; performance measured up to Q3 2011), Sthree, Temp Holdings, TrueBlue, and USG People. The performance targets for the relative TSR awards have been determined by the NCC as follows: with an Adecco S.A. TSR lower than the weighted-average TSR of the peer group, there will be no entitlement to a vesting of the relative TSR part of the award. With an Adecco S.A. TSR that exceeds the weighted-average TSR of the peer group, the participants will be entitled to the vesting of performance share awards to the following extent: if the positive difference between Adecco S.A. TSR and the weighted-average TSR of the peer group is between 0 and 5 percentage points, awards will vest in a linear mode between 0% and 100% of the number of awards granted. The entitlement is capped at 100% of the relative TSR part of the award.

Absolute TSR awards measurement principles: in case the performance of the Adecco S.A. TSR, measured as the compound annual growth rate (”CAGR”) in Adecco S.A.’s shareholder value, including reinvested dividends, exceeds a certain target over a period of approximately three years, awards will vest in a linear mode between 50% and 100% of the number of awards granted depending on the level of target achievement and overachievement. The performance targets for the absolute TSR awards have been determined by the NCC. These targets are set for a specific business year and are considered highly confidential as they would allow competitors to understand the objectives of the Company. They are not published in order to protect the business secrets.

Additional TSR awards measurement principles: if at the end of the performance period, the performance target of the absolute TSR awards is fully achieved and the performance target of the relative TSR awards is overachieved, additional TSR awards will vest, depending on the degree of overachievement of the relative TSR awards target. If the positive difference between Adecco S.A. TSR and the weighted-average TSR of the peer group is between 5 and 10 percentage points, additional TSR awards will vest in a linear mode between 0% and 100% of the number of awards granted.

RSU awards
RSU awards contain an undertaking to deliver a number of Adecco S.A. shares to the participants of the plan. The vesting of the awards is not subject to performance conditions but to employment conditions. Provided that the employment relationship continues, RSU awards will vest in equal portions over a period of three years at the anniversaries of the grant.

Participants, who terminate their employment with the Company at their own will, and those who receive notice of termination for cause before a vesting date, will no longer be entitled to the vesting of the RSU awards. In case of an involuntary termination without cause, a time-weighted pro rata portion of RSU awards will vest at the regular vesting date.

The maximum number of shares under the RSU award part of the plan that may vest in favour of the members of the Executive Committee is indicated in the table under section 3.5.2 “Share awards”.

2.3.2 Compensation programme 2012 for the Executive Committee

The NCC has decided to continue the existing compensation programme for the Executive Committee, as described under section 2.3.1 “Compensation programme 2011 for the Executive Committee”.