Logo stampa
 

Remuneration components

Overview

The structure of the remuneration package foreseen for the various offices is defined with a view to balancing its fixed and variable components, taking into account the Company’s specific risk profile.

The basic components involved in retribution for Hera executives are as follows:

ComponentObjective and characteristicsImplementation
Fixed compensationRecompenses professional and managerial technical skillsCompensation profile assessed on the basis of performance, experience, level of responsibility, internal consistency with respect to the evolution of the
organisation, and market benchmarks
Short-term variable compensationEncourages the achievement of strategic and financial objectives as well as the adoption of behaviours consistent with the corporate leadership modelAssignment of individual objectives linked to the Group's Balanced Scorecard system for executives and executive directors
Deferred variable compensatione for retaining managersRetention measure for executives with strategic roles, high performance and high market riskReference period: three years. Bonus accrued in relation to the Group's results and the evaluation of the individual development process.
Non-monetary benefitsAn integral part of the salary package, predominantly welfare and social security in characterDefined in accordance with industry
standards and relevant company policies
CompensationSeverance compensation for the purpose of protecting the interests of the companyIn the event of early termination or revocation of the office of Director

 

 
 
  • The fixed component of compensation is usually determined by the professional specialization and the organizational role along with related responsibilities. It is therefore a reflection of technical,
    professional and managerial skills.
    The levels of the fixed component of remuneration are established with respect to the specific nature of the company and its risk profile, so as to guarantee the ability to attract and retain talent with the professionalism the Group requires.


    Fixed remuneration


    For each executive, the reference salary level is determined on the basis of the weight of the organizational position held, on the basis of which a benchmarking comparison is carried out in relation to selected external markets. The benchmarking, carried out by an external company, takes into consideration a total of 232 companies, 35% of which are Italian and 65% foreign. 14.6% of the companies have more than 5,000 employees.
    These benchmarks are drawn from specialized, sector companies that carry out remuneration surveys, surveys in which the Group participates. On the whole, the remuneration level chosen as a reference point is in the medium band for the market (first quartile/median). These market references, combined with an evaluation of performance and managerial ability, form the basis of individual compensation reviews.



    Remuneration


    The differences between the salaries applied and those defined by labour agreements are due not only to previously established economic standards but also the amount of seniority in age (with an average of 52.2 years) and time spent within the Group (with an average of 17.9 years).

  • The scope of the BSC system extends to include all Hera S.p.A. and Group subsidiary company Directors and Executives. The scope includes 46 Directors and 106 Executives. A similarly arranged evaluation form is also envisaged for the Chairman and the CEO. The short-term variable remuneration envisaged by the BSC system involves an amount expressed as a percentage of the fixed gross annual salary (RAL), divided by category of recipient:

    • Chairman and CEO: 40% of the RAL
    • Directors : 25% of the RAL
    • A-class executives: 22% of the RAL
    • B-class executives: 17% of the RAL

    Executives are expected to have a maximum of two separate variable remuneration levels, based on the weight of the manager within the organization and the strategic value of the executive's duties.


    The Committee defines a target at the beginning of each reference period and for each objective. The amount of the bonus to be paid to each recipient is determined according to whether the set targets are actually reached (result) and the specific weight of the individual objective.


    The result of the evaluation carried out using the aforementioned individual BSC system is weighted through a company results profile, which takes into account the performance recorded by the Group with reference, for 2018, to four parameters:

    • EBITDA
    • Net Profit
    • Net Financial Position (PFN)
    • Customer Satisfaction Index (ICS)

    On the basis of the performance profile achieved by the company on these four parameters, the weighting percentage to be applied to the individual individual results is defined in a range from 115% of the bonus (in the event of performance beyond that set out in the established company targets) and 40% of the bonus (in the event that performance is signficantly below set company targets) according to the following scheme:


    Weightinh class

    Each parameter is evaluated separately. The weighting percentage is determined by calculating the weighted average of the percentage values that come from the results of each individual indicator. All the indicators in class D cause the weighting percentage to be reduced to zero.


    The maximum variable, short-term bonus, expressed in percentage terms of fixed gross annual salary, varies according to the results of the incentive system and the office held by the recipient, specifically:

    • For the Executive Chairman and Chief Executive Officer: a maximum variable remuneration of 46% of the total fixed gross remuneration [(46%) = maximum individual variable (40%) x maximum company weighting (115%)];
    • For directors: a maximum variable remuneration of 28.8% of the total fixed gross remuneration [(28.8%) = maximum individual variable (25%) x maximum company weighting (115%)];
    • For executives: there are two distinct levels of maximum variable remuneration based on the weight of the exective within the organization and the strategic importance of the executive's tasks, equal to 25.3%, respectively [(25.3%) = maximum individual variable (22%) x maximum company weighting (115%)] of the total fixed gross remuneration and 19.6% [(19.6%) = maximum individual variable (17%) x maximum company weighting (115% )] and of the total fixed gross remuneration.

    The following table shows a summary of the maximum variable compensation for the various categories of recipients (in the event of maximum individual performance and outperformance of all corporate targets):

    Position heldMaximum company weighting (A)Maximum individual variable (B)Maximum variable compensation (AxB)
    Chairman and Chief Executive Officer115%40%46%
    Directors115%25%28.8%
    A-class executives115%22%25.3%
    B-class executives115%17%19.6%


    The BSC system entails a series of quali-quantitative assessments for the Directors/Executives listed below:

    1. a quarterly assessment that is also shared in the management review (Management Committee):
    2. the most important strategic projects are evaluated in terms of the progress made, the obstacles that might cause a possible slowdown of the project and what might be done to resolve them;
    3. any instances of outperfomance are taken into consideration during the revised budget;
    4. the assessment of projects is quali-quantitative
    5. the evaluation of behaviors in keeping with the model takes place with the recipient's superior, who specifically assesses the executive's behavior according to the 8 dimensions identified by the leadership model:
      1. Energy and decision
      2. Realization
      3. Cooperation
      4. Influence
      5. Exellence and simplification
      6. Complexity management
      7. Innovation
      8. Valorization of people

    This assessment system encourages management not only to achieve the individual targets set, but also to implement behaviors that give rise to intangible value inside and outside the organization, important for granting greater strength and concreteness to the company's values in the daily work of all employees.


    The table below illustrates the mechanism for measuring the bonus of a director:

    ComponentDescriptionExample: outperforming company targets and achieving the maximum individual assessmentExample: achieving company targets and maximum individual assessment
    AAnnual gross salary (EUR)100,000100,000
    BTarget bonus (100% RAL)25%25%
    CTarget bonus (EUR) = A x B25,00025,000
    DIndividual pbjectives achieved (%)100%100%
    ECompany performance weighting coefficient (%)115%100%
    FValue of the bonus paid (EUR) = C x D x E28,750 EUR25,000 EUR


    With regard to transactions of strategic importance of an exceptional nature, with significant effects on the results of the company, the Board of Directors, following the proposal of the Remuneration Committee, can award discretionary bonuses to executive directors and management with strategic responsibilities. This discretionary bonus has never been awarded to either the Chairman or the CEO.

  • In 2016 the Board of Directors approved the application of a retention plan for a limited number of managers, taking into account the weight of the organisational position, the evaluation of the performances obtained in the area of the development process, and age.


    The Board of Directors has also deemed it appropriate to set up an annual evaluation mechanism for accessing and renewing/not renewing the aawarding of the monetary plan.


    This decision was supported by the evaluation of a series of elements:

    • since the moment in which Hera was established, the Group has grown significantly in terms of corporate size, geographical areas served and final results;
    • as regards its executive management, the Group has reached a composition that is the result of carefully balancing the entrance of new proficiencies coming from the market and specifically valued competencies already present;
    • the Group now enjoys a strong reputation and high market visibility, and it is therefore appropriate to set into place highly selective retention actions for those executives who hold strategic roles and display both high performance and high market risk

    From the point of view of keeping remuneration in line with performance, the retention plan encourages a commitment to "developing individual managerial skills" and the achievement of the "strategic objectives of the Group" in a three-year perspective.


    The evaluation parameter of "developing individual managerial skills" considers the level achieved by recipients in the three-year period in relation to the eight dimensions identified by the leadership model:

    1. Energy and decision
    2. Realization
    3. Cooperation
    4. Influence
    5. Exellence and simplification
    6. Complexity management
    7. Innovation
    8. Valorization of people

    If the recipient shows maximum achievement in each of the eight dimensions mentioned above in the three-year period, the level of individual managerial skills is included in calculating the bonus dictated by the retention plan at a maximum value of 100%.


    The incentive awarded in 2016 matures over 2016 - 2017 - 2018 and is disbursed in 2019 For the Chief Executive Officer, the maximum three-year incentive value is 100% of the fixed annual remuneration (RAL) in the event that he/she outperforms corporate targets over the three-year period.


    For the rest of Group management covered by the retention plan, the maximum three-year incentive is 100% of the fixed gross annual salary (with an annual quota equal to 33% of the fixed gross annual salary) or 50% of the fixed gross annual salary (with an annual share of 17% of fixed gross annual salary); variations in the amount of bonus assigned to various recipients is based on the weight of their organizational position, the performance evaluation they achieved as part of their development process and the "market risk" involved.


    The evaluation parameter of "developing individual managerial skills" does not apply to the Chief Executive Officer, as these same evaluation elements are considered to already be expressed by the achievement level of Group KPIs.


    If both company performance and managerial skills are found to be below the expected level, the result will be 0%. Intermediate achievement levels between 0% and 100% are also envisaged, depending on different combinations of company performance and managerial skills achievement.


    The calculation model for the maturation of the annual retention plan quota and of the bonus to be paid after the end of the reference three-year period is shown below.


    Annual quote maturity

  • In line with best practices, they also receive D&O Liability insurance coverage against civil responsibility towards third parties as well as insurance coverage for professional and extra-professional accidental injury and death. Executives who hold specific organizational positions are also to be assigned a company car for business and personal use.


    Furthermore, beginning in 2017, an incentive plan was introduced, linked to the achievement of the Group's corporate objectives, that involves paying out welfare quotas that can be spent on the services included among those of the existing corporate welfare plan.


    Payout is directly linked to the level of achievement of the Group KPIs already used as to weight the results of the BSC system following a scheme which, for each individual indicator, allows the bonus to be accessed only if performance exceeds the target associated with that indicator.


    Each indicator is evaluated separately. The overall result is determined by calculating the weighted average of the percentage values that come from the results of each individual indicator.


    The maximum value, on achieving 100% of plan objectives, is 6% of the individual theoretical variable, namely:

    • executive members: there is a maximum social bonus equal to 6% of 40% of the total gross fixed remuneration (equivalent to 2.4% of the RAL);
    • directors: there is a maximum social bonus equal to 6% of 25% of the total gross fixed remuneration (equivalent to 1.5% of the RAL);
    • executives: there are two separate levels of maximum social bonus, equal to 6% of 22% of the total gross fixed remuneration (equivalent to 1.3% of the RAL) and 6% of 17% of the total gross fixed remuneration (equivalent to 1% of the RAL), respectively;

    Furthermore, in keeping with the implementation of the Group welfare plan launched in 2016, access to a Flexible Benefit plan was established for all Group employees, involving the allocation of 385 euro in 2018.


    Finally, the entire non-managerial population of the Group is allowed to convert up to 50% of the corporate performance bonus into the goods and services included as part of the corporate welfare plan.

  • The Committee defines a target at the beginning of each reference period and for each objective. The amount of the bonus to be paid to each recipient is determined according to whether the set targets are actually reached (result) and the specific weight of the individual objective.

    The short-term incentive system involves assigning an individual BSC for each of the recipients. Each BSC includes a series of objectives belonging to three evaluation areas:

    • objective-oriented projects, defined according to the Group's Strategic Map, including projects aimed at enhancing the Corporate Social Responsibility profile;
    • economic objectives of the individual budget units, evaluated through economic-financial type indicators;
    • evaluation based on the extent of adoption of the nine types of behaviour set out in the leadership model adopted by the Group.

    Each area is divided into a series of pre-set objectives, each with a specific performance indicator. The relative weight of each area under the scope of the individual BSC is different for Directors and Executives, and corresponds to the total of the weight of the individual objectives belonging to the same area.


    Regarding the deferred variable compensation, to keep the remuneration in line with the performance, the retention plan encourages a commitment to "developing individual managerial skills" and the achievement of the "strategic objectives of the Group" in a three-year perspective.
    The evaluation parameter of "developing individual managerial skills" considers the level achieved by recipients in the three-year period in relation to the 8 dimensions identified by the leadership model (Energy and decision; Realization; Cooperation; Influence; Excellence and simplification; Complexity management; Innovation; Valorization of people).


    For the 2019-2021 three-year period, the retention plan is to evolve in terms of the parameter relating to the "strategic objectives of the Group"; three-year KPIs have been introduced that differ from those of the short-term incentive plan (BSC) and which further enhance the ability to create and share value, as well as further consolidating the Group's culture of financial solidity in the long term.


    In particular, as established by the Board of Directors on 19 December 2018 meeting, following the proposal by the Remuneration Committee, this evolution is based on the following new elements:

    • change of objectives → differentiate the elements of evaluation of the Long-Term Incentive Plan from those of the Short-Term one (BSC);
    • modifying the disbursement Plan → for current recipients, limit the risk of them abandoning their positions at the moment of the May 2019 pay-out;
    • updating the list of potential recipients in line with the general criteria applied to 2018.

    With regard to the first macro area (change of objectives), the proposed new structure aims to increase the bonus in proportion to the degree to which the set objective has been achieved.


    Consequently, for the 2019-2021 three-year period, the type of objectives set was modified through the use of three new parameters (weighted equally):

    • economic-financial indicator: Economic Value Added (EVA) or the cumulative target value for the 2019-2021 three-year period, equal to the difference between NOPAT (Net Operating Profit fter Taxes) and WACC (Weighted Average Cost of Capital) for the capital invested;
    • the year-end relationship as of 2021 between the Net Financial Position and EBITDA;
    • the target percentage of Created Shared Value (CSV) on EBITDA at the end of the 2021 financial period.

    The following diagram shows the Group's long-term strategic objectives for the new retention plan as compared to those used in the previous version:


    strategic objectives

  • Resignation, lay-off or termination of the employment relationship
    With the renewal of the Board of Directors that took place as part of the Chareholders' Meeting held on 27 April 2017, a clause was inserted for Executive Directors establishing that, in case of removal from office (except for cases of just cause), he or she will be paid an amount, as compensation for damages, comprehensive of any other claim, equal to the sum he or she would have received as remuneration, pursuant to art. 2389 of the Civil Code in the amount of 18 monthly salaries.
    As far as executive directors are concerned, termination compensation includes the notice required by the national labor contract.


    Claw-back clause
    With the renewal of the Board of Directors that took place as part of the Chareholders' Meeting held on 27 April 2017, the claw-back clause was inserted that establishes ex-post corrective mechanisms for the exective directors' remuneration system.


    This clause entails the obligation to return already paid-out variable components of remuneration (or to withhold sums subject to deferral) determined on the basis of data that subsequently proved to be incorrect, and is effective from the date of appointment throughout the entire duration of the term; the request to return funds can be made once the relevant assessments have been completed, within three years of disbursement in relation to the year in which the instance occurred.

In line with its highly conservative risk profile, Hera has chosen not to make use of volatile financial instruments such as option rights or other similar instruments.

The Group does not use benefit policies involving the distribution of stock options to its own employees.

The table below summarises the remuneration components awarded to directors and the general manager.

PositionFixed remunerationShort-term variable remunerationDeferred variable remuneration for management retentionNon-monetary benefitsCompensation
ChairmanSpuntaSpunta SpuntaSpunta
CEOSpuntaSpuntaSpuntaSpuntaSpunta
Vice ChairmanSpunta  Spunta 
Non-executive directorsSpunta  Spunta
General Manager OperationsSpuntaSpunta Spunta


Page updated 19 April 2019

 
 
REINVENTING THE CITY Regenerating resources to move to a society based on the circular economy
 
REINVENTING THE CITY Regenerating resources to move to a society based on the circular economy
 
 
Sustainability and Shared value
 
Sostenibilità e Valore condiviso
 
 
2018 Economic results
 
Risultati economici 2018 - Il commento del Presidente del Gruppo Hera