10 Consequences for long-term variable pay

The shift in function also ensures that the view of long-term rewards changes colour. This variable pay must no longer be dependent on predetermined performance measures and their related objectives. There must be room for the supervisory board to weigh the success of the company in all its aspects, including how that measured success was achieved. This does not mean that the various indicators included may not be announced in advance, but rather that executives will only be considered for variable pay if actual sustainable success has been determined. In this way the improvement of an indicator does not automatically lead to higher remuneration.

An additional advantage is that the suggested adapted structure is in line with the updated remuneration principles in the 2016 Code. Removing the complex intentions usually associated with the advance guidance of executives should make remuneration policy much more straightforward. A greater simplicity in combination with a clear remuneration ideology should lead to a clear and comprehensible remuneration policy. Further, the suggested structure concentrates more on value creation in the long term, and remuneration policy should encourage executives to act not only, or no longer, in their own interests and to avoid taking risks that do not fit the formulated strategy and the established risk-taking propensity. The current Code therefore paves the way to resolving one of the fundamental problems in the current remuneration system.