global compensation guidelines - executive summary apr 14

8/12/2019 Global Compensation Guidelines - Executive Summary Apr 14

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Riservato - Confidenziale

Global Compensation

Guidelines

Executive Summary


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A New Global Compensation Guideline

The Guideline will provide the foundation concepts and methods to be adopted indefining, evaluating and implementing policies and decisions related to all ourpeople compensation, effective for fiscal year 2013/2014

The document will also prescribe authorization procedures to be followed by eachManager in charge of powers of attorney or powers of delegations in HR matterswhen executing compensation actions.

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Where applicable and useful, the Guideline

will provide also some detail on how todeal with personnel cost planning aspects.

A first release of the Global CompensationGuideline will focus on cash onlycompensation elements, although it isrecognized that a more comprehensive

approach inclusive of non cashcompensation components is to beembraced in the future.

TRANSACTIONAL

COMPENSATION

LEARNING &DEVELOPMENT

BENEFIT

WORKENVIRONMENT

RELATIONAL

COMUNAL

INDIVIDUAL

- Cash Benefit- Healthcare Benefits- New Age Benefits

- Pensions Plan

- Base pay/Salary- Variable Pay (Bonus)

- Incentives (MBO)

- Training- Performancemanagement

- Career DevelopmentPlan

- Succession Planning

- Culture- Communication

- Recognition & Praise- Flex Working System

- Work Life Balance


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GC Guidelines Benefits and Objectives

To define a common framework for GP Group based on common valuesand principles

To improve coherency among: Compensation policies

Business results

Individual performances

To foster the adoption of meritocratic criteria and objective evaluations inHR management decisions

To improve HQ coordination and visibility on local decisions on HR

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GC Guideline Principles: Compensation components (cash only)

Generally speaking, we put into action a number of actions on our peoplecompensations that can be divided into the following:

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1. Base salary discretional increases for inflation protection

2. Base salary merit increases and one off payments

3. Regular bonus payments related to contractual provisions onvariable salaries or other assimilated practices

4. Other collective increases or bonuses, either consolidated or not,enforced by collective agreements or other regulations (nondiscretionary increases and bonuses)


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General Compensation Management Policies

Rationales

All the following must be planned and accrued in a specific section of Industrial Plan and Forecasts:

Base salarymeritdiscretional increases for inflation protection

Base salary increases andoneoffPayments Variable Salary contractual provisions or other assimilated practices

Non Discretionary Increases and Bonuses enforced by collective agreements or otherregulations

Recommendations

Profitable BU - or outstanding improvement vs PY - required for discretionary compensation

actions Planned increase of personnel costs on PY must be sustained by business results

improvements:

Increase for planned discretionary actions +Increase for planned non discretionary actions +Full year impact of actions occurred during PY < Increase of BU EBITDA

Overall increase of personnel costs for Bonuses & Compensation actions below 3% (invariantHC, low inflation rate)

Authorizations and Procedures

As currently foreseen by Industrial Plan Approval process

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Inflation Protection

Rationales

When collective agreements are not applicable

Recommendations Profitable BU or outstanding improvement vs PY

Applicable up to of population based on individual performance evaluations

Increase up to 75% of LTM inflation rate


Twice a year. Together with Base salary and one off payments, proposals to Corporate HR by

end of November/May Approval by CEO by end of January/June

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Base Salary merit Increases and one off Payments

Rationales

Roles/Responsibility progression

Permanent progression > Increase

Temporary or partial but satisfying progression > One off payment

Maturity, Seniority, Autonomy

Within labor market compensation range > Merit increase

At higher end of labor market compensation range > One off payment

Special non routine assignments > One off payment

Recommendations

Profitable BU or outstanding improvement vs PY Applicable up to 1/3 of population or 1/2 in case of exceptionally good business results

In the range of 4% to 7% of individual Base Salary

Balance between Increases and One off payments at BU level


Proposals to Corporate HR by end of November/May

Twice per year approval by CEO by end of January/June

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Variable Compensation

Rationales

Promote achievement of key business / operations performance indicators

Top Management and Managers: MBO Program

Middle Managers/Professionals (up to 20% of BU HC): Incentive Program

Coherency with Group and BU results

Recommendations

Program MBO:

1 Group level KPI: Company Value = (*) x EBITDA - NFP

2 Quantitative weighted objectives defined for BA/BU/Role

rewarded above 90% of target (90% -> 0%; 100% -> 100%) overachievement rewarded at a ratio of 150% / 130% of target (130% -> 150%)

capped at 150% of bonus over 130% of target

Incentive Program:

1 Group level KPI: Company Value = (*) x EBITDA NFP

2 Quantitative/Qualitative weighted objectives defined and evaluated by Line Manager


MBO and Incentive Programs coordinated by Corporate

MBO: Objectives set by Corporate; Incentive Program: Objectives set and evaluated by BU

Approval by Corporate at Annual Report Approval, by end of November

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(*) defined by Corporate each year


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Non Discretionary Increases and Bonuses

Rationales

Enforced by labor laws, participation agreements, other collective agreements

Recommendations To be planned in conjunction with discretionary actions

Timing

Impact on individuals


Information to Corporate HR one month before actuation

Applicable population Individual amounts

Impact on Cost

Impact on other discretionary actions

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Other BU/Country Managers

Corporate and Toys Italy Managers

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MBO Program Objectives

MANAGEMENT BY OBJECTIVES

ON

OFF

1 Objective 2 Objective 3 ObjectiveGroup Company

ValueWeight: 20%

Toys Italy EBITDAWeight: 60%

Role BasedOBJ

Weight: 20%

Group EBITDAWeight: 20%


Role BasedOBJ

Weight: 20%

e.g. Consolidated logisticcosts

Profitable Groupresults

Or outstandingimprovement vs

PriorYear

ON

OFF


ValueWeight: 20%

BU OBJWeight: 60%

Role BasedOBJ

Weight: 20%

Group EBITDAWeight: 20% Toys Italy EBITDAWeight: 60%

Role Based

OBJWeight: 20%

e.g. 7 x BU EBITDA BU PFN e.g. BU Stock RotationIndex

Profitable BUresults

Or outstandingImprovement vs

PriorYear


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Other BU/Country Middle Management and other employees (up to 20% of BU HC)

Corporate and Toys Italy Middle Management and other employees

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Incentive Program Objectives

INCENTIVE PROGRAM

ON

OFF


ValueWeight: 20%


Role BasedOBJ

Weight: 20%



Role BasedOBJ

Weight: 20%

e.g. Consolidated logisticcosts

Profitable Groupresults

Or outstandingimprovement vs

PriorYear

ON

OFF


ValueWeight: 20%

Role Based OBJWeight: 60%

IndividualOBJ

Weight: 20%

Group EBITDAWeight: 20% Role Based OBJWeight: 60%

Individual

OBJWeight: 20%

e.g. 5 x BU EBITDA BU PFN e.g. BU Stock RotationIndex



PriorYear


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MBO Accrual Curve

The bonus is paid above 90% of target achievement and accelerated abovethe target according to a 150/130 ratio

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Performance

Payout (one

obiective)

TargetValue

(e.g.100 Mln )

90% - 130% Accrual Range

Over-achievement

Acceleration(150%/130%)

MinValue

(e.g.90 Mln )

CapValue

(e.g.130 Mln )

Target Bonus(e.g. 8.000,

100% of

WeightedBonus)

Example (one objective only): Base Salary: 100.000 Bonus : 20% Objective Weight: 40%Max Bonus

(e.g. 12.000,150% of Target

Bonus)

At 95% oftarget, bonus

equals 50% ofWeighted

Bonus (e.g.

4.000)

TargetAchievement

WeigthedBonus Accrual

0% - 90% 0%

91% 10%

92% 20%

100% 100%

110% 116,6%

120% 133,3%

130% 150%


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Transition to the new policy: FY 14 and FY15 milestones

End of April 2014:

Corporate HR to send to each BU list of MBO Program Participants

BU / Country Managers to send Corporate HR list of Incentive Program Participants

End of May 2014: Corporate HR to receive BU / Country proposals for:

Inflation protection increases

Base salary merit increases

End of June 2014:

Corporate CEOs to approve the above

End of July 2014:

BU / Country Managers to send proposals for Role Based Objectives defined for MBO ProgramFY15 participants and Incentive Program participants

End of November 2014:

Corporate HR to evaluate achievements and bonus calculations for upper managers (MBOProgram) and other empoyees (Incentive Program); see next page for more details

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MBO Program - Other BU/Country Managers

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Transition to the new policy: MBO and Incentive Programs for FY14

MBO and INCENTIVEPROGRAMS

ON

OFF

1 Objective 2 ObjectiveGroup Company

ValueWeight: 20%

BU OBJWeight: 80%


BU OBJWeight: 80%

7 x GROUP EBITDA GROUP PFN



PriorYear

Incentive Program - Other BU/Country Middle Management and other employees (up to 20% of BUHC)

ON

OFF

1 Objective 2 ObjectiveGroup Company

ValueWeight: 20%

BU OBJWeight: 80%

Group EBITDAWeight: 20% BU OBJWeight: 80%



PriorYear

7 x GROUP EBITDA GROUP PFN 7 x BU EBITDA BU PFN

7 x BU EBITDA BU PFN

For FY14 only: 3 Objective is absorbed by

2 Objective whose weight isset to 80%

For FY14 only: 3 Objective is absorbed by

2 Objective 2 Objectives weight is set

to 80% 2 objective is defined as

7 x BU EBITDA - PFN

global compensation guidelines - executive summary apr 14

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