Remuneration Summary 2017

(ESR = Executives with Strategic Responsibilites)

FIXED REMUNERATION

PURPOSES AND BASIC FEATURES DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT 
It is an adequate return for services rendered and is proportionate to the duties and responsibilities assigned, with the purpose of retaining talented resources for the performance of the specific duties awarded to them

It is determined with reference to pay market benchmarks and periodically reviewed, also in relation to the pay mix policies.

 

CHAIRMAN'S PAY-MIX = 100% Fixed remuneration

 

CEO/GM'S PAY-MIX  = 42% Fixed remuneration; 58% Variable remuneration (of which 30% short-term variable remuneration and 28% medium/long-term variable remuneration)

 

ESR' AND OTHER MANAGERIAL RESOURCES' PAY-MIX
ESR and other top managers = Fixed between 30% and 45%; Variable between 70% and 55%
Key Executives = Fixed  between 45% and 60%; Variable between 55% and 40%
Other managerial resources = Fixed between 60% and 85%; Variable between 40% and 15%

 

CHAIRMAN = gross remuneration of € 148,000 p.a. (in addition to gross fees of € 90,000 p.a. set by the Shareholders' Meeting)


CEO/GM = gross remuneration of € 920,000 p.a. (in addition to gross fees of € 80,000 p.a. set by the Shareholders' Meeting)

 

ESR AND OTHER MANAGERIAL RESOURCES = remuneration set in relation to the responsibility of the person concerned and the target market positioning, included between lowest quartile and median quartile

 

SHORT-TERM VARIABLE REMUNERATION
(LEONARDO GROUP MBO SYSTEM) AND CO-INVESTMENT PLAN

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT

MBO SYSTEM

It is an incentive to achieve the annual objectives set in the Company’s budget
 

Financial/operational and role-specific objectives are set in relation to the responsibility in the Company’s organisation

A maximum payout cap is applied to all the participants in the MBO system, to an extent that varies from 20% to 70% of fixed remuneration, in relation to the responsibility in the Company's organisation.

A "performance gate" is provided which is linked to the business' overall profitability ratios.

 

A claw-back clause is provided for all the variable incentives, under such clause the Company will be entitled to request repayment of the variable remuneration paid out vis-à-vis such incentives in the event that the payout was awarded on the basis of data which is afterwards proved to be incorrect or misstated.

 

CO-INVESTMENT PLAN

This  consists in voluntarily deferring the payment of a portion of the annual bonus earned from a minimum of 25% up to a maximum percentage of 100%. The deferred portion of bonus is converted into ordinary Leonardo shares that will remain restricted throughout the 3- year period. At the end of the vesting period, provided that the performance threshold set in the MBO scheme has been constantly achieved (the “performance gate”), bonus shares (“matching shares”) are to be assigned in the proportion of 1 free share for each 3 shares held.

CEO/GM OBJECTIVES

PAYOUT THRESHOLDS:  The Company has confirmed the introduction of a payout threshold for the incentive linked to the achievement of the following KPIs identified bu the Board of Directors:

- Lay down a plan for the retention of staff who have been identified as being exceptionally talented or as having high potentials before the end of June 2017;

- Raise the percentage of all the products procurred centrally by Leonardo from 19% in 2016 to 25% (% of total purchase orders placed by Leonardo S.p.a.) by the end of December 2017

The achievement of the threshold provides access to the MBO plan, structured as follows:
1) Group  EBITA (35% weight)
2) Group FOCF (35% weight)
3) Group Order Intake (consistently with the related margin) (30% weight)

 

ESR' S OBJECTIVES
1) Group or Division EBITA
2) Group or Old Company FOCF
3) Division Working Capital 
4) Group's SG&A expenses 
5) Division Order Intake

 

OTHER MANAGERIAL RESOURCES' OBJECTIVES
These are assigned in relation to the person’s responsibility in the organisation among the following objectives:
1) EBITA
2) FOCF
3) Working Capital
4) Order Intake with related margin
5) SG&A expenses
6) Effectiveness Objectives 
7) Efficiency Objectives 
8) When there are no profit or operational measurements, other quantitive objectives will be assigned in connection with the individual's area of activity and specific objectively measurable tasks. 

CEO/GM'S PAYOUT AND PERFORMANCE CURVE 
failure to achieve the PAYOUT THRESHOLDS: no payout
BELOW ENTRY LEVEL: no payout
ENTRY LEVEL: 43% of  Gross Annual Remuneration (€ 396,000)
AVERAGE: 57% of Gross Annual Remuneration (€ 528,000)
MAX: 72% of Gross annual Remuneration (€ 660,000)
ABOVE MAX: no additional payout


ESR' AND OTHER MANAGERIAL RESOURCES' PAYOUT
"CAP" on the maximum payout included between 20% and 70% of the Gross Annual Remuneration in relation to the responsibility of the person concerned


ESR'S AND OTHER MANAGERIAL RESOURCES' PERFORMANCE CURVE

BELOW ENTRY LEVEL: no payout
ENTRY LEVEL: 60% of maximum payout
AVERAGE: 80% of maximum payout
MAX: 100% of maximum payout

Payouts payable for performance results  between the set entry level, medium  and maximum targets will be calculated under the linear interpolation method

MEDIUM/LONG-TERM VARIABLE REMUNERATION INCENTIVE PLAN

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT

PURPOSES

Focusing the key managerial positions on the achievement of the objectives under the Company's Industrial Plan.

Creating the conditions for increasing the convergence of the interests of management and those of shareholders.

Bringing the system more in line with the practices of the sector peers and, more generally, with the practices adopted by the major European listed companies.

Fulfilling the investors' expectations regarding management remuneration.

 

VESTING

The system consists of recurring three-year cycles which will commence from each of the years 2015, 2016 and 2017. The incentive is conditional upon the achievement of targets over a three-year term. The achievement of the targets to which the incentive is linked will be verified at the end of each three-year period.

 

LOCK-UP

Once the three-year vesting period is elapsed, the plan provides for a one-year lock-up period for the CEO and General Manager, Executives with Strategic responsibilities and other Top Management positions 50% of shares is not transferable during this period.

1) Relative Leonardo Total Shareholder Return (TSR) compared to the TSR of a peer group - weight of 50% of total incentive

2) Group Return on Sales (ROS) - weight of 25% of total incentive

3) Group Net Debt (NFP) - weight of 25% of total incentive

 

The TSR performance will be measured on the basis of Leonardo's positioning compared to the peer group:

- equal to or greater than TSR of the companies occupying the top four positions in the ranking: 100% of bonus

- lower than the TSR of the company occupying the fourth place in the ranking and equal or greater TSR than the company occupying the sixth place in the ranking: 50% of bonus

- lower than the TSR of the company occupying the sixth place in the ranking and equal or greater than the TSR of the company occupying the eighth place in the ranking: 25% of bonus

- lower than the TSR of the company occupying the eighth place in the ranking: no payout

 

A minimum result target is set for Retirn On Sales and Group Net Debt, which earns a 50% portion of the bonus, and a maximum result target, which earns the entire bonus. Intermediate results give bonuses calculated proportionately.

The incentive is structured into a monetary component and a component expressed in ordinary Leonardo shares, based on a different proportion between cash and shares according to the managerial positions involved:

Category A: 100% in shares

Category B: 70% in shares and 30% in cash

Category C: 70% in cash and 30% in shares


PAYOUT TO CEO/GM

Three-year allocation for the first 2017-2019 plan cycle of 57,130 shares (obtained by dividing the maximum payout of € 621,000 by the price of € 10.87 per share taken as a reference for the determination of incentives in the phase of implementation of the plan).

 

 

PAYOUT TO ESR
Three-year allocation for the third 2017-2019 plan cycle of a number of shares equal to 140% of the annual gross remuneration (calculated taking as a reference the unit price of € 10.87 per share used for the determination of incentives in the phase of implementation of the Plan).

 

 

 

NON-CASH BENEFITS

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT 
Benefits are granted consistently with the total reward policies applied at the Leonardo Group level. Non-Cash Benefits are defined in accordance with provisions of law, collective bargaining agreements and any other applicable union agreements

CEO/GM

- Participation in the Supplementary pension scheme with the national Previndai pension fund in the sector and additional/replacement Health Insurance FASI+ASSIDAI
- Supplementary healthcare benefits
- Insurance Covers
- Company Car

DRS 

Non-cash benefits that can be assigned include:

- Participation in the Supplementary pension scheme with the national Previndai pension fund in the sector

- Supplementary/replacement Health Insurance FASI+ASSIDAI
- Supplementary healthcare benefits
- Insurance Covers
- Company Car
- Accommodation

 

PAY IN THE EVENT OF TERMINATION OF OFFICE OR EMPLOYMENT

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT
Retention purposes connected with the role in line with long-term strategies, values and interests set by the Board of Directors They are set in relation to added value with respect to business development and maintenance, as well as to the extension of non-competition obligations (if any)

CHAIRMAN
No severance pay

 

CEO/GM
Upon termination of executive employment contract =3 years pays + allowances as provided for by the National Collective Bargaining Agreement.

 

ESR

Allowances under the National Collective Bargaining Agreement, plus severance payment defined on an individual basis (if any) 

 

0