Remuneration Summary 2018

(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 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 fees of € 400,000 p.a. - non-recurring fees pursuant to Article 2389 , paragraph 3, for special powers (in addition to gross fees of € 90,000 p.a. set by the Shareholders' Meeting). 


CEO = gross fees 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.

 

SHORT-TERM VARIABLE REMUNERATION
(LEONARDO GROUP MBO SYSTEM) 

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 about 20% to about 80% of fixed remuneration, in relation to the responsibility in the Company's organisation. 

  

Two payout thresholds are set, which are 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.

 

 

FOR ALL BENEFICIARIES 
PAYOUT THRESHOLD : The Company has confirmed the application of two thresholds for incentive payments linked to the implementation of the following KPIs :
- GROUP EBITA: 85% of budget
- GROUP FOCF: 100% of budget
- The non-achievement of even only one of the two thresholds prevents the application of the Group's economic and financial KPIs; 

                           

CEO OBJECTIVES

The achievement of the threshold provides access to the MBO plan, structured as follows:

1) Group EBITA (30%); 

2) Group FOCF (30%); 

3) Specific target on Sustainability/ESG, Environmental, Social and Governance issues (10%)

4) Industrial Plan Objectives (30%)  structured into 3 specific KPIs:
- Progress in the actions under the Industrial master plan concerning the business performance as per the budget (relating to 2018) of the Helicopters and Aerostructures Divisions;
- Technology Innovation: implementation of strategic projects and the creation of units responsible for supervising UAVs and definition of a Training Academy business case; 
- Book to Bill ratio >=1

 

ESR' S OBJECTIVES
1) Group EBITA
2) Group FOCF
3) Division EBITA/Division FOCF/Function KPIs 
4) Industrial Plan Objectives 
5) Revenue Growth Targets
6) Target on Sustainability/ESG issues

 

OTHER MANAGERIAL RESOURCES' OBJECTIVES
These are assigned in relation to the person’s responsibility in the organisation among the following objectives: 
1) Group EBITA
2) Group FOCF
3) Division EBITA/Division FOCF/Function KPIs  
4) Revenue Growth Targets
5) Industrial Plan Objectives
6) Target on Sustainability/ESG issues
 

CEO PAYOUT AND PERFORMANCE CURVE 
- Group EBITA: no payout if the budget target is not achieved and a payout of 100% if the target is achieved or over-performed;
- Group FOCF: no payout if the budget target is not achieved and a linear payout from 100%  to 120% if the budget target is achieved or over-performed until the achievement of the overall maximum
- Sustainability/ESG Target: "ON/OFF" 
- Business Plan Objectives: 0 payout up to 89% of target, a payout of 60% from 90% to 99% of budget and fixed at 100%, from 100% upwards      

 


ESR' AND OTHER MANAGERIAL RESOURCES' PAYOUT"
CAP" on the maximum payout included between about 20% and about 80% of the Gross Annual Remuneration in relation to the responsibility of the person concerned.

 

 

PERFORMANCE CURVE OF ESR AND OTHER MANAGERIAL RESOURCES

- Group and Division EBITA: no payout if the budget target is not achieved and a payout of 100% if the budget target is achieved or over-performed;
- Group and Division FOCF: 0 payout up to 99% of budget, linear correlation between 100% and 120%, fixed at 120%, from 120% of budget upwards
- ther function / division / individual objectives: 0 payout up to 79% of target, a payout of 60% from 80% to 99% of budget, linear correlation between 100% and 120%, fixed at 120%, from 120% upwards.

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 Business 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 three-year cycles which will commence from 2018-2020. 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 Executives with Strategic responsibilities and other top management positions. 50% of the shares will not be 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 or greater than the 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 than  the TSR of 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 greater than the TSR of the company occupying the eighth place in the ranking: 25% of bonus

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


The Return on Sales will be measured on the average of the final values of each financial year part of the vesting period of the Plan;

 

The Group Net Debt will be measured on the final value at the end of the vesting period and for which the following performance conditions have been set:
- a maximum threshold equal to the budget that determines the achievement of 100% of the bonus.
- a minimum threshold of 5% below budget that determines the achievement of 50% of the bonus.
- for the values below the minimum threshold no bonus will be paid out.

 

Intermediate results give bonuses calculated proportionately.

The Plan provides for the assignment of incentives structured into a component that is fully expressed in ordinary Leonardo shares for the Company’s Chief Executive Officer, Executives with Strategic Responsibilities and other Top Executives. As regards the other beneficiary Executives, the Plan provides for the payment of a component that is fully expressed in ordinary Leonardo shares and of a cash component, based on a different proportion between cash and shares depending on the different levels of responsibility, the contribution to the Company’s results of operations and the position held in the relevant business organisation. 


 

CEO PAYOUT

For the first Plan cycle for the three-year period 2018-2020 allocation of a number of 51.653 shares determined by dividing the maximum incentive of € 500,000 by the unit price of € 9,68 per share used for the conversion of incentives in the implementation of the plan.

 

 

ESR PAYOUT
For the first Plan cycle for the three-year period 2018-2020 allocation of a number of shares equal to 140% of gross annual remuneration, determined by making reference to the unit price of € 9,68 per share used for the conversion of incentives in the 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
Non-cash benefits that can be assigned include:

- benefits similar and equivalent to those paid to the Group's executives
- Insurance Covers
- Company Car
Accommodation for guests' use


ESR 

Non-cash benefits that can be assigned include:

- participation in the supplementary pension Plan with Previndai (National pension fund for managers of industrial companies) 

- Supplementary health insurance benefits /in place of the benefits under the supplementary healthcare fund for managers of industrial companies FASI and ASSIDAI
- Insurance Covers
- Company Car
- Accommodation  for guests' use

 

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
If the appointment as Chief Executive Officer is revoked and/or if the term of office is terminated early and/or if the employment contract is terminated by Mr Profumo with just cause, he will be paid an amount as an indemnity and compensation payment, equal to such total remuneration (fixed and variable elements) as would be paid until the natural expiry of the term of office (24 months that will be set to zero upon natural expiry of the term of office). 

 

ESR

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

 

 

OTHER INFORMATION ON REMUNERATION

CEO-TO-EMPLOYEE PAY RATIO

CEO: SHARES' OWNERSHIP AND COMPENSATION EXECUTIVES WITH STRATEGIC RESPONSIBILITIES: SHARES' OWNERSHIP AND COMPENSATION

The ratio between the CEO’s total annual compensation and the average employee remuneration is equal to 32x.


The CEO’s total annual compensation is calculated as the sum of CEO’s fixed salary and the short-term maximum variable pay-out for 2018 - as reported in the Remuneration Report 2018.


The employee remuneration is an average value considering the total salaries and the average workforce in 2017 - as reported in the Financial Annual Report 2017.

The Company’s shares owned by the CEO, expressed as multiple of his annual base salary, are equal to 1x.


The ratio is calculated considering the value of the shares owned by the CEO and the CEO’s fixed annual compensation for 2018 – as reported in the Remuneration Report 2018.

The Company’s shares owned by the Executives with Strategic Responsibilities, expressed as multiple of their total annual base salary, are equal to 0.5x.


The ratio is calculated considering the total value of the shares owned by the Executives with Strategic Responsibilities  and the total fixed annual compensation for 2018 – as reported in the Remuneration Report 2018.

0