Remuneration Summary 2015

(ESR = Executives with Strategic Responsibilites)

FIXED REMUNERATION

PURPOSES AND BASIC FEATURES DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT (ON AN ANNUAL BASIS)
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 (fixed/variable ratio) adopted from time to time.

 

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 1st quartile and median quartile

 

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

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT (ON AN ANNUAL BASIS)

MBO SYSTEM

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

Financial 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 90% 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 Finmeccanica 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

THRESHOLDS:  a strategic objective set by the BoD ("One Company" Divisionalisation process: the assessment as to whether the objective has been attained will be conducted on the basis of the progress of the process according to the time schedule  of the project's implementation plan that will be defined by the CEO and GM and that will be submitted for approval of the BoD); when the objective is attained, the MBO plan provides 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 EBITA (25% weight)
2) Group FOCF (25% weight)
3) Group Working Capital (25% weight)
4) Group's SG&A expenses (25% weight)

 

OTHER MANAGERIAL RESOURCES' OBJECTIVES
These are assigned in relation to the person’s responsibility in the organisation among the following objectives:
1) Group's EBITA
2) Operating Company's EBITA  with gates on EBIT-Investments+depreciation
3) Group, Operating Company, Business Unit and Business Line's FOCF
4) Group, Operating Company, Business Unit and Business Line's Working Capital
5) Group and Operating Company 's SG&A expenses
6)When there are no profit or operational measurements, other quantitative objectives will be linked to individual areas of activity and specific objectively measurable tasks

 

CORRECTION FACTOR
The MBO system envisages a correction factor of ± 10% of the final payout alternatively associated with budget targets set for specific indicators (such as SG&A expenses, Order Intake etc.) in relation to the actual impact of management on these measurements.

CEO/GM'S PAYOUT
failure to achieve the PAYOUT THRESHOLDS: no payout
BELOW BUDGET: no payout
BUDGET: 43% base pay (€ 396,000)
AVERAGE: 57% base pay (€ 528,000)
MAX: 72% base pay (€ 660,000)
ABOVE MAX: no additional payout


ESR' AND OTHER MANAGERIAL RESOURCES' PAYOUT
"CAP" on the maximum payout included between 20% and 90% of the base pay in relation to the responsibility of the person concerned


PERFORMANCE CURVE

BELOW BUDGET: no payout
BUDGET: 60% of maximum payout
AVERAGE: 80% of maximum payout
MAX: 100% of maximum payout
ABOVE MAX: no additional payout
Payouts payable for performance results  between the set maximum and medium budget targets will be calculated under the linear interpolation method

MEDIUM/LONG-TERM VARIABLE INCENTIVE PLAN

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT (ON AN ANNUAL BASIS)

PURPOSES

Focusing the key managerial positions on the achievement of the objectives under the 2015-2019 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 Company’s Top Management. The 50% of shares is not transferable during this period.

1) Finmeccanica 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 Financial Position (NFP) - weight of 25% of total incentive

 

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

- above 3rd quartile: 100% of bonus

- between 3rd quartile and Median quartile: 50% of bonus

- between Median quartile and 1st quartile: 25% of bonus

- below 1st quartile: no payout

 

A minimum result target is set for ROS and NFP, 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 Finmeccanica shares, based on a different proportion between cash and shares according to the managerial positions involved:

Executives, ESR and other top managers: 100% in shares

Senior Managers: 70% in shares and 30% in cash

Other participants: 70% in cash and 30% in shares


PAYOUT TO CEO/GM

Three-year allocation for the first 2015-2017 plan cycle of 132,210 shares (obtained by dividing the maximum payout of € 1,137,000 by the price of € 8.60 taken as a reference for the determination of incentives in the first of phase of implementation of the plan).

 

 

PAYOUT TO ESR
Three-year allocation in the first 2015-2017 plan cycle of a number of shares equal to 140% of the annual gross remuneration (calculated taking as a reference the unit price of € 8.60 per share used for the determination of incentives in the first phase of implementation of the Plan).

 

 

 

BENEFITS

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT (ON AN ANNUAL BASIS)
Benefits are granted consistently with the total reward policies applied at the Finmeccanica Group level. Benefits are defined in accordance with provisions of law, collective bargaining agreements and any other applicable union agreements The benefits that can be assigned include:
- Supplementary pension funds
- Supplementary healthcare benefits
- Insurance Covers
- Company Car
- Accommodation

 

PAY IN THE EVENT OF EARLY TERMINATION OF OFFICE OR EMPLOYMENT

PURPOSES AND BASIC FEATURES

DETERMINATION CRITERIA AND PERFORMANCE CONDITIONS AMOUNTS AND PAYOUT (ON AN ANNUAL BASIS)
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) - within the limit of a maximum of 2 years pay.

 

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