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34 – Share based payments

Long Term Incentive (LTI) plans

LTI plans with similar conditions are granted annually to the Executive Board and selected Senior Managers in the Group. On the vesting date, shares will be granted to the participants. The number of bonus shares is determined depending on the achievement of defined performance criteria. The performance criteria and their corresponding typical weightings for the Executive Board members are defined in the Remuneration Policy and as of 2022 are as follows: Relative Total Shareholder Return (30%), Clean CCS (Current Cost of Supply) (40%), targets (30%). Based on predefined criteria (e.g., fatalities, Total Recordable Injury Rate (), process safety – also in comparison to industry benchmarks), a Health & Safety Malus of between 0.8 and 1.0 is applied to the overall target achievement for Executive Board members. In case of severe incidents, the Remuneration Committee may reduce the payout to zero. For Senior Managers, as of 2022, the following performance criteria apply: Relative Total Shareholder Return (30%), Free Cash Flow (35%), and ESG targets/Transformation targets (35%). The defined performance criteria may not be amended during the performance period of the LTI plans. However – in order to maintain the incentivizing character of the program –the responsible governing body for Senior Managers has the discretion to adjust the threshold/ target/ maximum levels of the Free Cash Flow, in case of material changes in external factors such as oil and gas prices. The adjustment can be made in both directions.

Disbursement is made in cash or in shares. Since 2022, the OMV Petrom LTI plan payment has been made in shares only. Executive Board members and Senior Managers as active participants of the plans are required to build up an appropriate volume of shares and to hold those shares until retirement or departure from the company. For Senior Managers, if the eligibility of the LTI plan lapses but they are still in active employment with the company, the shareholding requirement expires when the last LTI plan is paid out. The shareholding requirement is defined as a percentage of the annual gross base salary, for the Executive Board, and as a percentage of the respective Target Long-Term Incentive for Senior Managers. Executive Board members have to fulfill the shareholding requirement within five years after the initial respective appointment. Until fulfillment of the shareholding requirement, disbursement takes the form of shares whilst thereafter the plan participants can decide between cash or share settlement. As long as the shareholding requirements are not fulfilled the granted shares after deduction of taxes are transferred to a trustee deposit, managed by the Company.

For payments in shares the grant date fair values are spread as expenses over the three years performance period with a corresponding increase in shareholders’ equity. In the case of assumed cash-settlements a provision is made for the expected future costs of the LTI plans on the statement of financial position date based on fair values.

Long-Term Incentive Plans

 

 

 

 

 

 

2023 plan

2022 plan

2021 plan

2020 plan

Start of plan

01/01/2023

01/01/2022

01/01/2021

01/01/2020

End of performance period

12/31/2025

12/31/2024

12/31/2023

12/31/2022

Vesting date

03/31/2026

03/31/2025

03/31/2024

03/31/2023

Shareholding requirement

 

 

 

 

Executive Board Chairman

200% of annual gross base salary

200% of annual gross base salary

200% of annual gross base salary

200% of annual gross base salary

Executive Board Deputy Chairman

175% of annual gross base salary

175% of annual gross base salary

175% of annual gross base salary

175% of annual gross base salary

Other Executive Board members

150% of annual gross base salary

150% of annual gross base salary

150% of annual gross base salary

150% of annual gross base salary

Senior Managers

75% of the respective Target Long-Term Incentive

75% of the respective Target Long-Term Incentive

75% of the respective Target Long-Term Incentive

75% of the respective Target Long-Term Incentive

Expected shares as of December 31, 2023

357,842

287,735

501,677

Maximum shares as of December 31, 2023

761,728

674,776

794,894

Fair value of plan (in EUR mn) as of December 31, 20231

14

11

20

Provision (in EUR mn) as of December 31, 20231

3

5

16

1

Excluding incidental wage costs

Equity Deferral

The Equity Deferral serves as a long-term compensation instrument for the members of the Executive Board that promotes retention and shareholder alignment in OMV. It combines the interests of management and shareholders via a long-term investment in restricted shares. The holding period of the Equity Deferral is three years from vesting. The plan also seeks to prevent inadequate risk-taking.

The performance criteria and their typical weightings for the Executive Board are defined in the Remuneration Policy and are as follows: Reported Net Income (40%), Free Cash Flow (30%), Operational target (15%), and ESG target (15%). Based on predefined criteria (e.g., fatalities, TRIR, and process safety – also in comparison to industry benchmarks), a Health & Safety Malus of between 0.8 and 1.0 is applied to overall target achievement. In case of severe incidents, the Remuneration Committee may reduce the payout to zero.

The Annual Bonus is capped at 180% of the target Annual Bonus. A minimum of one-third of the Annual Bonus is granted in shares. The determined bonus achievement is settled on March 31 following the end of the period whereby at the statement of financial position date the target achievements and the share price is estimated (the latter on the basis of market quotes).

Given the volatility of commodity prices and market conditions inherent to the industry, the variable remuneration plans give the Remuneration Committee the authority (in line with general practices in the Oil and Gas industry) to adjust the threshold, target, and maximum levels of the financial targets based on oil/gas prices and EUR/USD exchange rates compared with assumptions at the time the targets were set. Adjustments can be applied in both directions. They are determined by the Remuneration Committee and published in the Remuneration Report. The granted shares after deduction of taxes are transferred to a trustee deposit, managed by the Company, to be held for three years.

In 2023, expenses amounting to EUR 3 were recorded with a corresponding increase in equity (2022: EUR 3 mn).

Personal investment held in shares1

 

 

 

12/31/2023

Active Executive Board members

 

Stern

24,434

Florey

49,930

van Koten

4,385

Former Executive Board members

 

Pleininger2

14,933

Skvortsova3

6,636

Seele4

12,190

Gangl5

16,680

Total — Executive Board

129,188

Other Senior Managers

255,539

Total personal investment

384,727

1

Personal investment held in shares refer to open LTI plans and Equity Deferral if shares are held in the OMV trustee deposit.

2

Johann Pleininger resigned from the Executive Board effective December 31, 2022.

3

Elena Skvortsova resigned from the Executive Board effective October 31, 2022.

4

Rainer Seele resigned from the Executive Board effective August 31, 2021.

5

Thomas Gangl took part in the LTIP 2020 as an Executive Board member. In 2021, he took part as both Executive Board member and Senior Manager. He resigned from the Executive Board effective March 31, 2021.

Total Expenses

In 2021, Borealis implemented a transitional LTI plan for 2021 and 2022 in order to bridge the cash gaps that arise from migrating to the new three-year plan. Transitional LTI plan allowances for 2021 and 2022 are based on the same KPIs as for the three-year LTI plan but measured on an annual basis and are settled in cash. Expenses related to all share-based payment transactions are summarized in the table below.

ROACE
Return On Average Capital Employed; NOPAT divided by average capital employed expressed as a percentage
ESG
Environmental, Social, and Governance
TRIR
Total Recordable Injury Rate per million hours worked
mn
Million