BE SEMICONDUCTOR INDUSTRIES N.V. Agenda
for the Annual General Meeting of Shareholders ("AGM") of BE Semiconductor Industries N.V. ("Besi" or the "Company") to be held virtually on Friday April 30, 2021 at 10.00 a.m.
1.
Opening
Financial year 2020
2. Consideration of the Annual Report 2020 (discussion)
3. Advisory vote on the Remuneration Report 2020 (vote)
4. Consideration and adoption of the annual accounts 2020 (vote)
5. Dividend
a. Reservation and dividend policy (discussion)
b. Declaration of dividend (vote)
6. Discharge
a. Discharge of the member of the Board of Management for his responsibilities (vote)
b. Discharge of the Supervisory Board members for their responsibilities (vote)
Remuneration
7.
Amendments to the Remuneration Policy 2020-2023 (vote)
Composition Supervisory Board
8.
Appointment of Supervisory Board members
a. Appointment of Ms Laura Oliphant as Supervisory Board member (vote)
b. Appointment of Ms Elke Eckstein as Supervisory Board member (vote)
Authorizations
9. Authorization of the Board of Management to (i) issue ordinary shares and grant rights to subscribe for ordinary shares and to (ii) exclude or restrict pre-emptive rights in relation to ordinary shares and rights to subscribe for ordinary shares (vote)
10. Authorization of the Board of Management to acquire ordinary shares (vote)
11. Reduction of the Company's issued share capital by cancellation of ordinary shares (vote)
12. Amendments to the Company's articles of association (vote)
13. Any other business
14. Closing
Explanatory Notes to the agenda for Besi's AGM to be held on April 30, 2021.
Agenda item 2 - Consideration of the Annual Report 2020
The Board of Management will discuss the key highlights of the Annual Report 2020. The Annual Report 2020 is available on the Company's website:www.besi.com or for inspection at the Company's offices, Ratio 6, 6921 RW Duiven, the Netherlands, tel. (+31) 26 3194500, email:info@besi.com,and at the offices of ABN AMRO Bank N.V., Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, email:ava@nl.abnamro.com.Upon request, it will be distributed free of charge to the Company's shareholders and others who are entitled to attend the AGM.
Agenda item 3 - Advisory vote on the Remuneration Report 2020
The Remuneration Report 2020 is included in the Annual Report 2020 on pages 80 through 95, included as Annex 1 to this agenda and available on the Company's website:www.besi.com.It has been prepared in line with the applicable Dutch legislation implementing the revised EU Shareholders Rights Directive. In accordance with this legislation, the Remuneration Report 2020 will be discussed and put forward to the General Meeting of Shareholders for an advisory vote.
Agenda item 4 - Consideration and adoption of the annual accounts 2020
Ernst & Young Accountants LLP has issued an unqualified auditors' opinion on the annual accounts 2020 as included in the Annual Report 2020. The Supervisory Board and the Board of Management recommend that the
General Meeting of Shareholders adopts the annual accounts 2020.
Agenda item 5 - Dividend a. Reservation and dividend policy
In accordance with the Dutch Corporate Governance Code, the Board of Management will explain the Company's
reservation and dividend policy.
The Board of Management will consider the payment of dividends on an annual basis based upon (i) a review of Besi's annual and prospective financial performance, business prospects, liquidity and financing needs, the prevailing market outlook and its strategy, market position and acquisition strategy, and/or (ii) a dividend payout ratio in the range of 40-100% relative to net income to be adjusted if the factors referred to under (i) so require.
b. Declaration of dividend
In view of Besi's earnings and cash flow generation in 2020, its net cash position and market outlook, it is proposed to distribute an amount equal to 94% of Besi's net income as a dividend for the year ended December 31, 2020. As such, the Board of Management proposes, with the approval of the Supervisory Board, to distribute a cash dividend equal to € 1.70 per ordinary share.
Payment of the dividend will take place as from May 7, 2021. In case the above dividend proposal is adopted, the ordinary shares will be traded ex-dividend per May 4, 2021, and the dividend record date will be May 5, 2021.
Agenda item 6 - Discharge a. Discharge of the member of the Board of Management for his responsibilities
It is proposed to grant discharge to the member of the Board of Management for the performance of his management activities during 2020. This discharge only covers matters that are apparent from the Annual Report 2020 and matters about which information is provided to the General Meeting of Shareholders.
b. Discharge of the Supervisory Board members for their responsibilities
It is proposed to grant discharge to each of the Supervisory Board members for the performance of his/her supervisory activities during 2020. This discharge only covers matters that are apparent from the Annual Report 2020 and matters about which information is provided to the General Meeting of Shareholders.
Agenda item 7 - Amendments to the Remuneration Policy 2020-2023
It is proposed to the General Meeting of Shareholders to adopt the proposed amendments to the Remuneration Policy 2020-2023, including the principles and procedures underlying the remuneration policy for the Board of Management and the Supervisory Board (the "Principles and Procedures"). If these amendments are approved, the proposed amendments to the Remuneration Policy 2020-2023, including the Principles and Procedures, will become an integral part of the Remuneration Policy 2020-2023 for the Board of Management, and the Principles and Procedures will become an integral part of the Remuneration Policy 2020-2023 for the Supervisory Board. The proposed amendments to the Remuneration Policy 2020-2023 are included as Annex 2 to this agenda and available on the Company's website:www.besi.com.
As a result of input received from shareholders in connection with the Annual General Meeting of Shareholders held on April 30, 2020, Besi conducted a review of the Remuneration Policy 2020-2023 for the Board of Management with a specific focus on key areas of shareholder concern. Besi engaged an independent consulting firm to help it analyze the additional performance share awards of Besi's Long-Term Incentive plan for members of the Board of Management as well as the pay for performance metrics relative to comparable peers. In addition, Besi reviewed the composition of its remuneration reference group given the significant change in Besi's financial profile, market presence, profitability and market capitalization since the remuneration reference group was first constructed ten years ago. Upon completion of the review process, meetings were conducted in the second half of 2020 between Supervisory Board members and key institutional shareholders both in Europe and the United States. The proposed amendments to the Remuneration Policy 2020-2023 focus primarily on:
the elimination of the discretionary basis upon which additional performance shares can be awarded to members of the Board of Management. It will be replaced by defined financial, strategic, non-financial and environmental, social and governance targets;
the composition of Besi's remuneration reference group so that it better reflects the peers with whom Besi competes for talent and its impact on Besi's pay for performance alignment;
the implementation of a minimum shareholding requirement for members of the Board of Management equal to three times their base salary.
Such proposed elements would further align the Board of Management's interests with those of Besi's shareholders.
Agenda item 8 - Appointment of Supervisory Board members
Having served as a Supervisory Board member for twelve years, Mr Douglas Dunn will not seek reappointment for another term upon the expiration of his current term at the end of the AGM. In addition, Ms Mona ElNaggar intends to resign her position as a Supervisory Board member prior to the end of her current term to pursue other interests. Her intended resignation will become effective at such time that Ms Elke Eckstein's appointment as a Supervisory Board member becomes effective.
a. Appointment of Ms Laura Oliphant as Supervisory Board member
The Supervisory Board proposes to appoint Ms Laura Oliphant as a Supervisory Board member for a four-year term.
Ms Oliphant (58) is a venture capital investor and technology veteran with significant experience in the semiconductor, semiconductor equipment and software industries. Currently, Ms Oliphant is an independent consultant with Serendibite Partners, where she provides expertise to early-stage businesses, Fortune 500
companies and venture capital firms. Prior thereto, Ms Oliphant served as CEO of Translarity, Inc., a venture backed, advanced probe card startup. Between 2001 and 2016, Ms Oliphant served as an investment director at Intel Capital, and between 1991 and 2001, she served in various capacities at Intel Corporation in the Technology and Manufacturing Group, including as a supply chain program manager and senior process engineer. She received her PhD in Chemical Engineering from the University of California, Berkeley where her research focused on plating technologies. Currently, Ms Oliphant serves as non-executive member on the board of directors of Aehr Test Systems (NASDAQ), Feasible Inc., Novelda AS and Numascale AS.
Ms Oliphant is considered independent for the purposes of the Dutch Corporate Governance Code and does not own any ordinary shares in the Company's issued share capital.
b. Appointment of Ms Elke Eckstein as Supervisory Board member
The Supervisory Board proposes to appoint Ms Eckstein as a Supervisory Board member for a four-year term effective September 1, 2021.
Ms Eckstein (56) currently serves as CEO and President of ENICS Group Electronics, an electronics manufacturing services company based in Zürich, Switzerland, a position she has held since 2019. Prior thereto, she served in senior management positions at a variety of global semiconductor, photonics and electronics firms in Germany, the United States, France and Taiwan, including Weidmüller Group, Osram AG, Global Foundries, AMD, Altis Semiconductor, Infineon AG and Siemens AG.
Ms Eckstein is considered independent for the purposes of the Dutch Corporate Governance Code and does not own any ordinary shares in the Company's issued share capital.
The information with respect to the appointment of the Supervisory Board members required to be submitted under
Section 2:142(3) of the Dutch Civil Code is available on the Company's website:www.besi.com. It is also available for inspection at the Company's offices, Ratio 6, 6921 RW Duiven, the Netherlands, tel. (+31) 26 3194500, email:info@besi.com,and at the offices of ABN AMRO Bank N.V., Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, email:ava@nl.abnamro.com. Upon request, it will be distributed free of charge to the Company's shareholders and others who are entitled to attend the AGM.
If both Ms Oliphant and Ms Eckstein are appointed as Supervisory Board members, the diversity of the Supervisory Board will increase, with female representation increasing from 20% to 40%.
Agenda item 9 - Authorization of the Board of Management to (i) issue ordinary shares and grant rights to subscribe for ordinary shares and to (ii) exclude or restrict pre-emptive rights in relation to ordinary shares and rights to subscribe for ordinary shares
It is proposed to renew the authorization of the Board of Management currently granted until May 14, 2022 enabling the Board of Management, subject to the approval of the Supervisory Board, to resolve on:
(i) the issuance of ordinary shares and the granting of rights to subscribe for ordinary shares up to a maximum of 10% of the Company's issued share capital at the date of the authorization, being April 30, 2021, and
(ii) the exclusion or restriction of the pre-emptive rights in relation to ordinary shares and rights to subscribe for ordinary shares in accordance with the maximum as described above.
It is proposed that the new authorization be valid for the period from April 30, 2021 until October 30, 2022. The purpose of this proposal is to allow the Board of Management to finance the Company as efficiently as possible. Upon approval, the current authorization will no longer be utilized.
Agenda item 10 - Authorization of the Board of Management to acquire ordinary shares
It is proposed to renew the authorization of the Board of Management, with the approval of the Supervisory Board, to cause the Company to acquire, other than for no consideration, ordinary shares up to a maximum number of ordinary shares representing 10% of the issued share capital of the Company at the date of authorization, being April 30, 2021, and otherwise within the limits set out in Dutch law and the articles of association in effect at that time. Such acquisition may be effected by any agreement, including private transactions and transactions effected through a stock exchange. The price shall range between an amount equal to the nominal value of the ordinary shares and an amount equal to 110% of the share price. The share price shall be understood to mean the average of the highest quoted price for each ordinary share during the five trading days prior to the date of acquisition as published in the Daily Official List of Euronext Amsterdam.
This new authorization shall be valid for a period of 18 months commencing on April 30, 2021 and ending on October 30, 2022. The authorization, among other things, enables the Board of Management to execute share repurchase programs in an efficient manner, including for capital reduction purposes. Upon approval, the current authorization will no longer be utilized.
Agenda item 11 - Reduction of the Company's issued share capital by cancellation of ordinary shares The Board of Management proposes to the General Meeting of Shareholders, with the approval of the Supervisory Board, to reduce the Company's issued share capital by cancellation of ordinary shares held by the Company. The number of ordinary shares that may be cancelled (whether or not in a tranche) will be determined by the Board of Management at its discretion but may not exceed 10% of the issued share capital of the Company as at April 30, 2021. The cancellation may be made in one or more tranches and at such dates and times as determined by the Board of Management at its discretion. Any reduction of the Company's issued share capital by cancellation of ordinary shares shall take place with due observance of the applicable provisions of Dutch law and the articles of association in effect at such time.
Agenda item 12 - Amendments to the Company's articles of association
On July 1, 2021, the Wet bestuur en toezicht rechtspersonen ("WBTR") will come into force. As part of the WBTR, amongst other, a mandatory statutory provision regarding the absence of all members of the Supervisory Board will have to be introduced. As the legislator has not opted for a transitional arrangement in relation to this requirement, the Board of Management proposes to the General Meeting of Shareholders, with the approval of the Supervisory Board, to amend the articles of association in this respect and to make use of the occasion to update the articles of association following some recent technical changes of law.
The literal proposal is available on the Company's website:www.besi.com.It is also available for inspection at the Company's offices, Ratio 6, 6921 RW Duiven, the Netherlands, tel. (+31) 26 3194500, email:info@besi.com,and at the offices of ABN AMRO Bank N.V., Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, email:ava@nl.abnamro.com. Upon request, it will be distributed free of charge to the Company's shareholders and others who are entitled to attend the AGM. The proposal includes the authorization of each practice support lawyer and (deputy or assigned) civil law notary at Freshfields Bruckhaus Deringer LLP, Amsterdam office, to execute the deed of amendment of the articles of association and to subsequently make the required filings.
Annex 1
Remuneration Report
Remuneration Report
This Remuneration Report provides an overview of Besi's:
• Remuneration Policy
• Remuneration structure
• Application of the Remuneration Policy in 2020
• Remuneration of the Board of Management
• Proposed amendments to the Remuneration Policy 2020-2023
• Remuneration of the Supervisory Board
The Company has successfully attracted and retained executives who are capable of leading and overseeing the Company at all levels. The Remuneration Policy is designed to facilitate this process. This Remuneration Report is drafted in accordance with article 2:135b of the Dutch Civil Code and the Dutch Corporate Governance Code.
The Remuneration and Nomination Committee (the "Committee") oversees all remuneration decisions. The Supervisory Board, upon proposal by the Committee, determines the criteria with which to measure the performance of the Board of Management considering their roles and responsibilities. For determining the remuneration of the Board of Management, the Committee is also informed of the remuneration scheme of the direct reports to the Board of Management including the applicable Short-Term and Long-Term Incentive Plans related thereto. Remuneration paid to such direct reports are fully aligned with the performance conditions under the Remuneration Policy.
Besi is committed to fair and responsible remuneration as we believe that all employees are integral to our success. We therefore consider the remuneration of the Board of Management and the Supervisory Board in the context of the remuneration of all Besi employees, including associated pay ratios. Over time, we have made adjustments to our Remuneration Policy to reflect our commitment to develop fair, responsible and transparent compensation plans. Furthermore, the Supervisory Board pro-actively engages with shareholders on matters regarding our Remuneration Policy and invites shareholder feedback whenever there are reasonable objections or concerns.
In implementing the Remuneration Policy, the Committee analyzes the possible outcomes of its variable remuneration elements and how they may affect the total remuneration of the Board of Management. In this respect, the Committee evaluates the development of the Company's underlying share price as well as the risks to which variable remuneration may expose the Company such as the Company's financial performance, business, strategy and ESG execution. Variable remuneration is primarily linked to predetermined, assessable and quantifiable targets which are predominantly of a sustainable nature. It is also linked to Besi's strategy including associated business objectives, values, purpose and vision, all of which are aligned with long-term shareholder value creation.
The dynamic environment in which Besi participates requires the implementation of our Remuneration Policy based on our common values and vision. Our common values help Besi provide a uniform response to internal and external challenges so that we achieve business goals in a fair and equitable manner. For this purpose, we have developed a Code of Conduct which addresses our responsibilities to the Company and to each other and what our stakeholders may expect from us. It is available on our website for further review (www.besi.com). In determining the actual remuneration of the Board of Management, the Committee assesses its actual performance relative to Besi's strategy and Code of Conduct. The Committee also takes into account the impact of the overall remuneration of the Board of Management relative to the pay differentials within the Company and obtains the views of the Board of Management with respect to the level and structure of remuneration.
Remuneration Policy
The Remuneration Policy applicable for the years 2020 up to and including 2023 for the Board of Management (the "Remuneration Policy 2020-2023") was approved by the Annual General Meeting of Shareholders held on April 26, 2019. The Remuneration Policy 2020-2023 was developed in view of changes in legislation, market developments, external market best practices and best practice provisions of the Dutch Corporate Governance Code. During the Annual General Meeting of Shareholders held on April 30, 2020 (the "2020 AGM"), the "Remuneration Principles and Procedures underlying the Remuneration Policies applicable for the years 2020 up to and including 2023 for the Board of Management and the Supervisory Board" were proposed for approval. This proposal received a simple majority of the votes cast but did not receive the required voting majority of 75%. As a result of input received from shareholders in connection with the 2020 AGM, certain amendments to the Remuneration Policy 2020-2023 will be proposed to the Annual General Meeting of Shareholders to be held on April 30, 2021 (the "2021 AGM") as described in "Proposed amendments to the Remuneration Policy 2020-2023" elsewhere in this Remuneration Report.
In addition to the "Remuneration Principles and Procedures underlying the Remuneration Policies applicable for the years 2020 up to and including 2023 Policy for the Board of Management and the Supervisory Board", the Annual General Meeting of Shareholders was asked to provide an advisory vote on the Remuneration Report 2019 at the 2020 AGM. Such proposal received the required simple majority of the votes cast.
The Supervisory Board seeks to achieve three broad goals in connection with Besi's Remuneration Policy and decisions regarding individual compensation:
• The Supervisory Board structures the Company's remuneration programs in a manner that it believes will enable Besi to retain, motivate and attract executives who are capable of achieving its business objectives.
• The Supervisory Board establishes remuneration programs that are designed to reward the Board of Management for the achievement of specified business objectives or related to the member's particular business unit. By linking remuneration to specific goals, the Supervisory Board believes that it creates a performance-oriented environment for the Company's executives.
• The Company's remuneration programs are intended to provide the Board of Management with an equity interest in the Company so as to link a portion of executive remuneration with the long-term performance of Besi's ordinary shares and to align their interests with those of shareholders.
The Supervisory Board regularly (i) reviews Besi's business and strategic objectives, (ii) undertakes risk assessments, (iii) assesses Besi's overall performance with respect to its business and strategic objectives and (iv) considers the performance of the individual member of the Board of Management compared to specific business objectives. Based on these considerations, the Supervisory Board then determines a balanced mix between fixed and variable remuneration components. It also determines a set of key performance indicators linked to variable remuneration components that are aligned with the Company's business and strategic objectives.
In its evaluation of the efficacy of Besi's Remuneration Policy, the Supervisory Board uses a third-party consulting firm to conduct scenario analyses of the variable remuneration components under the policy including the usage of the Monte Carlo stochastic model for the expected Total Shareholder Return ("TSR") performance analysis. The probability of vesting and pay-out of the performance share awards have also been taken into account in the scenario analyses. The Supervisory Board has set the performance targets based on the outcome of the scenario analyses, pay differentials, the executive's position within Besi and the internal pay ratio. In 2020, the internal pay ratio was 42 (2019: 37) based on the annual total remuneration of the Chief Executive Officer relative to the average total remuneration of all other full-time employees as reported in accordance with IFRS (excluding additional performance share awards). Furthermore, when drafting the remuneration proposal for the member of the Board of Management, the Supervisory Board annually considers the views of the member of the Board of Management regarding the level and structure of his own remuneration. The member of the Board of Management is not present when the Committee discusses his fixed and variable pay components.
Remuneration structure
The total remuneration package and pay mix for the member of the Board of Management is established on an annual basis by the Supervisory Board upon proposal by the Committee and consists of five components based on the goals set forth below:
1. Base Salary
2. Short-Term Incentive (annual performance-based cash bonus)
3. Long-Term Incentive (annual conditional award of performance shares and additional performance share awards)
4. Pension
5. Other Benefits
The above components are regularly compared to a remuneration reference group of companies selected based on industry, size, profitability, market capitalization and geography. The following companies are included in this remuneration reference group as adjusted for any acquisition or stock delisting related thereto.
Remuneration Reference Group
Aixtron SE AMG N.V.
ASM International N.V. Axcelis Technologies, Inc. Brooks Automation, Inc. Cohu, Inc.
Corbion N.V. Entegris, Inc
Ichor Holdings, Inc. IMCD N.V.
Jenoptik AG Kendrion N.V.
Koninklijke Wessanen N.V. Kulicke & Soffa Industries, Inc. MTS Systems Corporation Siltronic AG
TKH Group N.V.
Ultra Clean Holdings, Inc. Veeco Instruments, Inc. Xperi Corporation
The composition of this remuneration reference group will be reviewed by the Supervisory Board on a regular basis and updated, if necessary, to ensure an appropriate composition. Any substantial changes to the composition of the remuneration reference group will be subject to the approval of the Annual General Meeting of Shareholders.
In establishing remuneration for the Board of Management, the Supervisory Board consults PwC, a professional external remuneration consultant, in carrying out its duties. The Supervisory Board conducts a remuneration benchmark survey every two years and verifies that the consultant selected does not similarly provide advice to the Board of Management so that no conflicts of interest exist.
1. Base salary
Each year, the Supervisory Board reviews the annual base salary for the member of the Board of Management and considers whether to adjust his base salary level. The base salary of the member of the Board of Management will be determined in relation to the median and 90th percentile base salary levels of the remuneration reference group. The Supervisory Board also considers the historic salary levels of the individual and the nature of the individual's roles and responsibilities in positioning the base salary level relative to the remuneration reference group.
2. Short-Term Incentive (annual performance-based cash bonus)
The annual cash bonus opportunity is linked to the achievement of predetermined performance conditions based on financial, non-financial and ESG objectives as determined by the Supervisory Board. The following performance measures apply:
• Net income expressed as a percentage of revenue
The financial measure net income is preferred over other financial ratios for the Short-Term Incentive because net income is:
• A key indicator in evaluating Besi's overall performance for the year and therefore an important contributor to shareholder value.
• A key factor given the cyclical market in which Besi operates.
• A financial measure that can be influenced by the member of the Board of Management.
• A key component utilized to help determine Besi's stock market valuation.
• Personal performance of the member of the Board of Management
The annual criteria to measure the personal performance of the member of the Board of Management are at the sole discretion of the Supervisory Board. As such, the Supervisory Board focuses on a variety of business, strategic, financial and ESG targets that are considered important for the upcoming year and that help contribute to sustainable value creation in the medium- and long-term in line with Besi's strategy.
The Committee will propose annually to the Supervisory Board financial, non-financial and ESG goals to measure the performance of the member of the Board of Management.
The total annual cash bonus opportunity for the member of the Board of Management shall be determined on the basis of the following performance/pay-out grid.
Short-Term Incentive: | At minimum |
Performance versus pay-out | performance |
(below threshold) | |
Net income as % of revenue | 0% |
Personal performance targets | 0% |
Total annual bonus pay-out | 0% |
70% 105%
30% 45%
100% 150%
3. Long-Term Incentive (annual conditional award of performance shares and additional performance share awards)
The Long-Term Incentive consists of a conditional award of performance shares. The award represents a conditional right to receive a certain number of Besi shares depending on the achievement of predetermined financial performance objectives set by the Supervisory Board over a three-year performance period, subject to continued service, which include:
• Net income as a percentage of revenue over three calendar years
Net income as a percentage of revenue over the three-year performance period is considered a key measure for creating sustainable long-term shareholder value.
• Relative Total Shareholder Return ("TSR") over three calendar years
The development of Besi's share price including the reinvestment of dividends during a three-year performance period will be compared to a comparator group of 19 listed companies operating in the semiconductor equipment industry in which three-month share price averaging will be applied at the start and at the end of the TSR performance period. The TSR over the three-year performance period is also considered a key measure for indicating the development of shareholder value and Besi's TSR relative to its peers in the semiconductor equipment industry. It is also an appropriate performance measure to align the interests of the Board of Management with those of shareholders. The composition of the comparator group will be reviewed and adjusted by the Supervisory Board if circumstances arise which could affect the comparability of the companies involved, particularly in the event of a merger, acquisition or material change of business. Adjustments to the comparator group, including replacements, will be based on predetermined internal guidelines. The TSR comparator group currently consists of the following companies:
TSR comparator group (excluding Besi)
Aixtron SE
Applied Materials, Inc. ASM International N.V. ASML Holding N.V.
ASM Pacific Technology Ltd. Axcelis Technologies, Inc. Brooks Automation, Inc. Cohu, Inc.
DISCO Corporation Entegris, Inc.
Kulicke & Soffa Industries, Inc. Lam Research Corporation
Nova Measuring Instruments Ltd. Onto Innovation, Inc.1 FormFactor, Inc.2 SÜSS MicroTec SE Tokyo Electron Ltd. Tokyo Seimitsu Co., Ltd. Veeco Instruments, Inc.
1 Following the completion of the merger between Nanometrics, Inc. and Rudolph Technologies, Inc. on October 25, 2019,
Nanometrics, Inc. was replaced by Onto Innovation, Inc., the successor post-merger entity.
2
Shinkawa Ltd, was renamed Yamaha Motor Robotics following its business Integration into Yamaha Motor Robotics Holdings. Shinkawa was delisted on May 25, 2020 and replaced by FormFactor, Inc. in the TSR comparator group.
Conditional award
The at target number of performance shares conditionally awarded will be determined by the Supervisory Board based on a ratio equal to (i) 175% of the individual's gross annual base salary divided by (ii) the average closing price of Besi's shares for all trading days in the calendar quarter immediately preceding the start of the three-year performance period.
Vesting of performance shares
The number of shares that become unconditional (which vest) will be determined at the end of the three-year performance period depending on Besi's actual performance during such period. Vested shares are subject to a two-year lock-up period which means that the member of the Board of Management will have to retain such shares for two years following the vesting date. However, he will be allowed to sell shares sufficient to cover the income tax liability related to the vesting of the performance shares. The actual number of performance shares which will vest at the end of the three-year performance period will be determined based on the following grid:
Long-Term Incentive: | At minimum | ||
Performance versus vesting | (below | ||
threshold) | |||
Net income as % of revenue1 | 0% | 50% | 75% |
Relative TSR performance2 | 0% | 50% | 75% |
Total number of shares vesting | 0% | 100% | 150% |
1 Half of the vesting of the conditional awards is linked to Besi's net income relative to its revenue over the three-year performance period.
2
Half of the vesting of the conditional awards is linked to Besi's relative TSR performance over the three-year performance period.
The vesting range of the performance shares awarded subject to Besi's net income as a percentage of revenue is between 0% and 75% of the total number of performance shares awarded to the individual. The performance shares awarded from 2020 onwards subject to Besi's TSR performance are based on the actual absolute ranking of Besi within the comparator group and vest in a range between 0% and 75% of the total number of performance shares awarded to the individual. Vesting is determined based on the following schedule, whereby straight-line vesting percentages are being applied on a pro rata basis between rank 12 and rank 3 for awards made as from 2020:
Besi TSR ranking relative to comparator group | Vesting |
percentage | |
Top 3 | 75% |
Rank 6 | 50% (at target) |
Rank 12 | 25% |
Rank 13 - Rank 20 | 0% |
Performance adjustment |
After evaluating the three-year performance period for awards made in 2018 and 2019, the Supervisory Board may at its absolute discretion upwardly or downwardly adjust the number of performance shares that will vest by a maximum of 20%. This discretionary performance adjustment may be applied by the Supervisory Board to reflect the Company's overall performance and market developments and further aligns the interests of the Board of Management with those of shareholders. In accordance with the Remuneration Policy 2020-2023, this performance adjustment was eliminated as from 2020 onwards.
Clawback and ultimate remedium
The Short-Term Incentive and Long-Term Incentive components for the Board of Management are subject to clawback provisions. In addition, risk assessment tests are in place and measures are included in the variable remuneration documentation for the Board of Management to ensure that shareholders' interests are protected. In this respect, the Supervisory Board holds the discretionary authority to reclaim all or part of the Short-Term Incentive and Long-Term Incentive if such variable remuneration has been made based on incorrect financial data or other data or in the case of fraud, gross negligence, willful misconduct or any activity detrimental to the Company. This clawback is applicable to both the vested and unvested part of the Long-Term Incentive components.
The Short-Term Incentive and Long-Term Incentive components for the Board of Management are also subject to ultimate remedium clauses under which the Supervisory Board can adjust the value of the conditional variable remuneration components downwards as well as upwards. The adjustment can be made if the Supervisory Board is of the opinion that an unfair result would be produced due to extraordinary circumstances.
Additional performance share awards
The Supervisory Board may, at its absolute discretion and upon the recommendation of the Committee, award up to a maximum of 120,000 additional performance shares to the Board of Management in the event of extraordinary achievements or exceptional performance in a year. Market developments and the views of society are also considered in addition to the performance of the Company and the Board of Management. In case of a market downturn or a high underlying share price, the Supervisory Board may consider a maximum 20% downward adjustment to the additional performance shares awarded.
Additional performance shares awarded are subject to a five-year lock-up period, which means that the Board of Management will have to retain them for five years following the award date. However, the Board of Management is allowed to sell shares sufficient to cover the income tax liability following the transfer of the additional performance shares. Additional performance share awards may also be subject to additional terms and conditions as determined by the Supervisory Board.
If the number of Long-Term Incentive performance shares awarded under the Remuneration Policy 2020-2023 vest between at target and maximum performance levels (stretched performance), such stretched performance shares awarded will be deducted against the 120,000 maximum additional performance shares that can be awarded to the Board of Management at the discretion of the Supervisory Board. Furthermore, in case the Supervisory Board in any year decides to apply an upward adjustment of the number of vested Long-Term Incentive performance shares granted up to and including 2019 (as referred to under Performance Shares Adjustment above), such adjustment will be deducted against the 120,000 maximum additional performance shares.
The Company intends to eliminate the discretionary component associated with the award of up to a maximum of 120,000 additional performance shares as part of a proposal to amend its Remuneration Policy 2020-2023 at the 2021 AGM. It is intended that such awards for extraordinary performance will instead be linked to the achievement of a variety of defined financial and non-financial targets.
Final assembly AMS-LM at Besi Leshan, China.
Number of shares available
The aggregate total number of performance shares available under Besi's Long-Term Incentive arrangement (for all participants including the Board of Management) shall not exceed 1.5% of the total number of outstanding shares as at December 31 of the year prior to the year in which the performance shares are awarded.
4. Pensions
Different pension arrangements are provided to the Board of Management based on their salaries, local customs and the rules existing in their countries of origin. A defined contribution scheme is in place for statutory directors, of whom the CEO is currently the only one. Due to legislative changes enacted in the Netherlands as from the beginning of 2015, part of the pension contribution is no longer tax exempt. As such, in order to provide for a market competitive pension arrangement for Dutch members of the Board of Management, the pension contribution is now based on a premium ladder as in effect from 2014. However, commencing in 2015, a portion of this contribution is funded directly to the personal pension account of the statutory director as a tax-exempt contribution and the remaining balance is paid to the statutory director as a taxable pension allowance which can be used by the statutory director to build up his net pension on a voluntary basis.
5. Other benefits
Other benefits awarded to the Board of Management are linked to base pay and in line with general prevailing market practice. These other benefits include expense compensation, medical insurance and social security premiums.
Loans
As a matter of policy, the Company does not provide loans to members of the Board of Management.
Employment contracts/service contracts
Service contracts with any new member of the Board of Management will in principle be entered into for a period of four years. Existing employment contracts for members of the Board of Management with an indefinite period of time will not be replaced by contracts with a limited period or by contracts with different conditions. The current notice period applicable to the member of the Board of Management is six months.
Severance payment
The remuneration paid to members of the Board of Management in the event of dismissal may not exceed the individual's gross annual base salary (fixed component). If the maximum of one year's salary would be manifestly unreasonable for a member of the Board of Management who is dismissed during his first term of office, such member of the Board of Management shall be eligible for severance pay not exceeding two times his annual base salary.
Application of the Remuneration Policy in 2020
The Supervisory Board, upon the recommendation of the Committee, applied the Remuneration Policy in 2020 without exception as set forth below. The only member of the Board of Management in 2020 was Richard W. Blickman, Besi's CEO.
1. Base salary
At the end of 2019, the base salary of the CEO was reviewed, taking into consideration the remuneration reference group. The Committee analyzed and considered the outcome of this review and recommended to the Supervisory Board a base salary for the CEO set between the median and 90th percentile levels of the remuneration reference group, as outlined in the Remuneration Policy 2020-2023. The Supervisory Board, upon the recommendation of the Committee, decided that the 2020 base salary of the CEO would remain unchanged at € 600,000, equal to the base salary applicable for both 2018 and 2019.
At the end of 2020, the base salary of the CEO was reviewed, taking into consideration the remuneration reference group. The Committee analyzed and considered the outcome of this review and recommended to the Supervisory Board a base salary for the CEO set between the median and 90th percentile levels of the remuneration reference group, as outlined in the Remuneration Policy 2020-2023. The Supervisory Board, upon the recommendation of the Committee, decided that the 2021 base salary of the CEO will remain unchanged at € 600,000.
2. Short-Term Incentive
The Short-Term Incentive (annual performance-based cash bonus) awarded to the member of the Board of Management is based on the following predetermined performance conditions: (i) net income as a percentage of revenue and (ii) personal performance of the member of the Board of Management expressed in certain non-financial and ESG goals that were considered important for 2020. The Committee reviewed at year end the quality of the predetermined financial, non-financial and ESG performance goals and the sustainable value delivered in order to determine the Short-Term Incentive awarded for 2020.
The total annual cash bonus for the member of the Board of Management was as follows.
Short-Term Incentive: Performance versus pay-out | At maximum |
performance | |
(in euros) | |
(a) Net income as % of revenue | 630,000 |
(b) Personal performance targets | 270,000 |
(c) Total annual bonus pay-out | 900,000 |
(a) Net income as a percentage of revenue
Besi's 2020 net income as a percentage of revenue was 30.5%. The performance achieved was well above the maximum pre-defined target range set. Upon the recommendation by the Committee, the Supervisory Board awarded the member of the Board of Management for the first financial performance condition a cash bonus equal to 105% of his annual base salary, or € 630,000, for the year 2020.
(b) Personal performance of the member of the Board of Management
The Committee reviewed the performance realized by the member of the Board of Management in relation to five equally weighted and pre-defined personal non-financial and ESG performance objectives representing 30% of the total cash bonus. These five pre-defined personal, non-financial and ESG performance objectives were:
1. The implementation of Besi's strategic plan 2020-2024, including ten COVID-19 related initiatives.
2. The implementation of career development and succession planning for Besi's management team and key staff.
3. The execution of <10 nanometer and hybrid bonding research and development programs with key industry players.
4. The enhancement of ESG programs including ambitions, short-, medium- and long-term targets and reporting metrics related thereto.
5. The development of initiatives to reduce European infrastructure costs via European facility relocation/consolidation.
During 2020, the Committee regularly reviewed the progress of the pre-defined personal, non-financial and ESG performance objectives. Additional objectives were set during the year due to the outbreak of the COVID-19 pandemic. While STI non-financial targets are set prior to the performance year, the Committee decided that the addition of such COVID-19 targets was relevant given their importance to Besi's short- and long-term success.
Based on the strategic updates provided, the effectiveness and progress of the objectives set were tested and monitored by the Supervisory Board during the year. An overall assessment was also completed after year end 2020 including a review of customer satisfaction, strategic plan execution and effectiveness, ESG development and cost reduction initiatives achieved. Based upon the review, it was judged that the execution of strategic initiatives proved to exceed the challenging goals and timelines initially set, including the successful execution in the fourth quarter of 2020 of a hybrid bonding joint development agreement with Applied Materials, Inc. Furthermore, the Committee noted success relative to the additional COVID-19 initiatives and timelines set with respect to the continuity of Besi's supply chain, production and customer deliveries, installation and service amidst unprecedented disruptions to the business caused by the pandemic. This was measured by Besi's superior financial performance, working capital management and
cash flow generation during the pandemic and achievement or over achievement of quarterly financial guidance to investors and analyst expectations set at the beginning of the year (pre-COVID-19), as well as increased customer satisfaction as highlighted in our annual survey. In addition, IT, personnel and management initiatives with respect to the implementation of work from home procedures proved to be very successful resulting in favorable employee retention and satisfaction as measured by the results of a special COVID-19 pulse survey conducted. Targets set for succession planning and ESG progress were also reviewed. The Chief Executive Officer proved to have initiated progress and overachieved targets on both such topics, in particular with respect to the new ESG program and goals related thereto for 2022 through 2030 as explained in further detail elsewhere in this Annual Report.
BESI VALUE CREATION: 2020/2019
(in millions, except share price)
2020
Revenue
2019
Δ
€ 433.6
Highlights
€ 356.2
+21.7%
Gross MarginNet Income Net Margin ROAE Share Price
€ 132.3
• Renewed revenue and net income growth amidst COVID-19 pandemic
59.6%
30.5%
55.8%€ 81.322.8%
+3.8 pts
+62.7%
+7.7 pts
€ 49.58
39.5%
24.2%+15.3 pts€ 34.46
• Peer leading financial metrics maintained
• Return on average equity increased to 39.5% (+15.3 pts)
• Share price increased by 43.9%. Total return 46.8%
+43.9%
• Signed hybrid bonding joint development agreement
• Enhanced ESG program. Set long-term targets
In addition, the Chief Executive Officer enhanced Besi's liquidity, market presence and financial position via the issuance of € 150 million of 0.75% Convertible Notes due 2027. The offering took advantage of market opportunities, further enhanced our position with customers who view Besi as an important partner in their development efforts and provided additional liquidity to deal with external challenges in the future such as the pandemic. Finally, our cost reduction programs and targets set were achieved which helped result in an only 1.7% increase in operating expenses in the face of 21.7% revenue growth achieved in 2020.
In the aggregate, the Committee review found that the Chief Executive Officer attained his goals even despite the unprecedented challenges to Besi's business model created by the outbreak of the COVID-19 pandemic. In the face of such a sudden and external threat, the Committee noted a resilient, flexible and sustainable organization capable of addressing the multi-faceted business, societal and human challenges posed by the pandemic.
Based on this review and upon the recommendation by the Committee, the Supervisory Board decided to award the member of the Board of Management a cash bonus related to his personal performance equal to 45% of his annual base salary for 2020, or € 270,000.
(c) Total Short-term Incentive
The sum of the financial, non-financial and ESG targets comprising the total cash bonus for the year 2020 equaled € 900,000, or 150% of the gross annual base salary, of the member of the Board of Management.
The Supervisory Board, upon the recommendation of the Committee, unanimously decided on such cash bonus based on the Company's superior revenue and net income growth, cash flow generation and return on average equity despite the outbreak of the COVID-19 pandemic. It was also based on Besi's share price appreciation, progress in strategic plan execution, peer leading financial metrics, new hybrid development partnerships realized and progress on ESG and sustainability goals.
3. Long-Term IncentiveConditional award
As from 2014, the Long-Term Incentive (annual conditional award of performance shares and additional performance share awards) is subject to continued employment and based on the following predetermined performance conditions: (i) net income as a percentage of revenue over three calendar years and (ii) the development of Besi's share price including the reinvestment of dividends during a three-year performance period compared to a comparator group of 19 listed companies operating in the semiconductor equipment industry.
Conditional grants outstanding
Vesting period
as of December 31, 2020
2018-2020
2019-2021
2020-2022
Conditionally awarded at target
18,026
32,887
31,920
Year of vesting
2021
2022
2023
Range of shares potential vesting (0-150%)
0-27,039
0-49,331
0-47,880
The at target number of conditional performance shares awarded was calculated based on the gross annual base salary of the member of the Board of Management divided by the average closing share price for all trading days in the last calendar quarter of the year immediately preceding the start of the three-year performance period. The number of shares that will actually vest will be based on the above mentioned predetermined performance conditions.
Vesting of performance shares
The vesting of the conditional performance shares for the member of the Board of Management for the 2018-2020 performance share award period was based on the following:
(i) Net income as a percentage of revenue over the three-year performance period of 26.6% overachieved the target resulting in a maximum vesting of 75% of this part of the performance shares awarded (50% of the total award made). The performance achieved was well above the maximum pre-defined target range set; and
(ii) Besi ranked at the 9th position within the TSR comparator group resulting in a vesting of 25% of this part of the performance shares awarded (50% of the total award made).
As a result, 100% of the 18,026 shares related to the 2018 performance share award will vest on April 30, 2021, subject to the member of the Board of Management's continued employment until such date. The vested shares are subject to a two-year lock-up period except for the shares that may be sold to cover the withholding/income tax liability upon vesting of the performance shares.
The following table presents the summary of the applicable performance incentive zones and the performance realized for the Short-Term Incentive and Long-Term Incentive awards for 2020:
Performance criteria applicable for STI and LTIRelative weightingThreshold levelsTarget levels and corresponding awardPerformance incentive zones (as % of base salary)Maximum performance levels and corresponding awardPerformance realized and actual award outcome 2020
R.W. Blickman, CEOR.W. Blickman, CEOSTI - net income as % of revenue ("NIR") (NIR Performance incentive zone between 5% and 20%)
Personal performance (see above)
LTI - net income as % of revenue
(NIR Performance incentive zone between 5% and 15%)
LTI - Relative Total Shareholder Return (performance incentive zone depending on actual ranking of Besi in reference group, see above)
LTI - Performance adjustment
Additional performance shares (see below)
70%
Below threshold (0%),
vesting starting at threshold levels
30%
Below threshold (0%),
vesting starting at threshold levelsTarget performance
(30%); € 180,000
50%
At threshold (25%);
4,507 shares Below threshold (0%)
50%
At threshold (25%);
4,506 shares Below threshold (0%)
At target (50%)
9,013 shares
20%
Minimum (-20% of award):
-3,605
Target performance
(70%); € 420,000
At target (50%)
9,013 sharesMaximum performance
(45%); € 270,000
Maximum performance
(75%); 13,520 sharesMaximum performance
(75%); 13,520 sharesAt max (+20% of award);
+3,605
Maximum performance
(105%); € 630,000
Maximum performance (105%);
€ 630,000
Maximum performance (45%);
€ 270,000
Vesting at maximum level 75%; 13,520 sharesVesting at threshold level 25%; 4,506 shares
No performance adjustment
103,000 shares
Additional performance share awards for the member of the Board of Management Under the Remuneration Policy 2020-2023, the Supervisory Board may, upon the recommendation of the Committee, award additional performance shares to the member of the Board of Management for extraordinary achievements or exceptional performance, up to a maximum of 120,000 shares.
In January 2020, the Supervisory Board awarded the member of the Board of Management 103,000 additional performance shares. This award was made following the review, inter alia, of quantitative and qualitative financial and strategic/non-financial performance criteria applied for determining whether overperformance was achieved. The financial criteria utilized related to the following financial metrics: (i) Besi's absolute net margin, return on average equity and cash flow efficiency targets for one-year and three-year average periods and (ii) Besi's relative gross margin, net margin and return on average equity as compared to ASM Pacific Technologies and Kulicke & Soffa Industries, Besi's two most directly comparable public company peers with whom we compete. The non-financial criteria utilized related to specific strategic operating initiatives in accordance with Besi's strategic plan 2015-2019 and ESG goals.
The conditional award of additional performance shares was made, in part, due to the recognition of the following business developments:
• The continued successful implementation of Besi's business and ESG strategy.
• Active measures implemented to significantly reduce headcount and overhead in alignment with volatile market conditions.
• The achievement of peer leading gross and net margins of 55.8% and 22.8%, respectively, despite a significant industry downturn and a revenue decrease of 32.2%.
• Overperformance relative to challenging STI and LTI targets.
• The continued expansion of the performance gap between Besi and its peers in terms of key financial metrics such as gross margin, net margin, average return on equity and cash flow generation relative to revenue in a difficult market environment.
• Continued implementation of an attractive capital allocation plan whereby approximately € 167 million was distributed to shareholders even during an industry downcycle.
As a result of the activities and leadership of the member of the Board of Management, the Company is fit for purpose, has successfully retained and enhanced its position (i) as a technological leader in the highly cyclical assembly equipment industry with timely and sustainable forward strategic thinking as to Besi's internal development, (ii) in the assembly equipment market and with its key customers, and (iii) relative to its direct competition. Other items have also been considered in addition to the Company's performance and performance of the member of the Board of Management such as market developments and the views of society. The extraordinary award vested on January 23, 2020 as approved by the Supervisory Board. The vested shares are subject to a five-year
lock-up period which means that the member of the Board of Management will have to retain such shares for five years following the vesting date.
The award is also supported by an analysis of Besi's performance versus its direct competitors in the assembly equipment market (ASM Pacific Technology and Kulicke & Soffa Industries), the median of all industry peers used in our TSR comparator group and the median of all companies used in our remuneration reference group. This analysis includes both one-year and three-year rolling performance periods wherein return on average equity, gross margin and the ratio of cash flow as a percentage of revenue are also considered, reviewed and analyzed in addition to the net income as a percentage of revenue metric as applied under the Remuneration Policy.
As compared to the TSR comparator group, Besi's performance consistently tracks the 90th percentile for the one-year and three-year periods examined. This substantiates the Company's very strong performance over the past seven years in both significant industry up and downcycles and was an important consideration in setting and determining the member of the Board of Management's performance under the Remuneration Policy. In addition, the charts below present Besi's growing outperformance gap versus its direct assembly equipment peers on all metrics analyzed. Both ASM Pacific Technology and Kulicke & Soffa Industries have consistently performed more in line with market median levels which also contributes to the extraordinary performance achieved and considered for awarding the additional performance shares.
The charts below clearly indicate the success of Besi's strategic execution and the strong development of its financial metrics in a challenging industry environment for the award period. They also highlight Besi's superior performance versus each of its TSR and remuneration reference group peers and growth in its outperformance versus its most direct peers. All such factors help underpin the Supervisory Board's rationale in awarding the additional performance shares to the Chief Executive Officer.
PERFORMANCE COMPARED TO THE TSR REFERENCE GROUP
Net Income/Revenue
35%
30%
Besi
20%
25%
15%
Median
10%
0%
5%
2014
2013
2015
BesiASM PTK&S
2016
2017
2018
Peer median90th percentile
Cash Flow from Operations/Revenue
40% 35% 30% 25% 20% 15% 10% 5% 0%
90th %
Besi
Median
2019
Gross Margin
60%
55%
Besi
40% 35% 30% 25%
50%
45%
2020
2013
2014
2015
BesiASM PTK&S
2016
2017
2018
Peer median90th percentile
2019
2020
2013
2014
2015
BesiASM PTK&S
2016
2017
2018
Peer median90th percentile
2019
2020
Net Income/Revenue (3yr)
30%
Besi
25%
90th %
20%
Cash Flow from Operations/Revenue (3yr)
40% 35% 30%
Besi
90th %
10%
15%
0%
5%
25% 20% 15% 10% 5% 0%
2011-13
2012-14
2013-15
BesiASM PTK&S
2014-16
2015-17
2016-18
Peer median90th percentile
2017-19
Gross Margin (3yr)
60%
55%
Besi
90th %
50%
45%
Median
40%
35%
30%
25%
2018-20
2011-13
2012-14
2013-15
BesiASM PTK&S
2014-16
2015-17
2016-18
Peer median90th percentile
2017-19
2018-20
2011-13
2012-14
2013-15
BesiASM PTK&S
2014-16
2015-17
2016-18
Peer median90th percentile
2017-19
2018-20
Return on Equity
40% 35% 30% 25% 20% 15% 10% 5% 0%
40% 35% 30% 25% 20% 15% 10% 5% 0%
Median
2013
2014
BesiASM PTK&S
Source: Datastream
2015
Return on Equity (3yr)
Besi
2016
2017
2018
Peer median90th percentile
BesiASM PTK&S
2019
2020
2011-13
2012-14
2013-15
2014-16
2015-17
2016-18
Peer median90th percentile
2017-19
2018-20
PERFORMANCE COMPARED TO THE REMUNERATION REFERENCE GROUP
Net Income/Revenue
35% 30% 25% 20% 15% 10% 5% 0% -5%
Besi
10% 5% 0%
2013Besi
2014
2015
2016
Peer median90th percentile
2017
2018
2019
2020
Net Income/Revenue (3yr Avg.)
35% 30% 25%
Besi
90th %
20% 15% 10% 5% 0% -5%
Median
Cash Flow from Operations/Revenue
40% 35% 30% 25% 20% 15%
2013Besi
2014
2015
2016
Peer median90th percentile
2017
2018
2019
2020
Cash Flow from Operations/Revenue (3yr Avg.)
40%
35% 30% 25% 20% 15% 10% 5% 0%
Besi
90th %Median
Gross Margin
65% 60% 55% 50% 45%
90th %
40% 35% 30% 25%
Median
2013Besi
2014
Peer median90th percentile
Gross Margin (3yr Avg.)
60%
55%
Besi
50%
45%
90th %
40% 35% 30% 25%
2011-13 | 2012-14 | 2011-13 | 2012-14 | 2011-13 | 2012-14 |
Besi | Peer median | Besi | Peer median | Besi | Peer median |
2013-15
Besi
2015
2016
2017
2018
2019
2020
Median
2014-16
2015-17
2016-18
2017-19
2018-20
2013-15
2014-16
2015-17
2016-18
2017-19
2018-20
2013-15
2014-16
2015-17
2016-18
2017-19
2018-20
90th percentile
90th percentile
90th percentile
Return on Equity
45%
40%
35%
30%
25%
20%
10%
-5%
15%
0%
5%
40% 35% 30% 25% 20% 15% 10% 5% 0% -5%
Besi
2013 | 2014 | 2011-13 | 2012-14 |
Besi | Peer median | Besi | Peer median |
90th percentile
Source: Datastream
Return on Equity (3yr Avg.)
Besi
2015
2016
2017
2018
2019
2020
2013-15
2014-16
2015-17
2016-18
2017-19
2018-20
90th percentile
The following table presents the shares awarded or due to the member of the Board of Management for the last five reported financial years and unvested or subject to a holding period as at December 31, 2020:
Clawback and ultimate remedium
In accordance with Dutch law and the Remuneration Policy, the Short-Term Incentive and Long-Term Incentive components for the member of the Board of Management are subject to clawback provisions and ultimate remedium clauses. During 2020, no circumstances were identified by the Supervisory Board that could result in any adjustments or clawback.
4. Pensions
Prior to 2015, a defined contribution scheme with an annual contribution (based on a maximum allowed percentage of base salary for tax purposes) was in place for the member of the Board of Management. As a result of the legislative changes applicable for Dutch pension arrangements as from January 1, 2015, the Committee reviewed Besi's pension policy for the members of the Board of Management during 2014.
Based on the outcome of this review, as from January 1, 2015, pension contributions for the member of the Board of Management have continued to be based on contributions applicable for 2014. However, a portion of this contribution is now funded directly to the personal pension account of the member of the Board of Management as a tax-exempt contribution and the remaining balance is now paid as a taxed pension allowance, which can be used by the member of the Board of Management to build up his pension on a voluntary basis.
5. Other benefits
Other benefits include expense compensation, medical insurance and social security premiums.
BESI PAY-TSR ALIGNMENT (2015-2020)
Indexed to 2015. Base = 100 800
700 600 500 400 300 200 100
0
2015 2016 2017 2018Besi Total ReturnCEO Total Comp
Median Rem Reference Group Total Return (Datastream)
Remuneration of the Board of Management
Remuneration of the member of the Board of Management recognized by the Company for the years ended December 31, 2020 and 2019 was as follows:
(in euros, except for performance shares) | ||
Base salary | 600,000 | 600,000 |
Annual cash bonus | 900,000 | 600,000 |
Other benefits1 | 230,260 | 239,475 |
Total cash benefits | 1,730,260 | 1,439,475 |
Pension contribution2 | 35,904 | 33,159 |
Equity compensation benefits: Incentive Plan3 | 938,690 | 791,569 |
Total remuneration, excluding discretionary elements | 2,704,854 | 2,264,203 |
Equity compensation benefits: additional performance shares4 | 3,944,900 | 2,270,400 |
Total remuneration | 6,649,754 | 4,534,603 |
Conditional performance shares awarded5 | 31,920 | 32,887 |
1 Other benefits include expense compensation, medical insurance, employer social security contributions and for 2020 and 2019 a taxable pension allowance of € 181,740 and € 181,008, respectively.
2 The pension arrangements for the member of the Board of Management are defined contribution plans. The Company does not have any further pension obligations beyond an annual contribution.
3 Expenses recognized in 2020 and 2019 for performance shares awarded from 2018 to 2020 made under the Incentive Plan as determined in accordance with IFRS.
4 Expenses recognized in 2020 and 2019 for the additional performance share award of 103,000 shares which vested on January 23, 2020 and of 120,000 shares which vested on January 17, 2019, as determined in accordance with IFRS.
5 Performance shares for 2020 and 2019 may vest in 2023 and 2022, respectively, subject to continued service and the actual performance during the performance period 2020-2022 and 2019-2021, respectively.
Other remuneration information
The actual cash remuneration paid by the Company and the value of the vested equity remuneration to the Board of Management for the years ended December 31, 2020 and 2019 were as follows:
(in euros)
Base salary Fringe benefits
Total fixed remunerationYear ended December 31, 2020 2019
600,000 600,000
230,260 239,475
830,260 839,475
One-year variable 4,844,900 2,870,400
2019
2020
Equity compensation benefits: Incentive Plan 1,354,939 2,325,093
Total variable remuneration 6,199,839 5,195,493
Pension expense Total remuneration
Proportion of fixed and variable remuneration
35,904 7,066,003 12%/88%
33,159 6,068,127 14%/86%
The following table presents the items used to evaluate remuneration and Company performance over the last five reported financial years:
Year ended December 31,
Director's actual cash remuneration and value of equity remunerationR.W. Blickman, CEOCompany performance
Board of Management Annual change
Net income as % of revenue realized
Total shareholder return (base 2015 = 100%)
Average actual cash remuneration and value of equity remuneration Full-time equivalent basis of employees, excluding CEO (in thousands) Annual change
2020
7,066,003 16%
30.5% 688%
68.2
5%
2019
6,068,127 -33%
22.8% 465%
64.8
0%
2018
9,096,692 15%
25.9% 234%
64.7 -2%
2017
2016
7,911,037
5,857,080
35% 12%
29.2% 17.4%
410% 179%
66.2 61.9
7% 3%
Loans
At the end of 2020, no loans, advances or guarantees were outstanding to the CEO in accordance with the Remuneration Policy.
Proposed amendments to the Remuneration Policy 2020-2023
As a result of input received from shareholders in connection with the 2020 AGM, we conducted a review of the Remuneration Policy 2020-2023 with a specific focus on key areas of shareholder concern. We engaged an independent consulting firm to help us analyze the additional performance share awards of Besi's Long-Term Incentive compensation plan for members of the Board of Management as well as our pay for performance metrics relative to comparable peers. In addition, we reviewed the composition of our remuneration reference group given the significant change in Besi's financial profile, market presence, profitability and market capitalization since the time the remuneration reference group was first constructed ten years ago. Upon the completion of the review, meetings were conducted in the second half of 2020 between members of the Supervisory Board and key institutional shareholders both in Europe and the United States.
The proposals focus primarily on the elimination of the discretionary basis upon which additional performance shares can be awarded to members of the Board of Management and the composition of our remuneration reference group and its impact on our pay for performance alignment. The Supervisory Board also agreed to implement a minimum shareholding requirement for members of the Board of Management equal to three times their base salary. Such proposed elements would further align management's interests with those of Besi's shareholders.
Set forth below is a summary of the principal proposals for approval at Besi's 2021 AGM.
Proposed change to Additional Performance Shares (effective 2021) | Proposed change Remuneration Reference Group (effective 2021) |
|
|
The Supervisory Board believes that the financial and non-financial program components and specific targets associated therewith reward exceptional performance, both with respect to defined internal metrics as well as versus the performance of direct peers. They are also strongly aligned with the strategic initiatives set forth in Besi's strategic plan 2020-2024 as well as with stakeholders' interests associated with Besi's long-term, sustainable value creation.
Remuneration Supervisory Board members
The remuneration of the members of the Supervisory Board is reviewed on an annual basis. Effective April 30, 2020, the General Meeting of Shareholders approved the Remuneration Policy of the Supervisory Board. The Remuneration Policy was applied in 2020 as set forth below.
The total cash remuneration of the members of the Supervisory Board for the five years ended December 31, 2020 was as follows:
(in euros)
2020 2019
2018
Year ended December 31, 2017 2016
L.J. Hijmans van den Bergh - Chair | 79,200 | 53,900 | - | - | - |
D.J. Dunn - Member and chair Remuneration and Nomination Committee | 66,000 | 66,000 | 64,088 | 60,000 | 60,000 |
N. Hoek - Member and chair Audit Committee | 66,000 | 66,000 | 44,967 | - | - |
C. Bozotti - Member | 62,700 | 62,700 | 31,350 | - | - |
M. ElNaggar - Member | 68,700 | 70,700 | 60,884 | 57,000 | 57,000 |
Former members of the Supervisory Board: | |||||
T. de Waard | - | 26,400 | 76,800 | 72,000 | 72,000 |
K.W. Loh | - | 26,900 | 60,884 | 57,000 | 57,000 |
J.E. Vaandrager | - | - | 20,000 | 60,000 | 60,000 |
Total remuneration | 342,600 | 372,600 | 358,973 | 306,000 | 306,000 |
The current remuneration of Supervisory Board members is as follows:
• Member of the Supervisory Board, including committee membership(s): € 62,700.
• Member of the Supervisory Board and Chair of a committee: € 66,000.
• Chairman of the Supervisory Board: € 79,200.
• Meeting attendance fees, including conference calls: none.
• Intercontinental travel allowance: € 6,000 for physical attendance at a minimum of three meetings.
The members of the Supervisory Board are not entitled to any performance or equity related compensation and are not entitled to any pension allowance or contribution.
Loans
At the end of 2020, no loans, advances or guarantees were outstanding for any of the members of the Supervisory Board.
Annex 2
BE Semiconductor Industries N.V. ("Besi" or "the Company")
Proposed Amendments to the Remuneration Policy 2020-2023
The following amendments to the Remuneration Policy 2020-2023 for the Board of Management are proposed to be adopted by the shareholders at the Annual General Meeting of Shareholders to be held on April 30, 2021 (the "2021 AGM"). If approved, they will be integrated into the Remuneration Policy 2020-2023 for the Board of Management and effective as of the financial year 2021.
Introduction
At the Annual General Meeting of Shareholders held on April 30, 2020 (the "2020 AGM"), the principles and procedures underlying the Remuneration Policy for the Board of Management and the Supervisory Board were proposed to be adopted but did not receive the required 75% of the vote necessary for approval. As a result, we conducted a review of the Remuneration Policy 2020-2023 for the Board of Management with a specific focus on key areas of shareholder concern. We engaged an independent consulting firm to help us review the issues raised by shareholders and to formulate proposals responsive to their concerns. Upon completion of the review process, meetings were conducted in the second half of 2020 between members of the Supervisory Board and key institutional shareholders both in Europe and the United States.
The amendments proposed to be made to the Remuneration Policy 2020-2023 for the Board of Management are threefold and are subject to the approval by the shareholders at the 2021 AGM. They consist of:
The elimination of the discretionary element with respect to the award of additional Performance Shares to the Board of Management.
The introduction of a shareholding requirement for members of the Board of Management.
A revised Remuneration Reference Group.
Finally, the principles and procedures underlying the Remuneration Policy for the Board of Management and the Supervisory Board are proposed to be adopted by the shareholders.
Additional Performance Shares
Under the Remuneration Policy 2020-2023 for the Board of Management, the Supervisory Board may, at its discretion and upon recommendation of the Remuneration and Nomination Committee, award additional Performance Shares to members of the Board of Management in recognition of extraordinary achievements or exceptional performance up to a maximum of 120,000 shares.
It is proposed to eliminate the discretionary element associated with the award of additional Performance Shares to the Board of Management. Instead, the award of additional Performance Shares will be linked to defined quantitative and qualitative financial, strategic, non-financial and environmental, social and governance ("ESG") targets as a means of determining exceptional performance. As presented in the chart below, it is proposed that the achievement of defined financial metrics will represent up to a maximum of 90% of potential additional Performance Shares which can be awarded to members of the Board of Management, for which two separate tests (each of which represents 45% of program components) must be achieved in order to grant the maximum award related thereto (90%, or 108,000 shares). The financial criteria used in the first test consist of three financial targets for 1- and 3-year average periods including Net Margin, Return on Average Equity and Cash Flow from Operations/Revenue. The second financial test requires Besi to outperform its most directly comparable public peers, ASM Pacific Technology Limited and Kulicke & Soffa Industries, Inc., with respect to Gross Margin, Net Margin and Return on Average Equity for the most recent annual or latest twelve-month financial period. In addition, and as presented in the chart below, the achievement of defined strategic, non-financial and ESG targets as determined by the Supervisory Board are proposed to represent up to a maximum of 10% of program components (or 12,000 shares).
Market developments and the views of society are also considered in determining the number of additional Performance Shares which may be awarded to the Board of Management. This means that the Supervisory Board could apply a downward adjustment of the total number of additional Performance Shares that may be awarded in any year by a maximum of 20% in case of a market downturn or a high underlying share price.
Additional Performance Shares awarded vest immediately and are subject to a five-year lock-up period which means that members of the Board of Management will have to retain them for five years following the vesting date.
The charts below highlight the methodology used for the calculation of the number of additional Performance Shares which may be awarded in any year:
Financial Criteria for Awarding Additional PSA (90% Weight)
Exceed Each Of Three Financial Targets For 1yr And 3yr Average Periods*
Up to 54,000 SharesTest 1
45%
No Award | 50%+ Award (Pro-rata) | 100% Max Award |
• Net Margin < 20% | • Net Margin ≥ 20% < 25% | • Net Margin ≥ 25% |
• ROAE < 20% | • ROAE ≥ 20% < 25% | • ROAE ≥ 25% |
• CFO/Revenue < 25% | • CFO/Revenue ≥ 25% < 30% | • CFO/Revenue ≥ 30% |
*Test 1 Award Calculation: |
• Calculate % achieved for each metric in each of 1 and 3 year periods
• Total 6 data points
• Simple average % of all 6 data points
• Multiply by 54,000 shares
Test 2
45%
Exceed Gross and Net Margins & ROAE vs. direct peers (ASMPT, K&S) for 1 year
54,000 Shares
1
Strategic/Non-Financial Criteria for Awarding Additional PSA (10% Weight)
Strategic Operating Targets | Description and metrics | |
1. | Progress on product strategy | Key die attach, packaging, and plating initiatives |
2. | Organize R&D to achieve revenue targets in strategic plan | Define governance, structure, allocation and spend |
3. | Partner with the winners 2.0 | Deepen partnerships with current and future winners |
4. | Execution of cost reduction initiatives | Cost-down engineering, supply chain, manufacturing, organization |
5. | Capital allocation | Optimize shareholder value through dividends, share repurchases, acquisitions and external financing |
Strategic ESG Targets | Description and metrics | |
1. | Environmental Impact | Energy use, renewable energy, carbon emissions, water use, waste and hazardous material usage, sustainable design |
2. | People/Wellbeing | Diversity and inclusion, employee health and safety, employee development and engagement |
3. | Responsible Business | Ethics and compliance, responsible supply chain, community impact, tax practices |
2
The Supervisory Board believes that the proposed financial, strategic, non-financial and ESG program components and specific targets associated therewith are challenging and aligned with the strategic initiatives set forth in Besi's strategic plan 2020-2024. They are also well aligned with stakeholders' interests with respect to Besi's long-term, sustainable value creation. All targets and program components and achievements in connection therewith will be reviewed by the Supervisory Board on an annual basis.
Shareholding requirement
Besi is also proposing a minimum shareholding requirement for members of the Board of Management equal to 3x their base salary. Such an element would further align the interests of the Board of Management with those of Besi's shareholders. The ratio will be measured annually using the average closing price of Besi's shares for all trading days in the calendar quarter immediately preceding the start of each new financial year. Newly appointed members of the Board of Management will have a period of five years from their date of appointment to satisfy the minimum shareholding requirement.
Remuneration Reference Group
The principles and goals of Besi's Remuneration Policy 2020-2023 for the Board of Management are to attract, motivate and retain highly qualified executives with the relevant backgrounds capable of leading the Company to achieve its strategic business objectives. One component of Besi's Remuneration Policy 2020-2023 for the Board of Management is the composition of the Remuneration Reference Group which is reviewed by the Supervisory Board on a regular basis and updated, if necessary, to ensure an appropriate composition.
Following the review undertaken in 2020, we propose to revise and update our Remuneration Reference Group in order to better align its composition with Besi's current business profile and circumstances. In addition, we seek to better align our pay for performance metrics with those industry peers with which we compete for talent on a regular basis.
The current Remuneration Reference Group was constructed in 2011. Since that time, Besi's business and financial profile has changed as we have grown significantly relative to key metrics such as revenue, net income, market capitalization, return on average equity, net margin, cash flow generation and three-year total shareholder return. Besi's customer, market and global operating presence has also increased significantly as we moved a substantial portion of personnel and operations from Europe to Asia and emerged as the leading player in the advanced packaging segment of the assembly equipment industry. The unique characteristics and highly cyclical nature of the semiconductor assembly equipment industry requires the recruitment of executives familiar with our business, its global nature, its volatility and specific technical and market requirements.
Consequently, we believe that a new and more global Remuneration Reference Group comprised primarily of our industry peers is more compatible with our changed business and financial profile. The proposed change is important so that Besi can continue to attract, motivate and retain highly qualified technical personnel and international executives with the required background, skills and experience necessary to implement Besi's business strategy in an increasingly competitive global semiconductor and semiconductor equipment industry.
As such, we propose to operate two separate Remuneration Reference Groups to better reflect the markets in which we compete and the business profile of Besi's industry peers. They consist of a European group of public companies as our primary reference and a US group of public companies for a secondary, comparative reference, each of which consists of twelve companies as set forth below. The European group consists of virtually all European semiconductor equipment companies and semiconductor manufacturers and reflects a broad cross section of the European semiconductor industry. The US group consists solely of US based semiconductor equipment companies.
Proposed Remuneration Reference Group | |
Primary European Reference Group | US Comparative Reference Group |
Aixtron SE | Axcelis Technologies, Inc. |
ASM International N.V. | Brooks Automation, Inc. |
ASML Holding N.V. | Cohu, Inc. |
Dialog Semiconductor PLC | Entegris, Inc. |
Infineon Technologies AG | FormFactor, Inc. |
Melexis N.V. | Ichor Holdings, Ltd. |
Nordic Semiconductor | Kulicke & Soffa Industries, Inc. |
NXP Semiconductors N.V. | Lam Research Corporation |
Siltronic AG | Onto Innovation, Inc. |
Soitec | Teradyne, Inc. |
SÜSS MicroTEC SE | Ultra Clean Holdings, Inc. |
VAT Group AG | Veeco Instruments, Inc. |
Principles and Procedures underlying the Remuneration Policy for the Board of Management and the Supervisory Board
The principles and procedures underlying the Remuneration Policy for the Board of Management and the Supervisory Board will be presented and proposed to be adopted at the 2021 AGM and, if approved, will be integrated into the Remuneration Policy applicable to the Board of Management and the Supervisory Board for the same term (i.e. 2020-2023).
Introduction
The Remuneration Policy seeks to achieve three broad goals:
1. The Company's remuneration programs are structured in a manner that it believes will enable Besi to attract, motivate and retain highly qualified executives with the relevant background capable of leading the Company to achieve its strategic business objectives in an increasingly competitive global market.
2. The Company establishes remuneration programs that are designed to reward members of the Board of Management for the achievement of specified business objectives as a whole or the individual executive's particular business unit and are therefore linked to and dependent on the delivery of the Company's strategy in a socially responsible and sustainable manner. By linking variable remuneration to specific financial and non-financial goals that reflect the Company's strategic business objectives, the Company believes that it creates a performance-oriented environment for the eligible executives and to align their interests with those of internal and external stakeholders and the commitment to make a sustainable contribution in society. In designing the Remuneration Policy, the Company considers specific market trends, trends and developments in the industry and trends in society.
3. The Company's remuneration programs are intended to provide members of the Board of Management with an equity interest in the Company linking a portion of executive remuneration with the long-term performance of Besi's ordinary shares and aligning their interests with long-term interests of Besi's stakeholders by imposing a five-year lock-up period following the award date.
In addition to the three broad goals, the Remuneration Policy operates within the framework of the Company's Code of Conduct, which defines the common values inspired by the Company's vision.
Besi's Principles
The design of the Remuneration Policy is based on the guiding principles outlined below. Since the Company does not provide any variable compensation to the Supervisory Board, some of these principles may not or only partly apply to the compensation of the members of the Supervisory Board.
Alignment with strategy
The variable remuneration of the members of the Board of Management is structured with Short-Term and Long-Term Incentives for which the actual payout is directly linked to the realization of financial and non-financial performance objectives as set by the Supervisory Board prior to the start of the relevant performance period. These performance objectives reflect the essential elements of the strategy and business objectives of the Company.
In determining the actual remuneration, the Supervisory Board assesses the actual performance delivered based on the strategy and takes into account and considers the impact and development of the overall remuneration of the Board of Management on the pay differentials within the Company and the views of society. Besi has expanded its ESG activities in recent years with a focus on the environmental impact of its products and operations, sustainability in the supply chain, and the communities in which it operates. Besi aims to report its ESG activities in line with the Global Reporting Initiative Sustainability Reporting Standards. Besi also evaluates its ESG and non-financial risks that could affect both its strategy and business operations. Besi's ESG strategy is influenced by important global trends currently such as climate change and the circular economy as well as challenges such as diversity, human rights and the recruitment of highly qualified technical personnel. Short- and long-term topics are assessed through measures such as materiality analyses, key performance indicators for energy, water and waste usage, customer and employee satisfaction metrics, supplier audits and continuous stakeholder dialogue. Besi's ESG and non-financial risks form an integrated part of the actual remuneration when setting and measuring predetermined non-financial performance objectives.
Performance-oriented pay
The Remuneration Policy supports a performance-oriented pay principle for the Board of Management whereby inappropriate risk-taking behavior is minimized. The Short-Term and Long-Term Incentives are subject to claw-back provisions that provide the Supervisory Board with the discretionary authority to reclaim all or part of the Short-Term and Long-Term Incentives.
Competitive pay
Besi competes for qualified talent in a highly competitive global market. The competitiveness of the Remuneration Policy is benchmarked regularly against a balanced Remuneration Reference Group to determine the total remuneration package for members of the Board of Management.
Consistency and disclosure
The structure of the Board of Management remuneration is consistent with the remuneration structure for senior management positions to ensure internal alignment and to support a shared purpose. In the annual remuneration report and on the Company's website, we provide extensive disclosures of how the Remuneration Policy is implemented. This includes:
• Full disclosure of the peer group used for benchmarking purposes;
• Transparency on the term, as well as the performance measures and weights used in the Short-Term and Long-Term Incentive;
• The realized performance per objective for the Short-Term and Long-Term Incentive.
Alignment with stakeholder interest
As indicated in preparation of and as discussed during and following the 2020 AGM, the views of shareholders as expressed during the 2020 AGM or in dialogue with the largest investors and shareholder representative bodies are considered by the Remuneration and Nomination Committee when operating and setting the Remuneration Policy.
The Remuneration Policy aligns the strategic business objectives of Besi with the interests of the Company's stakeholders and society. As a globally operating company, we have a large variety of stakeholders. We also commit to transparency and high integrity with a broad list of stakeholders who have a strong interest in the Company, including employees, customers, suppliers, business partners and shareholders.
The stakeholders support us to improve constantly by challenging us, sharing insights on their concerns, offering feedback and collaborating with us. We engage with them in both formal and informal ways throughout the year on a wide range of topics that include societal, economic, and environmental aspects and reflect on the feedback provided.
Besi's procedures
Determination and execution
The Remuneration and Nomination Committee is responsible for advising the Supervisory Board in determining, revising, and executing the Remuneration Policy for both the Board of Management and the Supervisory Board. The Remuneration and Nomination Committee actively monitors internal and external developments to determine whether the Remuneration Policy is still aligned to and supportive of the Company's strategic and operational business objectives. If the Remuneration and Nomination Committee believes circumstances so require, it may submit a proposal for the amendment of the Remuneration Policy to the Supervisory Board. If supported by the Supervisory Board, any and all proposals for amendment of the Remuneration Policy will be presented to the General Meeting of Shareholders for adoption.
Within the Remuneration Policy for the Board of Management, the Supervisory Board may exercise discretion in the execution of the policy and the related Incentive Plans, including but not limited to:
• The adjustment of the Base Salary of the members of the Board of Management;
• The update of the Remuneration Reference Group and the TSR peer group in case of de-listings, mergers, or other extraordinary circumstances;
• The adjustment, positive or negative, of the performance of the incentive plans in case of unforeseen or unusual circumstances occurring during the performance period.
Risk assessment and compliance
A comprehensive analysis contemplating the various risks and scenarios associated with variable compensation elements is conducted regularly. This includes the calculation of remuneration under different scenarios, whereby different performance assumptions are reviewed and considered.
The design and implementation of the Remuneration Policy is compliant with applicable laws and corporate governance regulations. Decisions related to remuneration are made in accordance with the Company's Code of Conduct.
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BE Semiconductor Industries NV published this content on 19 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2021 08:55:04 UTC.
