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Remuneration – Executive Management
The composition of the remuneration to Executive Management reflects Lundbeck’s ambition to be a research-based company dedicated to brain disorders, which aims for long-term financial growth.
To a company such as Lundbeck, it is important that the overall remuneration package for the members of Executive Management is composed in such a manner that it rewards the achievement of ambitious short-term goals and clearly provides an incentive to focus on the long term based on the company’s performance. The overall remuneration package consists of a base salary, short-term and long-term incentive programmes and pension.
The base salary of the members of Executive Management is at market level. The compensation package includes short-term and long-term incentive programmes with a potential for a substantial reward for exceptional results.
The pension scheme for Executive Management is a defined contribution scheme which corresponds to the market level. The scheme includes both a savings part and the insurance coverage associated with general practice for pension schemes.
The short-term incentive programme for the members of Executive Management is an annual bonus awarded for the achievement of pre-determined targets for the preceding financial year. The CEO may receive up to nine months’ base salary as a bonus on condition of achievement of exceptional results. The other members of Executive Management may receive up to six months’ base salary as a bonus on condition of achievement of exceptional results. The bonus scheme is based on group targets and individual targets.
On termination of employment, members of the Executive Management will receive less than two years’ salary. The members of Executive Management participate in a three-year revolving long-term incentive programme (LTI) that can include shares and share-based instruments such as warrants, restricted shares and share options. For bad leavers, it is a prerequisite for upholding vesting rights in the LTI programme that their employment in the Lundbeck group is not under notice or cancelled throughout the period. The programme is based on value generation to shareholders.
All restricted shares - and other shares or share-based instruments - vest after three years if the economic targets for vesting are met. The targets will be defined by the Board of Directors and may include both financial and strategic targets. If none of the targets are met, none of the shares or sharebased instruments will vest.
Executive Management’s remuneration is based on guidelines submitted for adoption at the Annual General Meeting in 2012. The latest approved guidelines, which specify the components of the remuneration package for Executive Management members, are available as related material on this page.
| 2011 DKKm | 2010 DKKm | |
| Short-term staff benefits | 30 | 30 |
| Pension benefits | 5 | 6 |
| Severance package | 8 | - |
| Share-based benefits | 3 | 4 |
| Total | 46 | 40 |
| Short-term staff benefits | 71 | 65 |
| Pension benefits | 12 | 11 |
| Other social security costs | 2 | - |
| Share-based benefits | 11 | 6 |
| Total | 96 | 82 |
*Executives are individuals who report directly to Executive Management
In 2011, the executive management was reduced from six to four members. The total remuneration of the CEO, including bonus, which is a combination of company strategic and individual targets, and share-based payments, amounted to DKK 12.5 million for the 2011 financial year (DKK 11.5 million in 2010).
The fair value of the warrant schemes and share schemes for the Executive Management, vested and calculated according to the Black-Scholes method, was DKK 4.4 million at 31 December 2011 (DKK 16.0 million in 2010).
Remuneration - Board of Directors
Members of the Board of Directors receive a fixed remuneration and are not included in the company’s bonus and incentive programmes, neither in the form of cash bonus, options or shares. In addition, the members of the Audit, Remuneration and Scientific Committees receive a separate fee.
The total remuneration of the board of directors for 2011 amounted to DKK 5.7 million (DKK 5.7 million in 2010). The amount includes remuneration for participation in the Audit committee of DKK 0.7 million (DKK 0.7 million in 2010), for participation in the remuneration committee of DKK 0.7 million (DKK 0.7 million in 2010) and for participation in the scientific committee of DKK 0.7 million (DKK 0.7 million in 2010).
The remuneration for 2011 is consistent with that presented at the Annual general meeting
held on 30 march 2011. The members of the board of directors held a total of 9,734 lundbeck shares at 31 december 2011 (46,072 shares in 2010).
The total remuneration for 2011 of the chairman of the board of directors amounted to DKK 1.4 million (DKK 1.2 million in 2010). The amount includes remuneration for participation in the Audit committee and the remuneration committee for the chairman elected at the Annual general meeting held on 30 march 2011 as well as remuneration for participation in the remuneration committee for the retiring chairman. The total remuneration for 2011 of the deputy chairman of the board of directors amounted to DKK 0.8 million (DKK 0.8 million in 2010), including remuneration for participation in the Audit committee.