The Group's compensation policies are designed to ensure that Group companies may attract and retain management talent, recognising the international nature of its businesses. The Group sets high standards in the selection of executives, recognising their importance to the long-term development of the business.
In addition to a basic salary, executives may receive short-term performance-related bonuses and will generally be eligible to participate in the Group's stock option plan, details of which are set out below. The Group does not operate any schemes to issue shares or units to executives as part of their remuneration package.
The Compensation Committee of the Board of Compagnie Financière Richemont SA is responsible for determining the remuneration of the members of the Board of Directors, the Executive Chairman and members of senior management.
Non-executive directors receive an annual fee for their services. They are not eligible for performance-related payments and do not receive awards under the Group's stock option plan.
The total level of compensation paid to executive directors of Compagnie Financière Richemont SA and members of the Board of Richemont SA, the management board, including pension contributions, benefits in kinds and all other aspects of remuneration but excluding the value of awards under the Group's stock option plan, amounted to € 26 060 000.
Total fees and other remuneration paid to non-executive directors during the year amounted to € 862 000. Included within this figure is an amount of € 235 000 paid to a non-executive director for consultancy and advisory services. No option grants are made to non-executive directors.
Additional fees and remuneration In addition to fees paid in respect of Board membership, Me Jean-Paul Aeschimann, the Deputy Chairman, is a partner in a professional firm, Lenz & Staehelin, which received fees totalling € 523 000 from Group companies during the year under review for advice on legal and taxation matters.
No such payments were made during the year under review.
No units were allotted to directors or members of the management board during the year under review.
As at 31 March 2005 non-executive directors and parties closely linked to them owned a total of 48 100 Richemont 'A' units. Executive directors and members of the management board and parties closely linked to them held a total of 221 310 Richemont 'A' units at that date. As noted above, Mr Johann Rupert is the General Managing Partner of Compagnie Financière Rupert, which holds the 52 200 000 'B' registered units in the Group. Parties associated with Compagnie Financière Rupert held a further 135 426 'A' units or 'A' unit equivalents at 31 March 2005.
The Group operates a long-term unit-based compensation scheme whereby executives are awarded options to acquire units at predetermined market-linked prices. No awards under the stock option plan have been made to non-executive directors.
Richemont agrees with the principle that stock options form part of compensation and that the issue of new shares to meet the obligations under stock option plans results in unfavourable dilution. For this reason, Richemont has implemented a series of buy-back programmes since 1999 to acquire 'A' units to meet the obligations under its unit-based compensation schemes. By using its own capital to acquire these units, Richemont has effectively reflected the cost of the unitbased compensation schemes in the profit and loss account by way of a financing charge.
Awards under the Group's stock option plan will not result in the issue of new capital and, in consequence, there will be no dilution of current unitholders' interests.
Details of options held by executive directors and members of the management board under the plan at 31 March 2005 are as follows:
| Granted during the year ended 31 March | Exercise price SFr | Expiry dates | Number of options |
|---|---|---|---|
| 2000 | 24.25 | 2009 | 225 000 |
| 2003 | 24.25 | 2009 | 4 777 000 |
| 2010 | 15 000 | ||
| 2011 | 189 750 | ||
| 2012 | 496 350 | ||
| 21.00 | 2012 | 35 000 | |
| 20.00 | 2012 | 3 431 700 | |
| 2004 | 29.10 | 2013 | 2 500 000 |
| 30.95 | 2013 | 500 000 | |
| 2005 | 33.10 | 2012 | 200 000 |
| 2013 | 1 215 500 | ||
| 33.55 | 2015 | 233 333 | |
| 2016 | 233 333 | ||
| 2017 | 233 334 | ||
| Total | 14 285 300 |
Each option entitles the executive to purchase one Richemont 'A' unit
As at 31 March 2005, loans totalling € 8 208 000 were outstanding to four executive directors. The loans are denominated in Swiss francs, US dollars and euros and carry interest rates between 3 and 5 per cent. They are repayable over periods of up to five years. No loans were outstanding to non-executive directors. Current policy is not to extend further loans to executive directors.
The total level of remuneration paid to the highest paid director, including pension contributions, benefits in kind and all other aspects of remuneration but excluding the value of awards under the Group's stock option plan, amounted to € 2 823 000. In addition, that director received options entitling him to acquire 850 000 Richemont 'A' units. These options are exercisable over the coming 12 years at exercise prices of between SFr 33.10 and SFr 33.55.
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