Arla Foods Consolidated Annual Report 2021

54 Arla Foods Consolidated Annual Report 2021 / Governance / Management remuneration MANAGEMENT REMUNERATION Arla's executive remuneration guidance is designed to encourage high performance and support value creation. The guidelines ensures alignment with the Group's strategic direction and the interests of our farmer owners. We have a structured approach to remuneration, ensuring that salaries are unbiased towards gender, nationality and age. Contents Remuneration governance Arla's remuneration practice is governed by the remuneration guidance set by the Board of Directors (BOD) and reviewed regularly. The BoD is guided by the recommendations of the Remuneration Committee (RemCo), consisting of six board members, including the chairmanship. The RemCo works as a preparatory committee for the BoD as well as the Board of Representatives (BOR), with a special focus on the BoD, BOR and the Executive Board. It is also the Committee's responsibility to ensure that the remuneration guidance, practices and incentive programmes support the strategy of Arla and create value for the owners by enabling Arla to attract and retain the best qualified elected representatives, executives, directors and key employees. The RemCo meets four times a year. Our remuneration practices Remuneration packages are constructed to ensure attraction, engagement and retention of the best senior managers, and at the same time should drive strong performance in both short-term and long-term business results. In line with Scandinavian practice, the majority of the remuneration is fixed. However, in recent years the variable part of the remuneration has increased to ensure that total remuneration is also dependent on achieving Arla's short-term and long-term financial targets. All executives and members of senior management are employed on terms according to international standards, including adequate non-compete restrictions, as well as confidentiality and loyalty restrictions. Our performance measures Board of Directors (BoD) The remuneration of the BoD comprises a fixed fee and is not incentive-based. We believe this ensures that the Board is primarily focused on the coopera- tive's long-term interests. Beyond a minimal travel per diem, no additional compensation is paid for meeting attendance or committee service. The BoD's remuneration is assessed and adjusted on a bi-annual basis and approved by the BoR. The most recent adjustment made was in 2019. For more details on specific amounts, refer to page 113. Executive Board and Executive Management Team (EMT) The compensation elements and approach for the Executive Board and the Executive Management Team (together: executives) are identical. Remuneration paid to the Executive Board is assessed annually by the BoD based on recommen- dations from RemCo. The EMT's remuneration is set by the CEO. For more details on specific amount, go to page 113. The remuneration package for the executives is based on external benchmarks against European and international FMCG companies, providing a competitive and sustainable mix of fixed and variable pay. Pension contributions and non-monetary benefits such as company car, telephone etc. are also part of the package. Levels of fixed remuneration are set based on individual experience, contribution and function, while variable pay reflects performance against annual SHORT-TERM COMPONENTS* 0 business targets. The variable pay component consists of an annual short-term incentive (STI) plan, and a long-term (three-year) incentive (LTI) plan. The STI is composed of the same elements for all executives. The main components of the LTI are branded volume growth, and the group's perfor- mance versus a peer group (see graphs). LONG-TERM COMPONENTS* * The ratio of elements displayed here is only illustrative, as the weight of the elements differs across members of the EMT. Calcium/Fund our Future Profit ■Leadership Branded volume growth Performance vs. peer group Branded volume growth |||

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