Performance-related Compensation
The recognition of individual performance encourages employees to think and act like an entrepreneur and strengthens motivation. We offer state-of-the-art compensation and benefit programs which enable Henkel to attract, motivate and retain highly skilled, talented and best-performing employees all over the world. Our compensation strategy is a significant part of our performance management. It is designed to reward employees for their contributions in the achievement of company targets and role-specific objectives. Pay for performance signifies our key philosophy in rewarding employees for the achievement of short and long-term business goals.
Henkel’s compensation and benefits policy is supported by the following components:
- Base Salary is a fixed pay component determined by the requirements of the job local market conditions, individual performance, skills and potential for development.
- Short-Term Incentive is based on an annual incentive plan which applies to all managers. The purpose of this plan is to acknowledge and reward the achievement of yearly target agreements.
- Long-Term Incentive is a reward for our core management team for the long-term creation of shareholder value.
Our compensation and benefits policy encourages the mobility of our employees across countries, businesses and functional areas, thus promoting the flexibility of our organization all over the world.
The Henkel “Target Dialogue”
Henkel has implemented a globally consistent system of performance-related remuneration for its managerial staff. The general Target Dialogue philosophy is to strengthen personal performance through targets which can be individually influenced and measured in numbers.
Targets for the Target Dialogue are set using a cascading approach of corporate, team and individual targets. Once corporate targets for the entire company are set, they form the basis for setting team targets. Individual targets should be set so that they support the team and group targets.
All targets in the Target Dialogue should be consistent from Group to Team to Individual. They should be ambitious, quantifiable and fair, and monitored during the whole year. We regard accurate target setting as a key management responsibility, linking individual achievement incentives with Henkel’s strategic focus.
Worldwide: Locally adapted
The principle of performance-related renumeration also applies to our non-managerial employees. Approximately 65 percent of them are covered by a performance-based incentive system that enables them to share in the economic success of the Company and its subsidiaries. The design of these schemes reflects local needs and requirements:
- In China, non-managerial employees receive annual bonus payments based on five defined team targets, five personal targets and their work attitude. The latter covers aspects such as acceptance of responsibility, initiative, customer orientation, and teamwork skills.
- In the Andean countries Colombia, Ecuador, Peru and Venezuela, all non-managerial employees benefit from a standardized system of performance-related remuneration. Two team targets, derived from the targets of the relevant business unit, are supplemented by three personal targets directly related to the employee’s field of responsibility and influence.
- Since the profitability of the Luxembourg production facilities for detergents and household cleaners is vitally dependent on the utilization rate of machine capacity, the quarterly bonus payments are linked to this factor.
- The performance-related remuneration system is part of the collective wage agreement of Henkel employees in Italy. Every four years, the Company defines the targets for the "premio di partecipazione." Performance indicators for the individual targets as well as the bonus amounts are determined in consultation with the unions and the works council.
Sharing in success
Since 2001, Henkel has been operating a share ownership plan for all employees worldwide, known as the Employee Share Program (ESP). For each euro invested by an employee (limited to 4 percent of salary up to a maximum of 5,000 euros per year), Henkel added an additional 33 cents in the year under review. The idea is to bind the interests of Henkel employees even more closely to those of the Company, while also giving employees an attractive opportunity to provide individually for their future and their retirement.
The number of participants in this plan increased once again in 2008: about 12,000 employees in 54 different countries bought Henkel shares within the ESP. At year-end, almost 15,000 employees held a total of 3.7 million shares within the ESP, representing around 2.1 percent of total preferred shares outstanding. The vesting period for newly acquired shares is three years.
