2005 Annual Report - SBM Offshore

Report of the Supervisory Board
Remuneration Report
Remuneration Policy
The remuneration policy of the Company was explained in
the 2004 Annual Report and approved in the 2005 Annual
General Meeting of Shareholders. It is available on the
Company’s website. This remuneration policy clearly
provides that Managing Directors’ remuneration is directly
linked to the Company’s performance over the past year (for
bonus payments) and over the next three years (for share
options and performance shares). The policy is therefore
considered to be effective.
Implementation of the Remuneration Policy
The Managing Directors’ remuneration is partly determined
by comparison with a peer group consisting of European oil
and gas service contractors. In 2005 the fixed element of the
Managing Directors’ remuneration was increased in line with
inflation.
The bonus is performance related, based upon the previous
year’s Economic Profit (Return On Capital Employed
exceeding an assumed Weighted Average Cost of Capital of
8%). It is payable 80% in cash and 20% in ordinary shares.
In addition, and upon completion of a vesting period of three
years in the Company’s employment, an equal number of
‘matching’ shares are granted. The bonuses paid in 2005
(derived from the 2004 results) were 29% above prior year,
which was affected by the relatively low 2003 profits. The
performance related remuneration accordingly represented
42% of total remuneration.
Pension plans for the Managing Directors continue to provide
for pensions of up to a maximum of 70% of final salary,
‘earned’ at the rate of 2% for each year of service within the
Company. Pension contributions in respect of the Managing
Directors were lower in 2005 than in 2004, when a provision
was taken for increased pension premium obligations in
respect of the appointment of Mr D. Keller to the position of
CEO.
In 2005, the new long-term incentive was introduced for
Managing Directors based upon a part options, part
performance shares compensation method, and depending
upon the future growth of earnings per share (EPS).
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The CEO allocation under the new scheme was 10,000 share
options plus 2,100 performance shares, both subject to EPS
growth over the period 2005-2007. The allocation to the other
Managing Directors was 75% of these amounts. Given that
Mr. Keller and Mr. van Dooremalen were each CEO for part of
the reference year (2004), they agreed to share the CEO’s
allocation equally.
Mr Keller is currently the only Managing Director of the
Company. For future appointments the Company intends that
a contractual term of four years will be specified, at the end
of which re-appointment will be necessary and that a limit of
one year’s fixed salary will be stipulated as severance pay in
the event of redundancy. If this latter condition would be
manifestly unreasonable during the first term of appointment,
the maximum compensation could be increased to two year’s
fixed salary.
In the year 2005 no extraordinary remuneration has been paid
to any present or former Managing Director.
FPSO Xikomba offloading a cargo into an export tanker offshore Angola