In order for his/her performance shares to be delivered, the Chief Executive Officer must be present within the Group at the vesting date. However, in accordance with the AFEP-MEDEF Code and the plan rules applicable to all beneficiaries of the Group's performance share plans, the Board of Directors, on the recommendation of the Compensation Committee, may authorize the Chief Executive Officer to retain his/her rights to any non-vested shares at the date of his/her departure.
In such a case, the number of shares that vest would be determined on a pro rata basis by reference to the actual time the Chief Executive Officer spent within the Group during the vesting period. The original vesting period would continue to run and the rules of the applicable plan including the performance conditions would still apply.
In accordance with article L.225-197-1 of the French Commercial Code, the Chief Executive Officer is required to hold in registered form, for the duration of his/her term of office, a number of vested shares whose value is equivalent to 30% of his/her annual fixed compensation at the date the shares are delivered.
In addition, the Chief Executive Officer is required to hold shares with value equivalent to 200% of his/her gross annual fixed compensation, and these shares must be built up over a maximum period of three years. In light of the external recruitment process currently underway for a new Chief Executive Officer, compliance will be required as from the date the first share award vests, i.e., three years following the initial grant by the Company.
In addition, as long as he/she remains in office, the Chief Executive Officer may not use hedging instruments on any granted performance shares.
The Board of Directors has decided not to create a multi-year compensation system, preferring instead to apply a share-based long-term compensation program, which it considers to be more closely aligned with the interests of the Company's shareholders.
However, the Board may envisage putting in place such a system if any regulatory changes or other changes in circumstances were to render it difficult or impossible to use shares. If a multi-year compensation plan were to be set up, it would be based on the same principles and criteria as those used for determining and allocating performance shares and the same grant cap would apply.
If the Chief Executive Officer's term of office is terminated for any reason (other than resignation, retirement or gross or willful misconduct) then he/she may be entitled to an indemnity representing up to twice the amount of his/her annual gross compensation (fixed and variable) received over the 12 months preceding the termination.
This indemnity will be paid subject to an achievement rate for the Chief Executive Officer's annual variable compensation targets of at least 80% for each of the two fiscal years ended prior to the termination of the appointment. This condition was previously defined as the annual increase in the Sodexo Group’s consolidated underlying operating profit, which must be equal to or higher than 5% for each of the three fiscal years ended prior to the termination of the appointment. It had been set in 2017 and has not been amended since. The Board of Directors deemed this condition no longer an appropriate measure of the Group’s performance in a context of business recovery following a health crisis that heavily impacted Sodexo’s earnings. The new performance condition ensures exacting standards regardless of the context.
In the event that the term of office is terminated in its first year, the indemnity will be calculated prorata temporis on the basis of a maximum amount equivalent to six months of total gross compensation (annual target fixed and variable), subject to the performance conditions relating to Sodexo’s financial and operating performance, which will be assessed by the Board of Directors based on the period considered.
In addition, in the event that the term of office is terminated in its second year, the indemnity will be calculated prorata temporis on the basis of a maximum amount equivalent to twelve months of total gross compensation (annual fixed and variable eff ectively paid) in respect of the previous year, subject to an achievement rate for the Chief Executive Officer's annual variable compensation targets for the year ended of at least 80%.
Under no circumstances can the maximum overall indemnity payable to the Chief Executive Officer in respect of the non-compete agreement and/or his/her indemnity on termination of office exceed 24 months of his/her fixed and variable compensation. Denis Machuel had expressly refused this indemnity and therefore did not benefit from any payment due on termination of office.
The Covid-19 health crisis has radically changed the competitive environment in which the Group’s executives operate. The ramp-up in digitalization and the fundamental change in Sodexo’s business sector, particularly resulting from the development of remote working arrangements, have meant that a wide variety of new players have entered and developed on the market.
For this reason, the Board of Directors considered that the noncompete clause in force, which had been drawn up when Denis Machuel took office in January 2018, no longer adequately protects Sodexo’s interests. Its scope of application was reviewed and strengthened, particularly with the introduction of new restrictions in terms of targeted businesses and sectors and geographical coverage.
Consequently, in the event of the termination of the Chief Executive Officer's term of office, he/she will be subject to a non-compete obligation for a minimum term of 24 months, restricting his/her freedom to hold any position as an employee or Corporate Officer, or carry out any consulting work, either directly or through another legal entity, for any of Sodexo's competitors. As consideration for these restrictions, the Chief Executive Officer is paid an indemnity on a staggered basis, the amount of which has been raised to a maximum of 24 months of his/her fixed and variable compensation awarded for the fiscal year preceding the termination.
The Board of Directors has the option to decide to waive the Company's right to enforce this non-compete agreement when the Chief Executive Officer leaves the Group. In addition, the maximum aggregate amount paid to the Chief Executive Officer for (i) his/ her non-compete agreement, and/or (ii) his/her indemnity on termination of office, may not exceed 24 months of his/her fixed and variable compensation.
SODEXO FISCAL 2021 UNIVERSAL REGISTRATION DOCUMENT 291 6 CORPORATE GOVERNANCE Compensation This non-compete indemnity is excluded if the Chief Executive Officer should be retiring, and in any event will not be paid once he/she reaches the age of 65.
