In the first quarter of each fiscal year, based on the Compensation Committee’s recommendations, the Board of Directors reviews the various targets, their weightings, and the expected performance levels. It then sets:
The variable component is calculated based on strategic financial indicators, which are measured at the level of the Group.
The setting of related Fiscal 2025 financial targets depends on the achievement of the 2025 budget objectives, previously approved by the Board of Directors. For reasons of business confidentiality, the financial targets are not disclosed.
There are two key measures of the Group’s ability to grow while demonstrating operational efficiency to best serve its customers through rigorous management of inflation and cost control: organic growth (measured by the increase in sales over a given period compared with the same period in the previous year, excluding the impact of acquisitions, disposals and currency effects) and underlying operating profit margin (calculated by dividing operating margin, excluding unusual or non-recurring items, by revenues).
The client retention criterion (measured as the percentage of the previous year's revenues retained during the current year) is a key lever in the Company’s model for sustainable, profitable growth, enabling it to develop over the long term, while preserving its freedom to be selective in the choice of new contracts.
The free cash flow criterion is an indicator of the Group’s ability to finance its activities and growth, and thus ensure the sustainability of its business.
Net income is a measure of Sodexo’s overall performance.
The non-financial performance targets only include quantitative indicators:
The annual variable compensation is calculated and set by the Board of Directors following the close of the fiscal year to which it applies.
In accordance with French law, payment of the annual variable compensation is subject to shareholder approval at the Annual Shareholders Meeting.
Furthermore, no clawback clause has been put in place for the variable compensation.
If a new Chief Executive Officer is appointed or the existing Chief Executive Officer’s term of office is terminated during the course of a fiscal year, the same principles as described above will apply, on a pro rata basis by reference to the period during which he or she holds office.
If an appointment was made during the second half of the fiscal year, the performance appraisal will be carried out on a discretionary basis by the Board of Directors, taking into account the recommendations of the Compensation Committee, within the limits of the applicable policy, while ensuring continued alignment with the Group’s performance.
The Board of Directors considers that the long-term variable compensation plan – which also applies to other key positions within the Company – is particularly suited to the position of Chief Executive Officer in view of the direct contribution that he/she is expected to make to Sodexo’s long-term value creation. This plan – based on performance share grants subject to criteria selected by the Board of Directors – is directly linked to the strategic priorities of the Company. It strengthens the motivation and loyalty of the Chief Executive Officer while facilitating the alignment of his/her interests with those of shareholders as well as the corporate interest of the organization.
Sodexo’s long-term compensation program currently consists solely of performance share grants.
Performance share grants are decided by the Board of Directors, acting on the recommendations of the Compensation Committee, during the first half of each fiscal year after the publication of the financial statements for the previous fiscal year.
The vesting period is three years, in line with the period over which performance conditions are measured and in line with market practices.
The Board of Directors has capped the value of the performance shares granted to the Chief Executive Officer at 150% of his/her total annual compensation (comprising fixed compensation and annual variable compensation, assuming targets achieved).
In addition, the percentage of performance shares granted to him/ her may not represent more than 8% of the total shares granted annually by the Board.
(3) A near miss is an incident that did not result in injury, illness or damage, but had the potential to do so. By reporting them and identifying their causes, risk areas can be identified, preventive measures put in place, and potential accidents avoided in the future. For Sodexo, this is an essential aspect of risk management and safety prevention.
