Compensation and other information

Implementation of 2011 compensation policies

This section of the report provides a description of the compensation policies implemented in 2011 for the Chairman of the Board of Directors, Non-executive Directors, Deputy Chairman and Chief Executive Officer, the Deputy CEO and other Senior Managers with strategic responsibilities.
The implementation of the 2011 compensation policy, as checked by the Compensation and Nomination Committee during the periodic assessment required under the Corporate Governance Code, was in line with the general principles referred to in the resolutions of the Board of Directors passed during the previous and current terms. The Committee’s assessment was that the 2011 Policy was consistent with the relevant market benchmarks in terms of both overall positioning and pay-mix.

Fixed compensation

Non-executive Directors departing in 2011 were paid the fixed compensation set by the Shareholders’ Meeting of April 28, 2008 calculated on a proportionate basis until the end of their term of office.
The current Chairman, Alberto Meomartini, was paid, on an annual pro rata basis, the compensation determined by the Board of Directors of June 16, 2011, applying a principle of continuity with the compensation structure and amounts set in relation to the previous term. In relation to both the previous and current terms, this compensation includes the compensation for the office of Director approved by the Shareholders’ Meeting.
Non-executive Directors were paid the compensation agreed for the new term by the Shareholders’ Meeting of May 4, 2011 pro-rated according to the portion of the year worked.
The fixed compensation paid to the Deputy Chairman and Chief Executive Officer (CEO) was adjusted in order to align it with market benchmarks through a resolution passed by the Board of Directors on June 16, 2011. In relation to both the previous and current terms, this compensation includes the compensation for the office of Director approved by the Shareholders’ Meeting.
With regard to the fixed compensation paid to the Deputy CEO, since no misalignment was found with regard to market benchmarks, the current compensation was confirmed. In relation to both the previous and current terms, this compensation includes the compensation for the office of Director approved by the Shareholders’ Meeting.
For other Senior Managers with strategic responsibilities, the annual salary review carried out for all senior managers brought in 2011 selective fixed compensation adjustments in relation to promotions to higher positions and in order to align salaries with market benchmarks.
Amounts for fixed compensation are specified in Table No. 1 on page 17.

Compensation for service on Board Committees

Non-executive Directors were paid the compensation agreed by the Shareholders’ Meeting of June 16, 2011 for service on Board committees, pro-rated according to the portion of the year worked.
Compensation for service on Board Committees is shown in Table No. 1 on page 17.

Variable incentives

Short-term variable incentives

The 2011 Annual Incentive was paid out to executives on the basis of the assessment of company performance in relation to the targets set for 2010 pursuant to the Strategic Plan regarding: (i) Adjusted EBITDAi, (ii) Orders acquired, (iii) Net financial position, (iv) Sustainability.
The 2011 Annual Incentive was paid out to Senior Managers with strategic responsibilities on the basis of company results and a series of individual targets pertaining to the manager’s specific area of responsibility, in accordance with the Saipem 2010 performance plan.
Saipem results for 2010 evaluated on a constant currency basis and approved by the Board of Directors at the proposal of the Compensation and Nomination Committee in the meeting held on March 8, 2011 generated a performance score of 127 points on the measurement scale employed, where 100 points corresponds to a target level performance and 130 to a maximum level performance. In terms of the variable compensation paid out, this performance score translated to:

  • award of a bonus to the Deputy Chairman and Chief Executive Officer of 76.2% of fixed compensation, taking into consideration a target level of 60% and a maximum level of 78%;
  • award of a bonus to the Deputy CEO of 45.2% of fixed compensation, taking into consideration a target level of 40% and a maximum level of 52%;
  • the award of bonuses to the other Senior Managers with strategic responsibilities determined in relation to performance achieved and the levels of incentive set in accordance with their roles.

The bonuses awarded to the Deputy Chairman and Chief Executive Officer, the Deputy CEO and the other Senior Managers with strategic responsibilities are indicated under the item ‘Non-equity variable compensation/bonuses and other incentives’ in Table No. 1 on page 17 and analysed in further detail in Table No. 3 on page 19.

Deferred monetary incentive

On March 13, 2012, 2010 EBITDA was determined by the Board of Directors to have attained the target level, as checked and proposed by the Compensation and Nomination Committee. 
Accordingly, the Board of Directors determined the award of a 2011 base incentive of €360,500 (40% of fixed compensation) to the Deputy Chairman and Chief Executive Officer.
The Board determined the award of a 2011 base incentive of €135,000 (25% of fixed compensation) to the Deputy CEO.
The base incentives awarded to the other Senior Managers with strategic responsibilities were determined based on their respective target levels which vary according to role, up to a maximum of 25% of fixed compensation.
The base incentives awarded to the Deputy Chairman and Chief Executive Officer, the Deputy CEO and the other Senior Managers with strategic responsibilities are shown under the item ‘Annual Bonus - deferred’ in Table No. 3 on page 19.
In addition, the Deferred Monetary Incentive awarded in 2008 to the Deputy Chairman and Chief Executive Officer, the Deputy CEO and other managerial resources matured in 2011. On March 13, 2012, the Board of Directors, at the proposal of the Compensation and Nomination Committee, set the factor to be applied to the base incentive to calculate the payable amount at 143% on a scale of 0 to 170%, based on Saipem EBITDA for the period 2008-2010.
Accordingly, the Deputy Chairman and Chief Executive Officer received an incentive of €559,130 (143% of the base incentive of €391,000 awarded in 2008) while the Deputy CEO received an incentive of €251,680 (143% of the base incentive of €176,000 awarded in 2008).
The amounts paid to the Deputy Chairman and Chief Executive Officer, the Deputy CEO and the other Senior Managers with strategic responsibilities are shown under the item ‘Bonuses from prior years payable/paid out’ in Table No. 3 on page 19.

Long-term Monetary Incentive

On October 26, 2011, the Board of Directors determined the award to the Deputy Chairman and Chief Executive Officer of a base incentive for the Long-term Monetary Incentive (which replaces the Saipem stock option plan which from 2009 onwards has not been implemented), as checked and proposed by the Compensation and Nomination Committee. The incentive was set at €451,000, applying the criteria and methods determined by the Board with the support of external specialist providers.
The Deputy CEO was awarded a base incentive of €189,000 as determined by the Board with the support of external specialist providers.
The base incentives awarded to the other Senior Managers with strategic responsibilities were determined based on their respective target levels which vary according to role, up to a maximum of 35% of fixed compensation. 
The base incentives awarded to the Deputy Chairman and Chief Executive Officer, the Deputy CEO and the other Senior Managers with strategic responsibilities are shown under the item ‘Annual Bonus - deferred’ in Table No. 3 on page 19.

Stock options

As of 2009, Saipem has no longer implemented stock option plans.
With regard to stock option plans currently in force, the 2008 award of the 2006-2008 stock option plan for the Deputy Chairman and Chief Executive Officer, the Deputy CEO and critical managerial resources vested during 2011. The plan is linked to Saipem’s performance in terms of Total Shareholders’ Return (TSR) during the three year vesting period as benchmarked against a panel of Saipem’s six largest international competitors in terms of market capitalization in the Oil & Gas Services sector.
On the basis of results achieved during the vesting period as checked and proposed by the Compensation and Nomination Committee, the Board of Directors in the meeting held on March 8, 2011, set the factor to be applied to determine the percentage of stock options exercisable as from July 30, 2011 at 95% on a scale from 0 to 100%. The options exercisable by the Deputy Chairman and Chief Executive Officer amounted to 124,450 with a strike price of €25.872 options, those exercisable by the Deputy CEO amounted to 59,850 with a strike price of €25.872, while those exercisable by critical managerial resources amounted to 51,850 with a strike price of €26.521.
For additional information with regard to stock option plans currently in force see the ‘Corporate Governance’ section of Saipem’s website.

Indemnities for termination of office or termination of employment

A Senior Manager with strategic responsibilities whose position changed as of February 8, 2011 was awarded a payment in addition to the relevant statutory and contractual entitlements which was determined in accordance with the company’s voluntary redundancy policies. The effects on the relevant monetary incentive schemes in force of the termination by mutual consent of the Senior Manager with strategic responsibilities’ employment in accordance with the relevant regulations are described in the notes in Table No. 2 on page 18 and Table No. 3 on page 19.
Amounts paid in relation to the termination of office or employment are shown under the item ‘Indemnities for termination of office or employment’ in Table No. 1 on page 17.

Benefits

Table No. 1 on page 17 shows the taxable value of benefits paid in 2011 to the Deputy Chairman and Chief Executive Officer and the other Senior Managers with strategic responsibilities. The values shown relate to the following benefits: (i) annual contribution to the supplementary pension fund FOPDIRE; (ii) annual contribution to the supplementary healthcare fund FISDE; (iii) assignment of a company car for business and personal use for a three-year period (the value stated is exclusive of the contribution paid by the assignee). The value of the benefits paid in 2011 to the Deputy CEO relates to: (i) annual contribution to the supplementary pension fund 1824 Clerical Medical Pension Fund; (ii) annual contribution to the supplementary healthcare funds BUPA - British Union Provident Association and CIGNA - International Employee Healthcare Plan.