30. Related party transactions
Compensation of key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company determined that key management personnel consists of members of the Supervisory Board, members and acting members of the Corporate Executive Board, the continental Chief Operating Officers and Senior Vice Presidents reporting directly to a Corporate Executive Board member, acting in that capacity.
Employment contracts with individual Corporate Executive Board members
The Company’s revised employment agreement with John Rishton to account for his appointment as CEO of the Company, dated November 20, 2007, provides for a base salary of EUR 945,000 per year. It also provides for participation in the annual cash incentive plan, as well as participation in the Company’s equity-based long-term incentive program (GRO – see Note 31). The at-target payout under the annual cash incentive plan is 100 percent of the base salary and is capped at 125 percent in case of extraordinary performance. On the starting date of his employment, John Rishton was granted 100,000 Ahold common shares to compensate the loss of long-term perquisites from his previous employer. The vesting of these shares was conditional upon three years of employment. Unless John Rishton’s employment agreement is otherwise terminated, he will be eligible for reappointment in 2010. In the event the Company terminates John Rishton’s employment agreement for reasons other than cause or because he is not reappointed, John Rishton is entitled to a severance payment equal to one year’s base salary. John Rishton’s employment agreement may be terminated by the Company with a notice period of twelve months and by John Rishton with a notice period of six months. John Rishton participates in Ahold’s Dutch Pension Plan.
The Company’s revised employment agreement with Kimberly Ross, dated February 25, 2008, provides for a base salary of EUR 500,000 per year, retroactively as of November 16, 2007, participation in the annual cash incentive plan, as well as participation in the Company’s equity-based long-term incentive program (GRO – see Note 31). The at-target payout under the annual cash incentive plan is 100 percent of the base salary and is capped at 125 percent in case of extraordinary performance. Unless Kimberly Ross’ employment agreement is otherwise terminated, she will be eligible for reappointment in 2012. In the event the Company terminates Kimberly Ross’ employment agreement for reasons other than cause or because she is not reappointed, Kimberly Ross is entitled to a severance payment equal to one year’s base salary. Kimberly Ross’ employment agreement may be terminated by the Company with a notice period of twelve months and by Kimberly Ross with a notice period of six months. Kimberly Ross participates in the US Benefits Plans: the Salary Continuation Plan (SCP), the Ahold USA Pension Plan and the 401(k) Plan.
The Company’s employment agreement with Peter Wakkie, dated October 9, 2003, provides for a base salary currently set at EUR 600,000 per year, participation in the annual cash incentive plan, as well as participation in the Company’s equity-based long-term incentive program (GRO – see Note 31). The at-target payout under the annual cash incentive plan is 100 percent of the base salary and is capped at 125 percent in case of extraordinary performance. Peter Wakkie was reappointed in 2008. Unless Peter Wakkie’s employment agreement is otherwise terminated, he will be eligible for reappointment in 2012. In the event the Company terminates Peter Wakkie’s employment agreement for reasons other than cause or because he is not reappointed, Peter Wakkie is entitled to a severance payment equal to one year’s base salary. Peter Wakkie’s employment agreement may be terminated by the Company with a notice period of twelve months and by Peter Wakkie with a notice period of six months. Peter Wakkie participates in Ahold’s Dutch Pension Plan.
The Company’s revised employment agreement with Dick Boer, dated March 29, 2007, provides for a base salary of EUR 625,000 per year, participation in the annual cash incentive plan, as well as participation in the Company’s equity-based long-term incentive plan (GRO – see Note 31). The at-target payout under the annual cash incentive plan is 100 percent of base salary and is capped at 125 percent in case of extraordinary performance. Unless Dick Boer’s employment agreement is otherwise terminated, he will be eligible for reappointment in 2011. In the event the Company terminates Dick Boer’s employment agreement for reasons other than cause or because he is not reappointed, Dick Boer is entitled to a severance payment equal to one year’s base salary. Dick Boer’s employment agreement may be terminated by the Company with a notice period of twelve months and by Dick Boer with a notice period of six months. Dick Boer participates in Ahold’s Dutch Pension Plan.
Remuneration of the individual Corporate Executive Board members
Remuneration of the individual Corporate Executive Board members, which is disclosed as of the year the General Meeting of Shareholders approved the appointment of a member, can be specified as follows:
| € thousand |
Base salary |
Bonuses1 |
Share-based compensation2 |
Pensions3 |
Termination benefits |
Other4,5 |
Total |
| J.F. Rishton |
|
|
|
|
|
|
|
|
| 2008 |
945 |
1,143 |
528 |
189 |
– |
156 |
2,961 |
| 2007 |
835 |
1,044 |
224 |
177 |
– |
149 |
2,429 |
| K.A. Ross |
|
|
|
|
|
|
|
| 2008 |
500 |
605 |
218 |
132 |
– |
190 |
1,645 |
| 2007 |
– |
– |
– |
– |
– |
– |
– |
| P.N. Wakkie |
|
|
|
|
|
|
|
| 2008 |
600 |
726 |
377 |
140 |
– |
13 |
1,856 |
| 2007 |
600 |
1,050 |
231 |
165 |
– |
13 |
2,059 |
| A.D. Boer |
|
|
|
|
|
|
|
| 2008 |
625 |
756 |
469 |
152 |
– |
209 |
2,211 |
| 2007 |
625 |
781 |
908 |
239 |
– |
10 |
2,563 |
| A.C. Moberg (resigned from the Board effective July 1, 2007) |
|
|
|
|
|
|
|
| 2008 |
– |
– |
– |
– |
– |
– |
– |
| 2007 |
750 |
2,556 |
457 |
– |
3,379 |
111 |
7,253 |
| Total 2008 |
2,670 |
3,230 |
1,592 |
613 |
– |
568 |
8,673 |
| Total 2007 |
2,810 |
5,431 |
1,820 |
581 |
3,379 |
283 |
14,304 |
1. Bonuses represent accrued bonuses to be paid in the following year. Peter Wakkie’s 2007 bonus included EUR 300,000 as a reward for the successful completion of the divestment program.
2. The amounts included in the table for share-based compensation represent the share-based compensation expense calculated under IFRS 2. The fair value of share-based compensation grants is expensed on a straight-line basis over the vesting period of the grants. For more information on share-based compensation programs, including outstanding options and shares for individual Corporate Executive Board members, see Note 31.
3. Pension costs are the total net periodic pension costs.
4. “Other” mainly includes allowances for representation expenses, housing expenses, relocation expenses, private medical insurance, international school fees, employer’s contributions to social security plans, and benefits in kind such as tax advice and medical expenses.
5. For shares granted under the Global Reward Opportunity program (GRO, introduced in May 2006) it is allowed to sell sufficient shares to finance income tax at the time it is due. However, this was not allowed for the 190,333 conditional shares granted to Dick Boer in January 2006, which vested in January 2008. Given restrictions on Insider Information and Securities Trading, no shares could be sold to finance income tax due until the end of August 2008. “Other” in 2008 includes a reimbursement for the lost value of the shares that would otherwise have been sold upon vesting. |
Remuneration of the Supervisory Board members
| € thousand |
2008 |
2007 |
| R. Dahan (appointed in 2004) |
68 |
71 |
| T. de Swaan (appointed in 2007) |
83 |
75 |
| D.C. Doijer (appointed in 2005) |
60 |
631 |
| M.G. McGrath (appointed in 2008) |
43 |
– |
| K.M.A. de Segundo (appointed in 2004) |
72 |
75 |
| S.M. Shern (appointed in 2005) |
79 |
86 |
| J. Sprieser (appointed in 2006) |
79 |
79 |
| M. Hart (resigned in 2007) |
– |
50 |
| J. Hommen (resigned in 2007) |
– |
26 |
| Total |
484 |
525 |
| 1. Decreased by EUR 12 thousand to correct the amount disclosed in Ahold’s 2007 Annual Report, which erroneously included VAT. |
Shares and other interests in Ahold
As of December 28, 2008, Corporate Executive Board members held the following shares and other interests in Ahold:
| |
Common shares |
| J.F. Rishton |
– |
| K.A. Ross |
1 |
| P.N. Wakkie |
6,000 |
| A.D. Boer |
119,151 |
| Total |
125,152 |
On January 1, 2006, the starting date of his employment, John Rishton was conditionally granted 100,000 Ahold common shares. These shares became unconditional in January 2009, after three years of employment.
As of December 28, 2008, René Dahan held 112,000 Ahold common shares. None of the other Supervisory Board members held Ahold shares.
Other key management personnel
The Company recognized remuneration expenses of EUR 14 million (2007: EUR 28 million) for consideration paid, payable or provided to other key management personnel (i.e., not members of the Corporate Executive Board or Supervisory Board). This consisted of short-term employee benefits of EUR 7 million (2007: EUR 23 million, which included amounts paid in connection with the successful completion of the divestment program), post-employment benefits of EUR 0 million (2007: EUR 1 million), termination benefits of EUR 1 million (2007: EUR 0 million) and share-based compensation of EUR 6 million (2007: EUR 4 million).
Trading transactions
Ahold has entered into arrangements with a number of its subsidiaries and affiliated companies in the course of its business. These arrangements relate to service transactions and financing agreements. Transactions were conducted at market prices, adjusted to reflect the volume of transactions and the relationship between the parties.
During 2008 and 2007, the Company entered into the following transactions with unconsolidated related parties:
| € million |
Sales to related parties |
Purchases from related parties |
Amounts owed by related parties |
Amounts owed to related parties |
| For the year ended December 28, 2008 |
|
|
|
|
| ICA |
11 |
8 |
3 |
8 |
| JMR |
4 |
– |
2 |
1 |
| Stationsdrogisterijen |
15 |
– |
– |
2 |
| Accounting Plaza B.V. |
– |
31 |
– |
– |
| A.M.S. Coffee Trading |
– |
48 |
– |
1 |
| Other |
3 |
10 |
10 |
– |
| Total |
33 |
97 |
15 |
12 |
| € million |
Sales to related parties |
Purchases from related parties |
Amounts owed by related parties |
Amounts owed to related parties |
| For the year ended December 30, 2007 |
|
|
|
|
| ICA |
7 |
1 |
3 |
5 |
| JMR |
5 |
– |
1 |
2 |
| Stationsdrogisterijen |
14 |
– |
– |
2 |
| Accounting Plaza B.V. |
1 |
22 |
– |
– |
| A.M.S. Coffee Trading |
– |
41 |
– |
2 |
| Kobalt Media Services B.V. |
1 |
63 |
– |
– |
| Related parties of Schuitema |
1 |
11 |
2 |
1 |
| Ahold Dutch managers and employees |
– |
– |
27 |
– |
| Other |
15 |
1 |
15 |
8 |
| Total |
44 |
139 |
48 |
20 |
These unconsolidated related parties consist of:
- ICA, a joint venture of Ahold in the retail business;
- JMR, a joint venture of Ahold in the retail business;
- Stationsdrogisterijen C.V., a joint venture of Ahold in the health and beauty care retail business;
- Accounting Plaza B.V., an associate of Ahold that renders accounting and administrative services to certain Ahold subsidiaries in the Netherlands, Czech Republic and Slovakia;
- A.M.S. Coffee Trading AG, an associate of Ahold that generates sales transactions with Ahold Coffee Company;
- Kobalt Media Services B.V., a former associate of Ahold that renders promotional and advertising services to certain Ahold subsidiaries in the Netherlands. Ahold sold its stake in Kobalt Media Services B.V. in December 2007;
- Several related parties of Schuitema rendered services in support of certain projects of franchisees and associated food retailers serviced by Schuitema;
- Ahold Dutch managers and employees. In January 1994, July 1996 and April 1998, Ahold granted loans to certain of its Dutch managers and employees to purchase investments in the Dutch Customer Fund, an independent investment fund that primarily invested all of its assets in Ahold’s shares and debt. These loans were repaid in 2008. For more information on these loans, see Note 17;
- Other includes mainly real estate joint ventures, in which Ahold has an interest, holding properties operated by Ahold, and Loyalty Management Nederland B.V., an associate of Ahold that renders services relating to the management of customer loyalty programs to certain Ahold subsidiaries in the Netherlands.
Furthermore, the Company’s post-employment benefit plans in the Netherlands and the United States are considered related parties. For more information on these plans, see Note 22.