In order to align their own objectives with the value creation objectives of shareholders, conditional performance shares are granted to the members of the Executive Board on an annual basis. Until 2013, a combination of performance shares and performance options were granted. As the number of (peer) companies using stock options was significantly lower and the instrument is now less highly regarded from a corporate governance perspective, as from 2013, only performance shares are granted, a change that was approved by the Annual General Meeting of shareholders in 2013.
Shares and options (granted before 2013) can become unconditional (i.e., may vest) depending solely on Randstad's TSR (Total Shareholder Return) performance compared to the performance peer group, measured over a three-year period starting from January 1 of the year in which they are granted. TSR reflects the return received by a shareholder and captures both the change in the company's share price and the value of dividend income, assuming dividends are reinvested in the company. TSR is considered to be an appropriate measure, as it objectively measures the company's financial performance and assesses its long-term value creation as compared to other companies in the sector.
Given the relevance of sustainability for Randstad's business, ambition and long-term viability, a proposal was submitted to the Annual General Meeting of shareholders in 2013 to add performance targets within Randstad's sustainability KPI framework at the discretion of the Supervisory Board. These targets are also set at the start of the three-year vesting period. As of 2013, the grant is therefore divided into TSR-dependent (80%) and sustainability-related (20%).
Performance shares are granted in the open period following the publication of the company’s fourth quarter financial results in February. The number of shares will be calculated based on the fair value of the Randstad share as at January 1. If a member of the Executive Board resigns before the vesting date, conditional grants of performance shares will in principle lapse. These conditions also relate to performance options granted until 2013. The company offers no financing arrangements at grant or exercise of the options. Performance shares need to be retained for at least two years after vesting, except to the extent necessary to settle any related tax liabilities.