Remuneration report 2022

Remuneration report 2022

Message from the chairman

Dear reader,

On behalf of the Supervisory Board, I am pleased to present our 2022 remuneration report. This report includes an overview of the implementation of the remuneration policies in 2022. Since a final set of EU guidelines on the standardised presentation of the remuneration report is not yet available, the 2022 remuneration report has again been drafted in the spirit of the latest draft guidelines, in line with the 2019, 2020 and 2021 remuneration reports. We intend to update our report where necessary once the final EU guidelines have been published.

The 2022 remuneration report will be subject to an advisory vote at our AGM on 18 April 2023. During last year’s AGM, 99.54% of the shareholders voted for the 2021 remuneration report. In preparation for the 2022 report, we consulted (representing bodies of) several external stakeholders. Their feedback has been taken into account and did not lead to any material changes to the remuneration report.

Highlights of 2022

The current geopolitical situation has major consequences globally. The unprecedentedly high level of inflation puts further pressure on costs. In combination with low consumer confidence it has clearly impacted consumer spending. PostNL has continuously adjusted its network capacity to safeguard customer and consumer service levels. At the same time, PostNL initiated steps towards a future-proof organisation in order to respond even better and faster to developments in digitalisation, innovation and sustainability. Despite aforementioned challenging market circumstances and the further tightened labour market, PostNL concluded new CLAs for all employees of PostNL and agreed upon an adjusted pension scheme with the unions in anticipation of the new pension law, leading to higher indexation.

Financial performance

Full year normalised EBIT and free cash flow came in significantly lower than last year and ended up below target level, which is mainly explained for by Covid related effects in 2021, a fierce step down of volume growth within Parcels and high increases of organic costs. Although PostNL maximally implemented cost measures to scale down operational costs, these measures could not counter the full impact of the shortfall of volumes and higher organic costs.

For more information on the Board of Management’s performance against targets, we refer to the section ‘2022 actual remuneration’.

Non-financial performance

Despite challenging and changing market circumstances, PostNL continued to demonstrate the strength of its core business by continued focus on its strategic objectives.

Providing customer value is a key driver in the execution of PostNL’s strategy. And although we believe that during 2022 PostNL continued demonstrating many achievements, customer satisfaction, measured by the share of highly satisfied customers, slightly decreased. We are however pleased that the share of highly satisfied customers increased at Parcels and the share of satisfied customers increased in 2022 throughout PostNL. The tight labour market clearly impacted quality levels throughout the company, especially at Mail in the Netherlands. We are glad that quality at Parcels remained very high and only slightly decreased compared to last year. Attracting and retaining motivated people is key to PostNL’s social value and crucial to the company’s success. The employee engagement score remained relatively high in 2022.

Because PostNL believes that sustainability is a license to operate, we included the performance measure climate impact in the Board of Management remuneration policy in 2020 as part of PostNL's strategic objective to improve environmental impact. We have now evaluated climate impact for the first time since its introduction and are pleased to demonstrate the progress made in this regard.

For more information on the Board of Management’s performance against targets, we refer to the section ‘2022 actual remuneration’.

Decisions made in 2022

In the beginning of 2022 it was decided to index the base salary of the Board of Management in line with the 2021 salary indexation and the framework as defined in the remuneration policy. Furthermore in 2022, after positive feedback from both internal and external stakeholders, the slightly revised remuneration policy of the Board of Management was put forward for a binding shareholder vote at the 2022 AGM. 98.21% of the shareholders voted for the revised remuneration policy.

These unprecedented times and future uncertainties, lead to intensive discussions within the Remuneration Committee regarding the long-term incentive (hereafter: LTI) target-setting, since targets should be both challenging and realistic, taking into account their multi-year character. Consequently, the current variable remuneration (short-term incentive (hereafter: STI) and LTI) structure will be an integral part of the 2023 evaluation of the remuneration policy of the Board of Management. Furthermore, the Remuneration Committee evaluated the annual committee cycle process, including the meeting frequency and standard decision framework topics. This did not lead to any material changes in the annual process.

At the beginning of the performance period, the Supervisory Board, following the advice of the Remuneration Committee, set challenging and realistic targets regarding both STI and LTI. Despite a challenging and rapidly changing environment, these targets have not been altered since. The Remuneration Committee conducted an assessment on the remuneration outcomes for the Board of Management, but given the current remuneration policy such assessment did not result in any adjustment to the variable remuneration outcomes of the Board of Management.

Looking forward to 2023

2023 will be marked by the re-evaluation of the total remuneration policies of both the Board of Management and Supervisory Board, whereby amongst others, the following topics will be discussed: remuneration profile and levels, external- and internal alignment, strategy alignment (incl. ESG) and structure of the variable remuneration. Both policies will be put forward for a binding shareholder vote at the 2024 AGM.

Furthermore, the Remuneration Committee will gauge if, and to what extent, the New Corporate Governance Code, the final EU guidelines on the standardised presentation of the remuneration report or any other (European) legislation will impact one or both policies and/or remuneration reporting.

The Hague, the Netherlands, 27 February 2023

On behalf of the Remuneration Committee,

Ad Melkert, Chairman