remuneration report 2008

This is a summary of Randstad Holding nv’s remuneration policy and its main components, as well as an overview of the actual remuneration of the members of the executive board and the members of the supervisory board in 2008. The full remuneration policy and report of Randstad Holding nv is posted on the corporate website. In accordance with legal and financial reporting requirements, some of the information is detailed in the financial statements.

Introduction

Randstad applied the remuneration policy for members of the executive board in 2008 as adopted by the Annual General Meeting of Shareholders held on May 8, 2007. This policy was also applied to establish the employment agreements for the new members of the executive board, Greg Netland and Brian Wilkinson, effective May 16, 2008.

Remuneration levels are determined on the basis of a number of clear, transparent criteria and reflect general as well as specific individual responsibilities in an international context. They are benchmarked against both an international labor market peer group and an international performance peer group:

• The international labor market peer group represents the market in which Randstad competes for senior management talent, and is used to benchmark fixed salary levels. It is composed of twelve international staffing and business outsourcing companies headquartered in five countries, reflecting Randstad’s international orientation. They are: Adecco S.A., Rentokil Initial Plc, Cap Gemini S.A., Atos Origin SA, Robert Half International Inc., LogicaCMG Plc, Manpower Inc., Kelly Services Inc., Spherion Corporation, True Blue Inc., Volt Information Sciences and Michael Page Plc. In view of its acquisition by Randstad, Vedior N.V. was replaced by Michael Page Plc in this group as from 2008.
  
  
• The international performance peer group is used as a benchmark to establish performance in terms of Total Shareholder Return (TSR), as described below, for the payout of certain variable remuneration components. It reflects the market in which the company competes for shareholder preference. This group is comprised exclusively of staffing companies and can be characterized as ‘sector-specific’. It consists of the following companies: Adecco S.A., Kelly Services Inc., True Blue Inc., Manpower Inc., Robert Half International Inc., USG People N.V., Spherion Corporation, Volt Information Sciences and Michael Page Plc. In view of its acquisition by Randstad, Vedior N.V. was replaced by Michael Page Plc in this group as from 2008.

TSR reflects the return received by a shareholder and captures both the change in a company’s share price and the value of dividend income, assuming dividends are reinvested in the company. The supervisory board considers TSR 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. TSR performance for the companies of the international, sector-specific performance peer group is calculated based on their ‘home/primary listing’.

Executive board remuneration in 2008

The remuneration of the executive board consists of fixed and variable elements, explained below. An overview of the 2008 and 2007 amounts is included in the notes to the financial statements (click here for details). For on-target performance, approximately half of the total compensation of a member of the executive board is performance-linked.

Fixed compensation

Base salary
In line with general market developments in the Netherlands, fixed salaries were increased by 5% as per January 1, 2008.

Pension contribution
The pension arrangements for members of the executive board are based on defined contribution and are placed with an insurance company. Randstad provides an annual contribution of 27% of base salary to the schemes of executive board members; the board members themselves contribute 8.5%. The company has no specific early retirement arrangements in place for board members.

Variable compensation

The variable portion of the total remuneration package is performance-related. It consists of short and longer-term components. Performance targets and conditions are derived from our strategy and annual business plans. Randstad’s strategy is extensively described in the annual report (click here for details). 

The supervisory board sets the targets prior to each performance period.

Short-term incentive: annual cash bonus
The total cash bonus opportunity in 2008 amounts to 70% of base salary for on-target performance and the maximum bonus level is 100% of base salary. If performance is below a pre-defined threshold level, no bonus will be paid out.

As set by the supervisory board at the start of 2008, the shared targets for the first half of 2008 are in line with the existing arrangements at that time: revenue growth (bonus opportunity ranges from 12.5% - 40%), EPS (bonus opportunity ranges from 12.5% - 40%) as well as the individual and discretionary targets (each max. 10%). These are linked to the successful completion of the Vedior acquisition and subsequent integration and are fully at the discretion of the supervisory board. For the members of the executive board who are former Vedior board members, their existing Vedior bonus arrangement was maintained for the first half of 2008.

Following the acquisition of Vedior, the preset criteria for the second half of 2008 required reassessment. The supervisory board adopted the following criteria: maintaining market share instead of organic revenue growth, and Group EBITA instead of EPS development. The maximum 10% discretionary bonus is fully dependent on the integration efforts. Bonus opportunity ranges remained unchanged.

Actual targets are not disclosed, as these qualify as information that is commercially sensitive and potentially share price sensitive.

Based on the partial achievement of the financial targets and limited use of the discretionary space, the bonuses paid with regard to performance in 2008 varied between 41.35% and 60% of the annual base salary per executive board member.

Long-term performance-related remuneration in shares and stock options
In the context of the expiration of the three-year performance share plan during the course of 2007 and with an eye to developments in market practice, the long-term incentive plan was reviewed by the supervisory board and presented for adjustment to the Annual General Meeting of Shareholders held in May 2007. The meeting adopted the proposals to conditionally grant performance shares and performance options on an annual basis as from 2007.

Shares and options granted under these plans (based on cliff vesting, i.e. 100% after 3 years) can become unconditional (i.e. might vest) depending – solely – on Randstad’s TSR performance compared to the performance peer group, measured over a 3-year period starting from January 1 of the year they are granted.

At the moment they are granted, the fair value of the shares assuming on-target performance is equal to an amount of 40% of base salary for all executive board members, while a similar amount of 40% of base salary is granted in options, also based on the fair value. The total medium and long-term consideration hence amounts to 80% of base salary – for all executive board members alike – which is in line with the median levels of the international labor market peer group.

Vesting is related to the company’s ranking within the peer group, as follows:

position 1		250%		(of the numbers of shares and options initially granted)
position 2		200%
position 3		150%
position 4		125%
position 5 (on-target)		100%
position 6		75%
position 7		50%
position 8 (treshold)		25%
position 9		0%
position 10		0%

On February 14, 2008, a conditional grant of performance shares for on-target performance was effected, based on 40% of the annual base salary per executive board member as per January 1, 2008 and the fair value of the performance shares as per January 1, 2008 (€ 20.49 per share).

On February 27, 2008, a conditional grant of performance stock options for ‘on-target’ performance was effected, based on 40% of the annual base salary per executive board member as per January 1, 2008 and the fair value of the performance options per January 1, 2008 of € 7.57. The options may vest and can be exercised three years after they are granted; the exercise price is the average price of the Randstad shares on Euronext on February 22, 2008 up to and including February 26, 2008 (three business days following the fifth business day after publication of the 2007 results): € 26.39 per share.

The potential on-target awards are as follows:



In line with this policy, the newly appointed members of the executive board, Greg Netland and Brian Wilkinson, were granted 9,000 performance (restricted) shares and 24,000 performance options each. All other conditions, including performance conditions, vesting period and exercise price, were in line with the 2008 award to the other members of the executive board.

Conditions:
The option term is seven years. Options can only be exercised after the moment of vesting, taking into account the applicable regulations for transactions in securities. If employment ends before the vesting date, the options will lapse. The company offers no financing arrangements at grant or exercise of the options.

As from 2008, performance shares and performance options are granted in the so-called open period following the publication of the Group’s fourth quarter financial results in February. From then on, the exercise price of performance options will be determined based on the average prices of the Randstad shares over the three business days following the fifth business day after publication of the fourth quarter results. The number of shares and options will be calculated based on the fair value of the Randstad share as per January 1.

Other benefits
Additional arrangements include: expense and relocation allowances, company car and accident insurance.

Loans
The company has issued no loans or guarantees to executive board members.