RENAULT GROUP CORPORATE GOVERNANCE AND REMUNERATION UPDATE MAY 2018 - PowerPoint PPT Presentation

RENAULT GROUP CORPORATE GOVERNANCE AND REMUNERATION UPDATE MAY 2018 1

01 REMUNERATION UPDATE 2

RESPONSIVE TO SHAREHOLDERS: REMUNERATION CHANGES SINCE 2016 2016 AGM to 2017 AGM 2017 AGM to 2018 AGM  Following the 2016 AGM vote outcome on the CEO’s remuneration, the Remuneration Committee  The 2017 AGM remuneration vote outcomes were meaningfully improved relative to Shareholder Engagement conducted a thorough review of the remuneration structure to better understand the reasons for the 2016, demonstrating shareholder support for the changes implemented negative outcome The Remuneration Committee continues to refine the remuneration structure in close  As part of this review, the Committee undertook a significantly expanded shareholder outreach effort to collaboration with shareholders  solicit investor perspectives on the incentive plans and feedback on proposed changes to the plans − We recently met with 6 of our largest investors to discuss a few additional − Over 15 meetings were held with investors regarding the Company’s remuneration programs changes to the remuneration structure and will continue engaging investors leading up to 2018 AGM − Patrick Thomas, Chairman of the Remuneration Committee, participated in a number of these meetings, in order to understand investor concerns and relay feedback to the full Board for − These changes aim to bring the performance objectives under the long-term consideration incentive plan in line with the Company’s new six -year Strategic Plan, announced in October 2017  In response to the program’s review and the feedback received from our shareholders, the Remuneration Committee made a number of meaningful changes to the remuneration structure for 2016 − The Committee has also sought to limit the potential payouts under our long-term plan, in-line with shareholder feedback, and to reduce total payouts to CEO, to reflect his new role Variable Pay Structure Quantum Remuneration Changes Reduced each of base salary, target variable compensation and target long-term No pay for failure   incentive award for CEO  Deferred variable pay no longer subject to any adjustment Long-Term Incentive Plan Implemented  Reduced target annual bonus cap from 150% to 120% of fixed pay  Implemented a cap on long-term incentive awards  Increased weight of quantitative performance metric under variable bonus to 70% Refined performance objectives to:  Reduced the number of qualitative criteria, from 6 to 4  Include two additional objectives that will incentivize achievement of key initiatives − Pay-out Calculations under the new long-term Strategic Plan, Drive the Future : Alliance platforms and  Simplified and increased transparency around financial performance targets and disclosed stretch electric vehicles targets for each performance metric under short-term and long-term variable pay plans − Remove relative operating margin metric  Disclosed 2 extraordinary financial performance targets to achieve maximum pay-out of 180% of salary Modify weightings of all performance objectives to reflect the above changes − Increased the weight of ROE metric to 15% from 10%  3

REMUNERATION PROGRAM OUTCOMES FOR 2017 VARIABLE COMPENSATION: Element Payout in 2017 2017 PERFORMANCE AGAINST OBJECTIVES Fixed Compensation  € 1,230,000 paid in cash  Financial performance objectives: 85% of base salary − Return on equity: 15% out of 15% achieved Variable Compensation  € 1,451,400 total representing 118% − Group operating margin: 35% out of 35% achieved of base salary − Free cash flow: 35% out of 35% achieved  Managerial performance objectives: 35% of base salary − € 362,850 paid immediately in − Monitoring of competitive agreement in France: 7% out of 7% cash achieved − € 1,088,550 deferred in shares − Quality of the environmental & CSR commitments: 7% out of 8% achieved − Partnerships and Alliance synergies: 9% out of 10% achieved Long-Term Incentives  Grant of 100,000 performance − Development of a multi-year R&D strategy: 10% out of 10% shares achieved − Payout will be contingent on  Additional performance objectives: 60% of base salary achievement of performance − Achievement of all financial and managerial performance objectives over 3-year objectives: Not achieved performance period 2017 variable compensation represents 118% of base salary 4

REMUNERATION PROGRAM DESIGN COMPARISON: 2017 & 2018 GO-FORWARD Changes to Long-Term Element 2017 2018 Go-Forward Performance Objectives Reduced by 19% Fixed Compensation  Equal to € 1,230,000  Equal to € 1,000,000 Performance objectives refined to include two new objectives that are tied to new six- Variable Payment terms Payment terms year Strategic Plan, Drive the Future Compensation 25% paid immediately in cash 25% paid immediately in cash    75% deferred in shares and not subject to any adjustment  75% deferred in shares and not subject to any adjustment  NEW : Alliance platforms: 30% − Measure: Percent of vehicles produced Performance objectives and targets Performance objectives and targets through Alliance platform Reduced from 120% to 100%  Target variable component of 120% of base salary  Target variable component of 100% of base salary − Rationale: Ability to use Alliance − Financial performance objectives : 70% of target bonus − Financial performance objectives : 70% of target bonus platform to increase cost synergies is a key performance lever for Renault • Return on equity: 15% (Max payout for ROE ≥ 10%) • Return on equity: 10% (Max payout for ROE ≥ 10%)  NEW : Electric vehicles: 30% • Group operating margin: 35% ( Max payout for COP ≥ budget+0,2 pt) • Group operating margin: 30% (Max payout for COP ≥ budget+0,2 pt) − Measure: Electric vehicle sales Free cash flow: 35% (Max payout for FCF ≥ Budget + 50%) Free cash flow: 30% (Max payout for FCF ≥ Budget + 50%) • • − Rationale: Key lever to take advantage − Managerial performance objectives : 30% of target bonus − Managerial performance objectives : 30% of target bonus of the energy revolution and keep Monitoring of competitive agreement in France: 7% Monitoring of competitive agreement in France: 6% • • Renault’s competitive advantage • Quality of the environmental & CSR commitments: 8% • Quality of the environmental & CSR commitments: 7%  REVISED : Free cash flow: 30% • Partnerships and Alliance synergies: 10% • Partnerships and Alliance synergies: 8% − Rationale: Modified weighting to reflect • Development of a multi-year R&D strategy: 10% • Development of a multi-year R&D strategy: 9% above changes  Additional variable component of 60% of base salary , contingent on  No more additional variable component REVISED : Relative TSR: 10%  achievement of: Removed additional − Rationale: Modified weighting to reflect variable component − All financial and managerial performance objectives above changes of 60% of base salary − Additional performance objectives : 60% of base salary  REMOVED : Relative automotive operating margin Reduced by 20% − Rationale: Long-Term Incentives  Target award of 100,000 performance shares, contingent on  Target award of 80,000 performance shares, contingent on achievement of achievement of performance objectives measured annually over three years performance objectives measured over a 3-year cumulative period • Goal achieved now that operating Implemented a cap margin aligned with peers  Performance objectives : 100% of target award − Cap on long-term incentive awards set at 80,000 performance shares on long-term awards  Performance objectives : 100% of target award • Significant changes in business mix − TSR vs. average of TSR for Euro Stoxx excluding Financials and TSR for of peers Euro Stoxx Automobile & Parts: 33.3% (No payout for TSR < Benchmark) TSR vs. average of TSR for Euro Stoxx excluding Financials and TSR for − Closely tied to retained FCF metric Euro Stoxx Automobile & Parts: 10% (No payout for TSR < Benchmark) • − Free cash flow: 33.3% (No payout for FCF < Budget) − Free cash flow: 30% (No payout for FCF < Budget) − Automotive operating margin vs. average of peer panel 1 : 33.3% (No payout for COP auto < average) − Alliance platforms: 30% (No payout for Alliance platforms < Budget) Refined long-term performance objectives − Electric vehicles: 30% (No payout for EV < Budget) 5 1 The panel comprises the following manufacturers: Fiat, PSA, Skoda, Volkswagen and Renault.