kpn.com

• Downloads|
• Contact us

• Home
• Key information
• Information about the company
• Operating results
• Financial statements
• Other information

Remuneration Policy 2007

KPN's remuneration policies were adopted by the shareholders at the Annual Meeting in April 2004 with only two substantive modifications since that time. In April 2006 shareholders approved the replacement of the existing stock Option Plans by a Performance Share Plan, and, in April 2007, shareholders approved the move to an all cash payout of its Long Term Incentive replacing a restricted share payout due to changes in the Dutch (Corporate) tax code.

KPN aims for a culture that is based on a strong bias for action and delivering results. Consistent with this high performance approach, our remuneration programs are structured to promote a pay-for-performance culture with an orientation towards variable pay, and an emphasis on long term value creation. Our plans are designed to achieve the following objectives:

• attracting and retaining the necessary leadership talent to sustain and expand our unique competencies and capabilities;
• driving performance that generates long term profitable growth;
• promoting behaviors that reinforce the business strategy and desired culture; and
• encouraging teamwork across business units and functional areas, and strongly linking rewards to shareholder value creation.

KPN's remuneration policy is guided by three broad principles:

1. pay competitively: this is achieved through benchmarking versus a peer group of European telecommunications and ICT companies with which KPN generally competes for talent;

2. pay for performance: target remuneration aims at 30-40% of pay in base salary, and 60-70% in variable pay to maintain a strong alignment with the Company's annual financial performance goals and long-term value creation strategy; and

3. differentiate by experience and responsibility: this is achieved through alignment of the remuneration with the responsibilities, relevant experience, required competences and performance of the individual job holders. Consequently, there can be substantial differences in pay levels, despite having similar job titles. These principles apply at all levels of management.

The composition of the remuneration is based on four components: base salary, short-term incentives (annual performance bonuses), long-term incentives (equity related) and other benefits, primarily pensions. This enables the Company to look at all remuneration elements in a consistent and integrated manner to ensure that the remuneration policy is market competitive.

To ensure overall competitiveness of the remuneration levels provided, the remuneration levels are benchmarked against both a Dutch and an European employment market peer group.

The tables below reflect the peer group companies KPN uses for its benchmarking.

The European employment market of KPN consists of direct competitors and includes:

The Dutch employment market of KPN consists of AEX-listed companies, excluding financial institutions and includes:

It should be noted that KPN ranks, on average, at the upper quartile level in terms of revenues and market capitalization and between the median and upper quartile level in terms of number of employees. Based on these factors the relative "size" of KPN is on or about at the 70 percentile of these peer groups. This is used as our directional target to ascertain whether we meet the principle of "paying competitively".

The Committee regularly reviews both peer groups to ensure that the peer group composition is still appropriate from a market competitive point of view. Changes in the peer group composition are also made as a result of mergers or delistings. However, with the appropriate regression analysis we can ensure market competitiveness.

Generally speaking, we consider our remuneration plan "competitive" when our base salaries are positioned within 10% (plus or minus) of the market competitive range and our total target compensation levels are positioned within 20% (plus or minus) of the market competitive range at target level. The Committee consults an independent remuneration advisor to ensure an appropriate comparison and ranking of KPN's position relative to the applicable peer groups.

The Company's remuneration policy is compliant with all relevant legal requirements and the principles of the Dutch Corporate Governance Code ('the Code').