Remuneration of Directors

REMUNERATION POLICY FOR EXECUTIVE DIRECTORS

The Board of Directors determines the compensation for Executive Directors with reference to the remuneration policy. The policy is approved by shareholders, and it is published on our website.

The objective of the remuneration policy is to provide a compensation structure that allows CNH Industrial to attract, develop and retain highly qualified executives.

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Features of the remuneration policy for Executive Directors

CNH Industrial’s compensation policy aims to provide total compensation that:

  • attracts, retains and motivates qualified executives;
  • is competitive against the comparable market;
  • reinforces our performance driven culture and meritocracy; and
  • is aligned to shareholders interests.

The standard remuneration structure for Executive Directors provides a fixed component as well as short and long-term variable components. CNH Industrial believes that the remuneration structure promotes the interests of CNH Industrial in the short and the long-term and is not intended to encourage the executive directors to act in their own interests. In determining the level and structure of the compensation of the Executive Directors, the Non-executive Directors will take into account, among other things, the financial and operational results as well as non-financial objectives of CNH Industrial. The Company periodically benchmarks its executive compensation program against peer companies and monitors compensation levels and trends in the market.

Fixed Component

The primary objective of the base salary (the fixed part of the annual cash compensation) for Executive Directors is to attract and retain well qualified senior executives. The Company’s policy is to periodically benchmark the base salary payable to Company executives to the base salary paid to comparable executives at comparable businesses.

Variable Components

Executive Directors are also eligible to receive variable compensation subject to the achievement of pre-established financial and other designated performance targets.

The targets will be defined in the Remuneration Report which will be available on the corporate website after the CNH Industrial strategic business plan is finalized, expected by the second quarter.

The variable components of Executive Directors’ remuneration, both the short and the long-term components, are linked to predetermined, assessable and influenceable targets.

Short-Term Incentives

The primary objective of short-term variable incentives is to focus on the business priorities for the current or next year. The Executive Directors’ variable incentive is based on achieving short-term (annual) financial and other designated objectives proposed by the Compensation Committee and approved by the Non-executive Directors each year.

In regards to the Executive Directors’ annual performance bonus determination, the Compensation Committee and the Non-executive Directors:

  • approve the Executive Directors’ target and maximum allowable bonus;
  • select the choice and weighting of metrics;
  • set the stretch objectives;
  • review  any  unusual  items  that  occurred  in  the  performance  year  to  determine  the  appropriate  overall measurement of achievement; and
  • approve the final bonus determination.

In addition, upon proposal of the Compensation Committee, the Non-executive Directors retain authority to grant annual bonuses for specific transactions that are deemed exceptional in terms of strategic importance and effect on the Company’s results.

Long-Term Incentives

The primary objective of the long-term variable incentives is to reward and retain qualified Executive Directors over the longer term while aligning their interests with those of Shareholders.

CNH Industrial’s long-term variable incentives consist of a share-based incentive plan that links this variable component to the achievement of pre-established performance targets (both individual and company) consistent with the Company’s strategic horizon. As typical with the objective of using equity based awards, these awards help align the Executive Directors’ interests with shareholder interests by delivering greater value to the executive director as shareholder value increases.

Other Benefits

Executive Directors are also entitled to usual and customary fringe benefits such as a company car, medical insurance, accident insurance, and in the case of the Chairman, a portion of the costs of personal security personnel. The Compensation Committee may grant other benefits to the Executive Directors in particular circumstances.

REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS

Remuneration of Non-executive Directors is approved by the Company’s Shareholders and periodically reviewed by the Compensation Committee.

The current annual remuneration for the Non-executive Directors is:

  • US$125,000 for each Non-executive Director.
  • An additional US$25,000 for each member of the Audit Committee and US$35,000 for the Audit Committee Chairman.
  • An additional US$20,000 for each member of every other Board committee and US$25,000 for the committee chairman.

Non-executive Directors elect which portion of their annual retainer fee, committee membership and committee chair fee payments will be made in cash, common shares of CNH Industrial or options to purchase common shares of CNH Industrial. Remuneration of Non-executive Directors is fixed and not dependent on CNH Industrial’s financial results. Non-executive Directors are not eligible for variable compensation and do not participate in any incentive plans.

IMPLEMENTATION OF THE REMUNERATION POLICY IN 2013

Directors’ Compensation

The following table summarizes remuneration paid or accrued to Directors for the year ended December 31, 2013, including the former CNH Global N.V. and Fiat Industrial S.p.A. Board of Directors until the end of their board service effective with the merger date.

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In €Office Held         In office from/to     Annual Fee/SalaryFees paid in equity instrumentsBonus and Other Incentives (non-equity)Non-Monetary Compensation (Fringe Benefits)(1)     Pension & Similar BenefitsTotal Remuneration
Directors of CNH Industrial N.V.        
MARCHIONNE Sergio (*) (2) ..CHAIRMAN01/01/2013 - 31/12/20131,290,697 812,339 56,2742,159,310
TOBIN Richard (*) CEO01/01/2013 - 31/12/2013869,006 1,169,4888,628126,2482,173,370
TAMMENOMS BAKKER Jacqueline (*) DIRECTOR01/01/2013 - 31/12/201376,048   9,00985,057
ELKANN John (*) DIRECTOR01/01/2013 - 31/12/2013100,446    100,446
GRIECO Maria Patrizia (*) DIRECTOR01/01/2013 - 31/12/201376,048    76,048
TABELLINI Guido (*) DIRECTOR01/01/2013 - 31/12/201380,739   5,87486,613
HOULE Léo W. (*)DIRECTOR01/01/2013 - 31/12/2013106,076    106,076
KALANTZIS Peter (*) DIRECTOR01/01/2013 - 31/12/201399,528    99,528
LANAWAY John (*) DIRECTOR01/01/2013 - 31/12/201367,03428,729   95,763
THEURILLAT Jacques (*) DIRECTOR01/01/2013 - 31/12/2013117,340    117,340
GEROWIN Mina DIRECTOR10/01/2013 - 31/12/201313,64925,069   38,718
Former Directors of Fiat Industrial S.p.A. or CNH Global N.V.        
BOMBASSEI Alberto (**) 01/01/2013 - 30/09/201352,500    52,500
CODA Gianni (**)  01/01/2013 - 30/09/201337,500   5,00342,503
LIBERATORE Robert (**) 01/01/2013 - 30/09/201348,750    48,750
MILONE Libero (**)  01/01/2013 - 30/09/201360,000    60,000
PERISSINOTTO Giovanni (**) 01/01/2013 - 30/09/201348,750    48,750
ZHAO John (**)  01/01/2013 - 30/09/201337,500    37,500
BOYANOVSKY Harold D. (***)  01/01/2013 - 30/09/201356,270  7,140 63,410
COLLIGAN Thomas J. (***) 01/01/2013 - 30/09/201367,524    67,524
HILER Edward A.(***)  01/01/2013 - 30/09/201364,710  10,256 74,966
JEKER Rolf M. (***)  01/01/2013 - 30/09/201364,710    64,710
LIPPER Kenneth (***) 01/01/2013 - 30/09/201364,710  10,256 74,966
MONFERINO Paolo (***) 01/01/2013 - 30/09/2013  56,270                                                        56,270   
TOTAL  3,555,805   53,7981,981,827  36,28202,408 5,830,118

(*) Remuneration paid by CNH Industrial N.V. for the period Sep. 30-Dec.31, and by Fiat Industrial S.p.A. or by CNH Global N.V. for the period Jan. 1-Sep. 29
(**) Former Director of Fiat Industrial S.p.A.
(***) Former Director of CNH Global N.V.
(1) It includes the use of transport for personal purposes.
(2) The financial statements for the year ended December 31, 2013 include a €319,687 provision related to a retention scheme granted by Fiat S.p.A. in 2004 and partially assigned to Fiat Industrial S.pA. upon the demerger of Fiat S.p.A. in favor of Fiat Industrial S.p.A.

CNH Industrial N.V. Directors’ Compensation Plan

Remuneration of non-executive directors is approved by the Company’s Shareholders and periodically reviewed by the Compensation Committee.

The current remuneration for the Non-Executive Directors is:

  • US$125,000 for each Non-Executive Director.
  • An additional US$25,000 for each member of the Audit Committee and US$35,000 for the Audit Committee Chairman.
  • An additional US$20,000 for each member of every other Board committee and US$25,000 for the committee chairman.

Non-Executive Directors elect which portion of their annual retainer fee, committee membership and committee chair fee payments will be made in cash, common shares of CNHI or options to purchase common shares. Remuneration of non-executive directors is fixed and not dependent on CNHI’s financial results. Non-Executive Directors are not eligible for variable compensation and do not participate in any incentive plans (collectively, the “Fees”).

Directors eligible to receive compensation under the CNHI Directors’ Compensation Plan do not receive benefits upon termination of their service as directors.

With effect from September 29, 2013, 200,000 common shares were reserved for issuance under the CNHI Directors’ Compensation Plan, as approved by Shareholders.

The tables that follow reflect the stock option and share activity for the year ended December 31, 2013 under the CNHI Directors’ Compensation Plan and the predecessor Company plans adopted by CNH Industrial pursuant to the merger agreement terms and condition in September 2013.

Related to the merger agreement, the outstanding stock option balances under former CNH Global N.V. Directors’ Compensation Plan and the outstanding stock option and share unit awards under the former CNH Global NV Equity Incentive Plan (“CNH EIP”) incurred two adjustments during 2013.

The first adjustment accounts for the impact of the December 2012 special dividend. The Board resolved at the January 2013 meeting to have balances adjusted by multiplying by a factor of 1.215 and exercise prices adjusted by dividing by a factor of 1.215. The 1.215 factor was determined by the ratio of the share price pre and post ex-dividend date of the US$10/CNH share special dividend. The ex-dividend date was December 18, 2012. The closing price on December 17 was US$49.44/CNH share and the opening price on December 18 was US$40.69/CNH share.

The second adjustment, effective the date of the merger, accounts for the conversion of CNH shares to CNH Industrial shares, per the merger agreement terms and conditions, by a factor of 3.828, the same conversion ratio applied to CNH Global N.V. equity holders.

No adjustment occurred on the former Fiat Industrial equity awards since the conversion factor per the merger agreement was 1:1, the same as the Fiat Industrial equity holders. On October 31, 2013, upon recommendation of the Compensation Committee, the Board of Directors of CNH Industrial resolved to consider the performance conditions met for the Chairman’s company performance share units (“PSU”s). The units will vest February 1, 2015.

The tables first state the beginning balance before the adjustments and then are restated to reflect the impact of the combined two adjustments, as applicable by individual. The activity during 2013 is also restated for the applicable adjustments.

Share-Based Compensation

The following table summarizes outstanding stock options for Directors as of December 31, 2013. For further details about outstanding stock options conditions, please refer to Note 24 to the Consolidated Financial Statements.

 Grant DateExercise
Price (US$)
BoyanovskyGerowinHilerHouleJekerLanawayLipperTheurillatTobinTotal
Beginning Balance as of 1/1/13              
(automatic option) 5/3/200517.284,0004,000
(automatic option) 4/7/200627.704,0004,0004,0004,00016,000
 10/3/200622.324,4801,0085,488
 12/29/200627.453,6438209115,374
 3/30/200738.042,6295926573,878
 6/30/200750.951,9634424912,896
 9/28/200760.541,6521,4874133,552
 12/27/200766.411,5061,3562,862
 3/19/200850.081,9971,7983,795
 4/26/200848.1210,57410,574
 6/17/200842.512,3532,1184,471
 4/30/200913.5828,51228,512
 4/30/201031.6993,39150,489143,880
 9/7/201032.303,5603,560
 4/29/201147.2040,67640,676
 12/27/201137.093,1013,101
 04/02/201240.032,8732,873
 07/02/201239.391,2691,269
 09/28/201240.79103,974103,974
 10/01/201239.271,2731,273
 12/31/201239.882,8842,884
Beginning Total  135,0198,00024,2236,8624,00019,1772,472195,139394,892
- Vested/Not Exercised  103,888—                 8,00024,2236,8624,00019,1772,47247,218215,840
- Not Vested    31,131—                 —                 147,921179,052
Beginning Balance as of 1/1/13 – Adjusted (1)            
(automatic option) 5/3/20053.7218,604 18,604
(automatic option)4/7/20065.9618,60418,60418,60418,60474,416
 10/3/20064.8020,8354,68525,520
 12/29/20065.9116,9423,8124,23324,987
 3/30/20078.1812,2262,7523,05418,032
 6/30/200710.969,1292,0552,28113,465
 9/28/200713.027,6826,9131,91716,512
 12/27/200714.287,0016,30413,305
 3/19/200810.779,2868,36017,646
 4/26/200810.3549,17849,178
 6/17/20089.1510,9409,84920,789
 4/30/20092.93132,610132,610
 4/30/20106.82434,359234,824669,183
 9/7/20106.9516,55616,556
 4/29/201110.15189,183189,183
 12/27/20117.9814,42014,420
 04/02/20128.6113,35913,359
 07/02/20128.475,8985,898
 09/28/20128.78483,468483,468
 10/01/20128.455,9185,918
 12/31/201210.4211,03911,039
Beginning Total - Adjusted  627,96337,208112,64531,90818,60486,80011,485907,4751,834,088
- Vested/Not
Exercised 
  483,17337,208112,64531,90818,60486,80011,485522,0991,303,922
- Not Vested    144,790 —385,376530,166
Total Options Granted in 201312/28/201311.3256,402 (3)6,402
2013 Sub-Total   6,402  6,402
Options Exercised in 2013 (2)           
 5/3/20053.729,302—               —                9,302
 4/7/20065.969,302—        18,60418,604—        18,604— 27,906
 10/3/20064.80—           4,6854,685—           4,685—             4,685
 12/29/20065.91—           3,8123,812—           3,812 —3,812
 3/30/20078.18—           2,7522,752—           2,752 —2,752
 6/30/200710.96—           2,0552,055—           2,055 —2,055
 3/19/200810.77—                ——               8,3608,36
 4/26/200810.3549,178—                — —49,178
 6/17/20089.15—                ——        9,8499,849
 4/30/20092.93132,610—                ——            —          132,61
 4/30/20106.82434,359—                ——             —               434,359
 9/7/20106.95—                ——              16,55616,556
 12/27/20117.98—                ——              14,42014,42
 04/02/20128.61—                ——              13,35913,359
 12/31/201210.42—                ——              11,03911,039
Total Options
Exercised in 2013
  616,14718,60431,90873,583740,242
Closing Total   11,8166,40218,604112,64518,60413,21711,485907,4751,100,248
- Vested/Not
Exercised
  11,8166,40218,604112,645 18,60413,21711,485522,099714,872
- Not Vested  385,376385,376

1. Adjusted for the following:

1.1 Payment of special dividend in December 2012. Adjustment factor was 1.215.
1.2 Effect of CNH Industrial merger. Adjustment factor was 3.828.
The outstanding options were multiplied by both adjustment factors, whereas the exercise price was divided by both adjustment factors.
For example, using the 5/3/2005 grant of 4,000 outstanding options with an exercise price of US$17.28.
Options
4,000 A 
1.215 B  
4,860 C = A * B  
3.828 D  
18,604 E = C * D 

Exercise Price
17.28 F 
1.215 G
14.22 H = F / G
3.828 I
3.72 J = H / I

2. All exercises and exercise prices are in adjusted amounts.
3. Immediately exercisable upon the grant date, but common shares purchased upon exercise may not be sold until at least six months after the grant. 

The following table summarizes outstanding (as of December 31, 2013) performance share units held by Directors (due to their current or former employment by the Company) with respect to which vesting has not yet occurred. For further details about outstanding performance share unit conditions, please refer to Note 24 to the Consolidated Financial Statements.

 Note Grant DatePriceBoyanovskyTobinMarchionneTotal
Beginning Balance as of 1/1/2013       
  09/30/2010US$34.7440,00075,000 -115,000
  01/01/2012US$37.64 -78,500 -78,500
  04/05/2012 €7.795 1,000,0001,000,000
Beginning Total   40,000153,5001,000,0001,193,500
Beginning Balance as of 1/1/2013 - Adjusted(1)09/30/2010US$7.47186,040348,826 -534,866
  01/01/2012US$8.09-365,103 -365,103
  04/05/2012€7.795 - -1,000,0001,000,000
Beginning Total - Adjusted   186,040713,9291,000,0001,899,969
Granted in 2013   ----
Total Granted in 2013   ----
Vested in 2013 09/30/2010US$7.47186,040116,275-302,315
Total Vested in 2013   186,040116,275-302,315
Ending Balance as of 12/31/2013
::Not Vested
 09/30/2010US$7.47-232,551-232,551
  01/01/2012US$8.09-365,103-365,103
  04/05/2012€7.795--1,000,0001,000,000
Closing Total   -597,6541,000,0001,597,654

(1). Adjusted for the following:

1.1 Payment of special dividend in December 2012. Adjustment factor was 1.215.
1.2 Effect of CNH Industrial merger. Adjustment factor was 3.828.
The outstanding RSUs were multiplied by both adjustment factors, whereas the price was divided by both adjustment factors.
For example, using the 9/30/2010 RSU award of 1,667 with a price of US$34.74.
Share Units
1,667 A,
1.215 B
139,725 C = A * B
3.828 D
534,866 E = C * D
Grant price
34.74 F
1.215 G
28.59 H = F / G
3.828 I
7.47 J = H / I

The following table summarizes outstanding (as of December 31, 2013) restricted share units held by Directors (due to their current or former employment by the Company) with respect to which vesting has not yet occurred. For further details about outstanding restricted share unit condition, please refer to Note 24 to the Consolidated Financial Statements.

 NoteGrant
Date
PriceTobinMarchionne(2)Total
Beginning Balance as of 1/1/2013 09/30/2010US$34.741,667 -1,667
  09/30/2011US$26.653,0003,000
  04/05/2012€7.795 -1,100,0001,100,000
Beginning Total   4.6671,100,0001,104,667
Beginning Balance as of 1/1/2013 - Adjusted(1)09/30/2010US$7.477,7517,751
  09/30/2011US$5.7313,95313,953
  04/05/2012€7.795 1,100,0001,100,000
Beginning Total - Adjusted   21,7041,100,0001,121,704
Granted in 2013   ---
Total Granted in 2013   ---
Vested in 2013 09/30/2010US$ 7.477,751-7,751
  09/30/2011US$5.736,977-6,977
  04/05/2012€7.795 366,667366,667
Total Vested in 2013   14,728366,667381,395
Ending Balance as of 12/31/2013
Not Vested
      
  09/30/2011US$5.736,976-6,976
  04/05/2012€7.795                               -  733,333                       733,333  
Closing Total    6,976   733,333                       740,309  

(1). Adjusted for the following:

1.1 Payment of special dividend in December 2012. Adjustment factor was 1.215.
1.2 Effect of CNH Industrial merger. Adjustment factor was 3.828.
The outstanding RSUs were multiplied by both adjustment factors, whereas the price was divided by both adjustment factors.
For example, using the 9/30/2010 RSU award of 1,667 with a price of US$34.74.
Share Units
1,667 A
1.215 B
2,025 C = A * B
3.828 D
7,751 E = C * D
Grant price
34.74 F
1.215 G
28.59 H = F / G
3.828 I
7.47 J = H / I

2. As of February 27, 2014 the beneficiary has not exercised its right with respect to the restricted share units vested.

 

EXECUTIVE OFFICERS’ COMPENSATION

The aggregate amount of compensation paid to or accrued for executive officers that held office during 2013 was approximately €14.6 million, including €4.7 million of pension and similar benefits paid or set aside by us. The aggregate amounts include 17 executives at December 31, 2013; during 2013, organizational changes occurred that were taken into consideration, pro-rata temporis, in the total compensation figures.