Conflict of interests and related parties

We consider that Gilead became a related party of Galapagos in 2019 because of Gilead’s 25.84% shareholding in Galapagos and the fact that Gilead is entitled to propose two candidates to be appointed to our board of directors under the share subscription agreement. A detailed explanation of our transactions with Gilead in 2019 can be found in the section titled Agreements with major Galapagos NV shareholders. We further refer to note 29.

In the event of a transaction where a director’s interest conflicts with the interest of Galapagos NV, the director shall notify the board of directors in advance of the conflict and will act in accordance with the relevant rules of the Belgian Companies Code (i.e. article 523 of the Belgian Companies Code and as of 1 January 2020, article 7:96 of the New Belgian Companies Code). In addition, Galapagos’ Corporate Governance Charter and Galapagos’ Related Person Transaction Policy contain procedures for transactions between Galapagos and its directors, members of its executive committee, major shareholders or any of their immediate family members and affiliates. Without prejudice to the procedure defined in article 523 of the Belgian Companies Code (and as of 1 January 2020, article 7:96 of the New Belgian Companies Code), these policies provide that all transactions between Galapagos and its directors, its members of the executive committee or its representatives need the approval of the audit committee and the board of directors, which approval can only be provided for transactions at normal market conditions. Moreover, conflicts of interest, even in the event they are not a conflict of interest within the meaning of article 523 of the Belgian Companies Code (and as of 1 January 2020, article 7:96 of the New Belgian Companies Code), are enacted in the meeting minutes, and the director or member of the executive committee cannot participate in the voting.

In 2019, the following conflicts of interests between Galapagos NV and a director within the meaning of article 523 of the Belgian Companies Code were noted:

• in a meeting of the board of directors held on 18 February 2019, the following was reported in accordance with article 523 of the Belgian Companies Code in connection with the proposed compensation review of the CEO: the chairman declared that Mr. Onno van de Stolpe had informed the board of directors of a conflict of interest, concerning the proposed compensation review of the CEO. The board considered that said compensation review was based on a benchmark exercise performed by an external advisor, and that the proposed amendments aim to align the compensation with the median of the peer group’s compensation level. The update of the compensation structure will have no material impact on the financial position of the company. The board shared the opinion of the remuneration committee that the proposed amendments are justified and reasonable. Mr. Van de Stolpe did not take part in the deliberation and the vote concerning this decision.
• in a meeting of the board of directors held on 24 September 2019, the following was reported in accordance with article 523 of the Belgian Companies Code in connection with the proposed bonus for the CEO for the successful closing of the Gilead transaction: the chairman declared that Mr. Onno van de Stolpe had informed the board of directors of a conflict of interest, concerning the proposed award to him of a bonus. Given the contributions by the CEO to the successful completion of the transaction with Gilead, Mr. Van de Stolpe is granted a total bonus of EUR 5 million (of which 50% payable in cash and 50% through the grant of RSUs, with half of the RSUs vesting after 2 years and the other half of the RSUs vesting after 3 years). The board considered that said bonus is a justified reward for the results achieved by Mr. Van de Stolpe. The bonus will have no material impact on the financial position of the company. The board shared the opinion of the remuneration committee that the proposed bonus is justified and reasonable. Mr. Van de Stolpe did not take part in the deliberation and the vote concerning this decision.
• in a meeting of the board of directors held on 17 December 2019, the following was reported in accordance with article 523 of the Belgian Companies Code in connection with the proposed salary increase, bonus and grant of RSUs to the CEO: the chairman declared that Onno van de Stolpe had informed the board of directors of a conflict of interest, concerning the proposed salary increase and award to him of a bonus and RSUs. Given the actual level of achievement of the performance criteria to be entitled to a salary increase and a bonus (i.e. the corporate objectives for 2019) a bonus equal to 75% of his 2019 salary was awarded to Mr. Van de Stolpe in cash and for 2019 and an equivalent number of RSUs (based on the average share price of the Galapagos share on Euronext Amsterdam during the month of March 2020) to be granted under the Annual Long-Term Incentive Plan. Mr. Van de Stolpe’s salary was increased with 4% as of 2020. In addition, the grant of 25,000 RSUs under the RSU Retention Plan and 15,000 RSUs under the RSU Discretionary Plan to Mr. Van de Stolpe was ratified by the board. The board considered that said salary increase, bonus and RSU grants are a justified reward for the results achieved by Mr. Van de Stolpe in 2019. Furthermore, the board deemed the grant of RSUs to be an important tool in the retention of Mr. Van de Stolpe as CEO of the company. The salary increase, bonus and RSU grants will have no material impact on the financial position of the company. The board shared the opinion of the remuneration committee that the salary increase, proposed bonus and RSU grants are justified and reasonable. Mr. Van de Stolpe did not take part in the deliberation and the vote concerning this decision.