Remuneration of non-executive directors of Galapagos NV
Upon recommendation of the nomination and remuneration committee, and upon the proposal of the board of directors, the annual shareholders’ meeting of 30 April 2019 resolved that the compensation (excluding expenses) of the non-executive directors for the exercise of their mandate during the financial year ending 31 December 2019 was established as follows: (i) chairman of the board (Dr. Parekh): €80,000; (ii) other non-executive board members (Mr. Rowe, Ms. Bosley, Dr. Kerr and Mr. Guenter, and until 30 April 2019, Dr. Cautreels and Dr. Mummery): €40,000 each; (iii) annual additional compensation for membership of a board committee (audit committee: Dr. Kerr and Dr. Cautreels, replaced by Mr. Guenter as from 18 June 2019; nomination and remuneration committee: Mr. Rowe and Ms. Bosley): €5,000; (iv) annual additional compensation for the chairmanship of a board committee (audit committee: Mr. Rowe; nomination and remuneration committee: Dr. Parekh): €10,000.
Upon recommendation of the nomination and remuneration committee, the special shareholders’ meeting of 22 October 2019 resolved that Mr. O’Day and Dr. Higgins would not receive any remuneration for their mandate as non-executive directors.
Subject to the approval of the shareholders’ meeting to be held on 28 April 2020, the annual remuneration for the non-executive directors will be increased, in line with the median of our peer group, to €100,000 in cash for the chairman of the board and €50,000 in cash for the other non-executive board members (other than Mr. O’Day and Dr. Higgins). Committee membership would entitle the board member to an additional €15,000 in cash and committee chairmanship to €20,000 in cash.
In addition, the chairman would receive a payment of €100,000 and each board member (other than Mr. O’Day and Dr. Higgins) would receive a payment of €50,000, in each case subject to the requirement to use the net amount (after taxes) to acquire Galapagos shares. These latter payments make up the equivalent of an equity component of the directors’ remuneration, as recommended by the 2020 Code. Further details can be found in the Remuneration policy for directors section of our remuneration policy.
The remuneration of the non-executive directors does not contain a variable part; hence no performance criteria apply to the remuneration of the non-executive directors.
In 2019, we issued two warrant plans for the benefit of employees of the group and of the directors and one independent consultant of Galapagos NV: Warrant Plan 2019 and Warrant Plan 2019 RMV. In accordance with the resolution of the annual shareholders’ meeting of 30 April 2019, the following number of warrants were offered under Warrant Plan 2019 to the non-executive directors: Dr. Parekh: 15,000 warrants; and Mr. Guenter, Ms. Bosley, Mr. Rowe and Dr. Kerr: each 7,500 warrants. All directors accepted the warrants offered. These warrants have a term of eight years. The exercise price of the warrants is €95.11. As regards the directors, the warrants vest over a period of 36 months at a rate of 1/36th per month. The warrants cannot be transferred and cannot be exercised prior to the end of the third calendar year following the year of the grant. No warrants were offered to directors under Warrant Plan 2019 RMV. The board of directors did not consider the above warrants as variable remuneration as defined by the Belgian Companies Code as they are not subject to any performance-related criteria.
Provision 7.7 of the 2009 Code recommended that non-executive directors should not be entitled to stock-related long-term incentive schemes. In deviation from this provision, the board of directors decided to grant warrants to non-executive directors. This way, Galapagos had additional possibilities to attract competent non-executive directors and to offer them an attractive additional remuneration that does not affect Galapagos’ cash position. Furthermore, the grant of warrants has been a commonly used method in the sector in which Galapagos operates. Without this possibility, Galapagos was confronted with a considerable disadvantage compared to competitors and peer companies that do offer stock-related incentive schemes to their non-executive directors. The board of directors is of the opinion that the granting of warrants had no negative impact on the functioning of the non-executive directors.
Nevertheless, as from 1 January 2020, Galapagos NV will no longer grant any warrants to non-executive directors, taking into account the stricter rules of the New Belgian Companies Code. Going forward, Galapagos will thus comply with provision 7.6 of the 2020 Code.