Introduction: remuneration report 2021
Galapagos’ remuneration policy
Galapagos’ remuneration policy was prepared in accordance with the Belgian Companies Code. Galapagos’ shareholders approved the current remuneration policy at the 2020 annual shareholders’ meeting with 68.21% of shareholder votes. The policy became effective as of 1 January 2020 and applies for the reporting year beginning on 1 January 2021. In this report we will look back at 2021.
Galapagos encourages an open and constructive dialogue with its investors to discuss its approach to governance, including remuneration. The increased disclosure in the remuneration report reflects the input received from Galapagos’ shareholders over the years as well as developments in the legislative framework, including individual disclosures for each supervisory and management board member.
The objective of our remuneration policy is to attract, motivate and retain the diverse qualified and expert individuals who are key in order to achieving our strategic and operational objectives. We further aim to be competitive in the labor market by benchmarking against relevant peer groups, incentivizing performance at the highest possible level, allowing for differential rewards according to individual performance, avoiding discrimination on any grounds other than performance, and reinforcing an open, fair, consistent and equitable culture.
Following the introduction of a one-tier governance structure, consisting of a board of directors and an executive committee, to be proposed to the extraordinary shareholders’ meeting to be held on 26 April 2022, a revised remuneration policy reflecting such change will be submitted for approval of the annual shareholders’ meeting to be held on 26 April 2022.
Peer group and benchmarking
Galapagos’ remuneration policy takes into account relevant benchmarks with appropriate peer companies and, for the management board members, also the group’s performance management system. For the most recent benchmarking exercise executed in 2018, our nomination and remuneration committee worked with Willis Towers Watson as external advisor. Willis Towers Watson also provided external support for the benefit of the nomination and remuneration committee in 2020. The peer group taken into consideration consisted of publicly listed, early-stage high value biotechnology companies with a comparable market capitalization in the U.S. and biotechnology and pharmaceutical companies in Europe. This benchmarking exercise indicated that in the biotechnology/pharmaceutical subsector, the “transatlantic” gap is higher than in broader general industry and in the wider health sciences sector. The observed gap in market pay levels between regional peer groups was attributable to long-term incentives; in Europe, long-term incentives were materially smaller. Galapagos’ pay-mix for all executive functions was broadly in line with market practice observed within the U.S. peer group, while in comparison to the European peer group it was more leveraged toward long-term incentives. These findings were in line with and reinforced remuneration committee priorities for executive compensation. The committee found the U.S. benchmark to be more relevant than that of Europe given the majority of our competitors are based in the U.S., we have a significant number of U.S. based shareholders whose views on remuneration are based on U.S. practices, and the overall relevance of the U.S. market to the pharmaceutical industry.