Alcatel-Lucent Board of Directors response on the recommendations of the ‘High Committee on Corporate Governance’ of France
Paris, France, September 11, 2015
The Board of Directors of Alcatel-Lucent (Euronext Paris and NYSE: ALU) met on Thursday, September 10, 2015 to review recommendations made by the High Committee on Corporate Governance (Haut Comité de Gouvernement d’Entreprise or HCGE) regarding the conformity of Michel Combes’ long-term compensation with the AFEP-MEDEF Code and with observations received from the French Autorité des marches financiers in that respect.
The Alcatel-Lucent Board of Directors has reviewed, with the full agreement of and upon the request of Mr. Combes, different aspects of that compensation and of his “non-compete” agreement.
Regarding Mr. Combes’ multi-year variable compensation, the Board of Directors is aligned with the interpretation of the HCGE, which defines a principle of acquisition on a prorata temporis basis. The Board observes that such a principle is more demanding than the current international practice. Taking into account the observations of the HCCG, the Board has resolved to pay Mr. Combes, in cash and not in shares, a multi-year variable compensation, calculated on the basis of the average of the preceeding 20 trading day prices of Alcatel-Lucent stock on the Paris stock exchange preceding Mr. Combes’ final day of employment with the Group.
The elements of this multi-year variable compensation plan were presented at the last shareholders’ meetings of the company, the compliance of which the HCGE has confirmed. Mr. Combes is therefore entitled to receive this compensation. The elements, however, will remain subject to the relevant performance criteria and will be evaluated in 2016 upon completion of the 2015 financial year.
As such, the maximum amount of multi-year variable compensation to be received by Mr. Combes will be a total of EUR 4,845,109, adjusted downwards for 2015 based on the actual level of achievement of the performance criteria as set for 2015. The payment to be made to Mr. Combes will be decreased by related social charges. Payment will only be made after the successful closing of the proposed transaction with Nokia.
Mr. Combes also requested that the Board of Directors reconsider his non-compete agreement. The Board reaffirmed the importance of this agreement in protecting the Group’s strategic business interests by preventing potential damage to company business. It prevents, in particular, Mr. Combes from carrying out or accepting any responsibilities with a Group competitor, either as an executive, administrator or consultant. The Board had no certainty of Mr. Combes’ professional future when it negociated this strict non-compete agreement with Mr. Combes. Its existence likely influenced his decision to join an operator.
However, taking into account that this agreement must be enforceable before the competent jurisdictions, that Mr. Combes’ new responsibilities reduce the risk to the company, and the HCCG’s observations, the amount of the indemnity was reduced to EUR 3.1 million, and the duration of the clause was extended to 40 (forty) months, until December 31, 2018. Cash payment will be made in thirds. The amount to be paid to Mr. Combes will also be reduced by relevant social charges.
The multi-year variable compensation and the non-compete indemnity are subject to French tax and social security contributions.
The Board of Directors reaffirmed its appreciation of the performance of Mr. Combes in leading Alcatel-Lucent since April 2013. By his work and his talent he rejuvenated the company and very significantly increased its value while carrying out the Group’s industrial and strategic transformation. The Board recognized that, as CEO at a critical moment in the Group’s existence, Mr. Combes’ leadership ensured that the Group would have a future.
Furthermore, Mr. Combes confirmed with the Board that he would remain at the Company’s disposal until the closing of the operation with Nokia.
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Alcatel-Lucent is the leading IP networking, ultra-broadband access and cloud technology specialist. We are dedicated to making global communications more innovative, sustainable and accessible for people, businesses and governments worldwide. Our mission is to invent and deliver trusted networks to help our customers unleash their value. Every success has its network.