CORPORATE GOVERNANCE REPORT Compensation and benefits of executive corporate officers 5 The compensation of each Executive Board member includes the The Supervisory Board, on a recommendation from the Nomination following elements: and Compensation Committee, has determined the fixed annual compensation of the Executive Board members for 2018 as follows: a) Annual fixed compensation > fixed annual compensation for the Chairman of the Executive The Nomination and Compensation Committee, by applying a Board: raised from €500,000 to €650,000; benchmark principle from the AFEP-MEDEF Code, decided to study > compensation of the Deputy CEO, Executive Board member: raised regularly the practice of companies comparable in size and activities from €400,000 to €440,000. to Klépierre to verify (i) the adequacy of Executive Board member compensation with regard to the Group’s size and to Board members’ The Board’s target is to by 2019, when the Executive Board next experience as well as (ii) the competitiveness of the compensation comes up for reappointment, and subject to the approval of the offered to Executive Board members vis-à-vis comparable companies. compensation policy for each of the members of the Supervisory After having recognized the lack of competitiveness of the Klépierre Board by the General Meeting, set the fixed annual compensation of Executive Board members’ fixed compensation compared to Executive Board members at a level that is considered reasonable and (1) close to the average of the median values for fixed compensation paid compensation offered in comparable companies , the Nomination to executives in the companies in the two samples studied, namely and Compensation Committee and the Supervisory Board have, in €750,000 for the Chairman of the Executive Board and €480,000 for the last few years, taken steps to restore it to the appropriate level by the Deputy CEO, Executive Board member. This fixed compensation introducing fixed annual compensation which is appropriate to the will then remain unchanged for the full term of the Chairman and experience and scope of responsibilities of Executive Board members of Executive Board members (i.e., until 2022) subject to any major as well as consistent with the market. changes within the Group and its environment. A gradual approach was decided upon in order to avoid a significant The Supervisory Board will continue to ensure that the fixed change in fixed compensation between one fiscal year and the next. compensation of Executive Board members is competitive compared The finding of the studies undertaken by Towers Watson in 2017 to companies of comparable size or that are involved in the same on the following panels showed that the fixed compensation of business, and will regularly check that the panels studied to this end Executive Board members remained below the median fixed annual are relevant, while also taking into account each member’s experience compensation of the corporate officers of the companies in the and their scope of responsibility. samples studied (in line with the findings of the benchmarking work The Board will also continue to ensure, when determining the fixed done in 2015 and 2016): compensation of Executive Board members, that the compensation > the panel of SBF 120 companies (comprising (i) the 10 CAC 40 package offered to the latter remains relevant and consistent with the companies with the lowest market capitalization, (ii) the 20 Next 20 median of the aforesaid samples. companies and (iii) the 10 SBF 80 companies with the highest If a new Executive Board member is appointed, his/her fixed annual market capitalization), and compensation will be determined by the Supervisory Board in > the panel of companies with comparable activities (STOXX® Europe compliance with existing market practices for the exercise of duties 600 – Real Estate). of the same nature and in line with the Klépierre compensation policy. It was in particular found that in the case of the fixed compensation b) Short-term variable compensation of the Chairman of the Executive Board, the difference vis-à-vis the median fixed annual compensation of the corporate officers of the Short-term variable compensation rewards executive performance companies in the samples studied is still significant. for year Y-1 and aims to establish a link between the interests of As announced in the registration document filed with the French executives and the Group’s operational strategy over the period in Financial Market Authority (AMF) on March 9, 2017, it has decided question pursuant to paragraph 24.3.2 of the AFEP-MEDEF Code. to pursue the policy of restoring their fixed annual compensation This compensation is determined by the achievement of clear and to the appropriate level. Therefore, the Board of Directors, at the ambitious targets, which are decided at the beginning of the year by recommendation of the Nomination and Compensation Committee, the Supervisory Board on the recommendation of the Nomination and decided: Compensation Committee (details and weighting of the qualitative > that the fixed compensation level of members of the Executive targets are communicated to Executive Board members at the Board, and more particularly, the fixed compensation of the beginning of the year but are not made public at this stage for Chairman of the Executive Board, was not commensurate with the confidentiality reasons – they are, however, made public after the fact). skills and scope of responsibilities of the executive team; The results are evaluated after the end of the fiscal year on the basis > that the current compensation of members of the Executive Board of the consolidated financial statements for that fiscal year and the could not be considered as a key factor for retaining executives; evaluation of the performance of each member of the Executive Board by the Supervisory Board. > that the quality of the executive team and its involvement in the Company’s development were key success factors for the Group; > that it was therefore necessary to make a significant effort to align their compensation with that of the market, and thus find a long- term solution to this situation. (1) For historical reasons, Executive Board members’ compensation was set at relatively low levels, and over time has lost its correlation with Klépierre’s size. In effect, Klépierre was, formerly, a BNP Paribas subsidiary, in which the compensation of the Executive Board members was determined in consistency with the compensation policy applicable to BNP Paribas group executives. Following the sale by BNP Paribas of its stake, initiated in March 2012 and ended in November 2015, Klépierre became a non-controlled company, whose strategic positioning has noticeably evolved, as seen in the refocusing of its portfolio on large-scale core assets. KLÉPIERRE 2017 REGISTRATION DOCUMENT 245