Compensation

Short-term compensation

The short-term variable compensation is associated with economic-financial, health and safety, sustainability and strategic initiatives goals, which were on extraordinary basis in 2019, targets exclusively linked to the remediation of the Brumadinho dam rupture. In addition to the targets set forth in the panel, the short-term variable compensation is still fully associated with the Company's cash generation, relating compensation paid to operating performance generated in the year.

In this sense, for the fiscal year 2019, 60% of executives' performance goals are based on targets focused on health and safety, sustainability, and mainly on organizational reconstruction and crisis management, to remedy environmental, social and humanitarian damages caused by the dam rupture in Brumadinho in January 2019, in addition to actions aimed at the Company's conscious actions of dam safety and stability, support for investigations, stakeholder relationship management and cultural restructuring. The remaining 40% of the 2019 targets are linked to operating cash generation (EBITDA targets).

Long-term compensation

Long-term variable compensation programs are comprised of Matching and VSP (virtual shares program) and are applicable only to the company's leadership levels, excluding Board of Directors, Fiscal Council and Advisory Committees, that would not be entitled to any type of variable compensation.

Vale's long-term compensation is associated with the performance of the common share, thus is directly related to the return given to shareholders. In the case of VSP, compensation is calculated as a direct function of Vale's Total Shareholder Return (TSR) indicator, which takes into account stock price fluctuations and dividends (or interest on equity) paid to shareholders over the plan period.

It is worth noting that, in 2019, the maintenance of share ownership was implemented, in which the executive must accumulate and hold on their Vale shares in the amount equivalent to at least thirty-six (36) honorary fees to the CEO and twenty-four (24) honorary fees for the Executive Directors. Shares may be accumulated through the share-based variable compensation programs offered by the Company.

Virtual Shares Plan (VSP)

This represents a variable long-term compensation amount, linked to the Company's performance against other large mining and similar companies, and focuses management efforts on the creation of value and wealth for Vale, aligning executives and shareholders’ interests and reinforcing the culture of sustainable performance.

The VSP payment metric consists on the Total Shareholder Return (TSR) relative to the peer group, taking into consideration the businesses and regions where Vale operates and the influence of Brazilian market fluctuations.

If Vale comes first in the ranking (P100 percentile), the value is increased by 50%; if Vale is at P25 (first quartile) or below, there is no payment; and for Vale's intermediate positions in the companies ranking (between P25 and P100), it is paid according to the performance, which may vary between 10% and 150% of the value, as follows:

The data in the table above refers to the last payment of the VSP that was made in January / 2019. The TSR calculated refers to the period from January 01 of the cycle year until December 31, 2018.

Matching

Although being a voluntary program for eligible leaders, participation and retention for statutory executives is mandatory. In order to adhere to the program, the executive must use their own resources to acquire common shares of the Company and keep the shares in their possession during the three-year cycle. Shares may be acquired through purchase in the market or through the use of shares already held by the executive (“Free Shares as long as they are not linked to other Matching cycles that are not yet closed. After 3 years, executives who are still in the Company and have held such shares receive the same number of shares originally acquired, including IRPF withheld at source. From the concessions started in 2019, the participants are entitled to receive the net amount equivalent to dividends (or interest on equity) on the shares not yet awarded, whenever there is distribution by Vale to its shareholders.

Compensation of the Board of Directors, Advisory Committees and Fiscal Council

Compensation of the Board of Directors

Fixed Compensation

Pro-labore: The compensation considers exclusively the payment of a monthly fixed amount (fees), for the purpose of remunerating the services of each member of the Board, within the scope of responsibility assigned to the Company's Board of Directors. The alternate members of the Board of Directors will only be compensated for each meeting that they attend to replace the full member, in the amount of 50% of the remuneration attributed to the full member.

Direct and Indirect Benefits: They are not entitled to direct and indirect benefits.

Participation in Committees: As of 2018, the full members of the Board of Directors who are also part of Committee(s) shall accumulate the respective monthly compensation, limited to one Committee.

Variable Compensation

They are not entitled to other types of compensation or benefits, including bonuses, profit sharing, meeting attendance compensation, commissions, post-employment benefits, termination benefits and share-based compensation.

Compensation of the Fiscal Council

Fixed Compensation

Pro-labore: The compensation considers, exclusively, the payment of a monthly fixed amount (fees), for the purpose of remunerating the services of each member of the Board, within the scope of responsibility assigned to the Company’s Fiscal Council. The determination of the compensation of the Fiscal Council is calculated as a percentage (10%) of the average compensation attributed to the Executive Officers of the Company.

Alternate members are only remunerated in cases in which they exercise their activities due to vacancy, impediment or absence of the respective full member.

Direct and indirect benefits: They are not entitled to direct and indirect benefits.

Variable Compensation

They are not entitled to other types of compensations.

Compensation of the Advisory Committees

Fixed Compensation

Pro-labore: The compensation considers exclusively the payment of a monthly amount (fees), for the purpose of remunerating the services of each advisor, within the scope of responsibility assigned to each Advisory Committee of the Company. Specifically for members of the IECCs* (Independent Extraordinary Consulting Committees), the monthly amount may vary according to time worked in each month. The compensation of the members of the Advisory Committees is defined by the Board of Directors.

Variable Compensation

They are not entitled to other types of compensation.

Compensation of the Statutory and Non-Statutory Board of Executive Officers

Compensation of the Statutory Board

Fixed Compensation

Pro-labore: They are entitled to receive a fixed monthly fee that has the objective of compensating the services provided by them within the scope of responsibility assigned to each one in the management of the Company.

Direct and Indirect Benefits: They are entitled to a benefits package that is also compatible with market practices and includes Medical-Hospital and Dental Care, Complementary Pension and Life Insurance. The benefits, in addition to being aligned with market practices, are intended to support executives and their dependents in key areas, such as health care and housing.

Participation in Committees: They are not entitled to compensation for participation in committees.

Variable Compensation

Bonus: It refers to Short Term Variable Compensation (annual), based on the Company's results and defined through indicators and targets, derived from the strategic planning and annual budget approved by the Board of Directors. The main purpose of the bonus is to ensure competitiveness with the market, align with shareholders' interests and focus on social and environmental issues, as well as recognize the executive's participation in the Company's performance.

This long-term portion is composed of 20% linked to the Matching Program and 26% linked to the Virtual Shares Plan (VSP).

In 2019, the maintenance of stock ownership was implemented, in which the executive shall accumulate, through the share-based compensation programs offered by the Company, and maintain ownership of the shares issued by Vale in an amount equivalent to a least thirty-six (36) times the amount of the monthly fixed installment for CEO and twenty-four (24) times the value of the monthly fixed installment for the Executive Officers.

Matching percentage of the Total Remuneration (target and maximum)

Compensation of the Non-Statutory Board

These are employees of the Company with an employment relationship and may be responsible for global corporate functions or business units, or for regional or local corporate functions, or for areas or operating systems in the Company's various businesses.

Fixed Compensation

Pro-labore: They are entitled to receive a monthly fixed amount, defined on the basis of the Company structure of positions, which is aligned to the market practices and the purpose of which, according to the employment agreement signed with each executive, is to remunerate the services provided within the scope of responsibility assigned to each one in the different activities of the Company.

Direct and Indirect Benefits: They are entitled to a package of benefits compatible with market practices including Medical-Hospital-Dental Care, Complementary Pension (Valia) and Life Insurance. The benefits, in addition to being aligned with market practices, are intended to support executives and their dependents in key areas, such as health care and housing.

Participation in Committees: They are not entitled to compensation for participation in committees.

Variable Compensation

Profit sharing: Refers to Short Term Variable Compensation (annual), based on the Company’s results and defined through indicators and targets, derived from the strategic planning and annual budget approved by the Board of Directors.

Virtual Shares Program ("VSP"): The rules and conditions of the VSP offered to these stakeholders are the same as those applied to the Statutory Officers.

Matching: The rules and conditions of Matching offered to these stakeholders are the same as those applied to the Statutory Officers except for the voluntary rule (for non-statutory leaders, participation in the program is voluntary).

Compensation of Boards, Councils and Comittees

Check the fixed and variable compensations list:

• Total compensation (%) - From 2016 to 2018
• Total compensation ($) - From 2016 to 2019
• Variable compensation ($) - Form 2016 to 2019

Policy

Executive Directors Compensation Policy