Compensation
As a global company, Vale knows that attracting the best professionals,
retaining talent, motivating and engaging leaders in strategic
positions, especially Statutory members of the Executive Board, members
of the Board of Directors, Advisory Committees and the Fiscal Council,
is a critical challenge for the company’s success at all times.
Therefore, the market is always a reference within a global perspective,
as well as the vision of aligning the organization's long-term
success with the management’s compensation policies and practices. Vale
considers the compensation policies and practices adopted by the main
mining companies and other large global companies in similar industries
and sectors, among other elements, such as its long-term strategy.
The annual compensation proposal is prepared based on these market
principles, also taking the responsibilities of each member, their
skills and the value of their services into account. The Company also
considers market practices, their alignment with short- and long-term
strategies, shareholder returns and the sustainability of its
businesses.
Compensation proposals and policies are prepared with the support from
the People, Compensation and Governance Committee (“CPRG”), which is
composed of five members, four of whom are members of the Board of
Directors, and one is an external specialist.
One of the core pillars of designing the compensation proposal is the
establishment of targets linked to the Company's sustainable
performance and to the returns to its investors.
Short-term variable compensation
Short-term variable compensation is based on performance goals of
different natures, which are an important management tool and have been
increasingly relevant to the evolution and implementation of the
Company’s main strategic plans. It is associated with economic and
financial, health and safety, sustainability and strategic goals.
Long-term variable compensation
Long-term variable compensation programs are comprised of Matching
(program in the Restricted Shares modality) and VSP - Vale Shares Plan
(program in the Performance Shares modality) 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 throughout their
terms.
Vale 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:
In addition to the TSR metric, the Company included, in 2020, the
performance metric related to ESG - Environmental, Social and
Governance: it includes (i) Health & Safety, with the indicator of
High Potential Recordable Injuries (N2), that is, incidents that can
generate fatalities and/or high potential injuries, with the objective
of zeroing N2 incidents by 2025, according to the curve presented to the
market in 2020; and (ii) Sustainability, with metrics based on
Vale's 2030 commitments , applicable to the entire Company, at a
global level, such as greenhouse gas reduction and Dow Jones
Sustainability Index (DJSI) performance.
Additionally, as approved at the 2021 Annual Meeting of Shareholders,
the award at the end of the cycle, conditioned to the achievement of the
performance factor, from the 2021 cycle onwards will be made through the
delivery of Common Shares issued by the Company, after the end of the
cycle. In addition to the regular award, in 2021 the additional payment
related to virtual dividends was also included, conditioned to the
distribution of dividends or interest on capital by the Company.
Historical summary
The evolutions and improvements strengthen the ownership feeling and the
executive engagement, in addition to aligning their actions with the
shareholders’ interests.
Matching
Matching Program is one of the long-term variable compensation programs;
although it is voluntary for eligible leaders, participation and
retention of shares is mandatory for Statutory Officers. To comply with
the program, the Statutory Officers must use their own resources to
acquire common shares issued by the company (through the purchase in the
market or the use of shares that the executive already owns, detached
from current cycles) and keep them in their possession for at least the
three-year cycle, observing the Stock Ownership Guidelines (SOG) or
Mandate of Share Ownership. After the three-year cycle, the executives
who are still in the Company and own these shares receive the program
award, of at least the same number of shares originally acquired.
Compensation of the Named and Non-Named Board of Executive Officers
Compensation of the Executive Officers
Vale's Executive Compensation has been constantly improved. In
recent years, the Company has been actively listening to investors and
has carried out foreign market research and data and performance
metrics analysis to advance its compensation practices, contributing
to the strategy execution, competitiveness, alignment with
shareholders’ interests and Vale’s cultural transformation.
Fixed Compensation
Base fee: this is the monthly fixed fee, which aims
to attract and retain executives with experience and capacity
compatible with the scope and responsibility of the position assigned
to them in the Company’s management. These components are not
associated with Vale’s performance.
Direct and Indirect Benefits: Executives are entitled
to a benefits package compatible with market practices, which includes
medical, hospital and dental care, supplementary pension plans and
life insurance. The benefits, in addition to being in line with market
practices, are intended to support executives and their dependents in
key areas, such as healthcare and housing.
Direct and Indirect Benefits: Executives are
entitled to a benefits package compatible with market practices, which
includes medical, hospital and dental care, supplementary pension
plans and life insurance. The benefits, in addition to being in line
with market practices, are intended to support executives and their
dependents in key areas, such as healthcare and housing.
Participation in Committees: Executives are not
entitled to compensation for participation in executive committees.
Compensation of the Non-Named Executive Officers
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
Base fee: 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.
Vale Shares Program ('VSP'): The rules and
conditions of the VSP offered to these stakeholders are the same as
those applied to the Named Executive 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).
It should be noted that the Stock Ownership Guidelines (SOG) rule does
not apply to this group.
Compensation of the Board of Directors, Advisory Committees and Fiscal
Council
Compensation elements for the Board of Directors, Board Committees
and Fiscal Council
Board of Directors (BOD): Members receive a fixed
monthly compensation, while the only alternate member receives the
fixed compensation when there is participation in a meeting of the
Board of Directors, replacing the member elected by the
employees.
Board Committees and Consulting Committees of the BOD:
The compensation considers exclusively the payment of a monthly
installment (fee) within the scope of responsibility attributed to
each Committee and Advisory Committee of the Company.
Fiscal Council: Fees for sitting members are
equivalent to 10% of the Statutory Officers’ average fixed
compensation.
There is no bonus or any variable remuneration
For more information about Vale's compensation access our Reference Form 2022
Compensation Discussion and Analysis
The proposed 2022 total compensation of R$ 261,144,411 (two hundred and
sixty-one million, one hundred and fourty-four thousand, four hundred
and eleven reais), free of social charges, includes statutory members of
the Executive Board, members of the Board of Directors, Fiscal Council
and Advisory Committees. The proposal for 2022 was higher than the
actual compensation for the year 2021 due to the compensation of the
Executive Board, as detailed below:
-
LTIs: refer to share-based, Matching and VSP programs, which are
provisioned monthly based on monthly partial results. The VSP result
calculated for the closing of 2021 was low (25% for the 2018
cycle and zero for the 2019 and 2020 cycles), which generated a
reversal of previous provisions and a negative accounting result for
2021. The impact of this result, when compared to the reach predicted
in the target/fair value, was R$ 68 million.
-
Fixed compensation: the increase is mainly due to the entry of new
executives into the Company's statutory Executive Board, impacting
fixed fees and private pension.
-
Others: mainly comprised of annual bonuses, termination of office and
other payments to the Executive Board, as well as the remuneration of
Boards and Committees.
Fixed compensation
In 2021, total fixed compensation was 15% higher than in 2020 and
1% higher than in 2019, in line with the number of active executives in
each of the years. In the same year, the average base fee per executive
was 12% lower than in 2020 and 14% lower than in 2019, which reinforces
the greater focus given by the Company on long-term variable
compensation.
For 2022, the total fixed compensation forecast is higher than the
compensation made in 2021 due to the greater number of executives and
merit adjustments made in January (considering only a few executives and
a percentage below inflation). However, the average base fee per
executive is in line with that of 2021 (increase of 3%)
| Annual Fixed Compensation (R$) |
| Executive Board (excluding social charges) |
2019A (cash) |
2020A (cash) |
2021A (cash) |
2022F (accrual) |
| Nº of members receiving compensation |
6.91 |
6.35 |
8.61 |
10.00 |
| Salary or pro-labore |
24,913,436 |
22,404,890 |
26,723,539 |
32,078,723 |
| Average salary or pro-labore |
3,605,418 |
3,528,329 |
3,103,779 |
3,207,872 |
| Direct and indirect benefits |
8,130,546 |
6,730,674 |
6,638,797 |
7,862,528 |
| Total |
33,043,982 |
29,135,564 |
33,362,336 |
39,941,251 |
Variable compensation
In 2019, as part of the response to the tragedy in Brumadinho, the Board
of Directors suspended the payment of short and long-term variable
compensation to its executives.
In 2020, with the evolution of the reparation program and the progress
of investigations, the Board resumed payments, retroactive to the year
of suspension, for executives who were not involved in the
investigations into the dam failure. Thus, payments suspended in 2019
were paid in 2020, cumulatively with the amounts due for payment this
year. For analysis purposes, this item provides, in addition to the
amounts actually paid each year, the amounts that would have been due
for payment each year if the suspension had not occurred (variable
“standardized” compensation). Additionally, in 2020, for the first time,
the payment of the “virtual dividends” of the Matching program took
place.
For 2022, in addition to the regular programs and the “virtual
dividends” of the Matching Program, for the first time, the “virtual
dividends” referring to the VSP Program are computed.
Vale's executive compensation mix has been adjusted in order to give
more focus and relevance to long-term, share-based variable compensation
programs. The objective is to increase the alignment with the practices
of the international executive market and the interests of shareholders.
The move is also an offshoot of the annual executive performance
evaluation process.
Variable compensation has increased as a result of: (i) the adequacy of
the executive compensation mix, with increasing focus on long-term,
share-based variable installments; and (ii) inclusion of the payment of
virtual dividends in the Matching and VSP Programs.
The increase seen in the last two years (2021 and 2022), in addition to
reflecting the greater weight of share-based variable compensation in
the compensation mix, also results from the increase in the price of the
dividend / JCP distributed by the Company to its shareholders in 2021
and the inclusion of virtual dividends in the VSP Program, in addition
to the increase in the number of executives.
Below the average variable compensation, considering only the variable
compensation programs (Annual Bonus, Matching and VSP Programs) and the
number of executives in each year:
Evolution of Executive Variable Compensation
Increase in line with the adjustment of the executive compensation mix,
focusing on long-term variable installments.
For further information and details about Vale's compensation
practices, click
here.
Annual bonus targets
2021 Bonus Panel composition
-
Collective targets may have a global scope or be adjusted for each
member of the Executive Board, taking their performance at the Company
into consideration, with the exception of the People goal.
-
The results of all targets are converted into points, using a scale
which establishes:
-
0.50 of a point as the minimum result for eligibility to receive
the annual bonus;
- 1.00 point as an expected result for the year;
-
1.50 points as the maximum result eligible for the annual bonus
payment.
Results of the 2021 Goals Panel
Results in relation to targets for Operational Risk Management,
Sustainability, People, Productivity and Adherence to the VPS Roadmap
exceeded the established expectations, while Health targets were fully
achieved in most business areas. These results are essential in the
Company advancing with its ambitions, in particular, the ambition to
become an industry reference in safety.
Global EBITDA-Current Investment (adjusted) was below expectations for
the year, impacted by lower volumes and higher unit and freight costs.
This impact was partially offset by higher overall premiums, commercial
initiatives in pellets, and lower execution in Current Investments.
Results for Safety targets were below expectations, with fatalities
occurring throughout the year penalized across all departments, with the
exception of Base Metals.
2022 Annual Bonus Panel
In 2022, the company intends to continue encouraging mutual
collaboration based on the key behavior “Responsibility for the Whole”,
through a model constituted with greater weight in collective goals. In
addition, the focus and relevance are maintained on the critical
objectives related to Safety, Risk and Sustainability, defined after
Brumadinho, so that Vale pursues its ambition to become a reference
company in Safety.
As a financial goal, in addition to maintaining “(adjusted) EBITDA” on
its dashboard, the “Fixed Expenditure” indicator was included, to
further reinforce Vale's direction in creating and sharing value.
In order to continue advancing in the implementation of the Vale
Management Model – VPS, this goal remains on the panel, aiming at
greater stability, safety and reliability of our assets and leveraging
the desired cultural transformation.
Finally, and in line with the Diversity, Equity and Inclusion strategy,
we remain committed to fostering a diverse pipeline at Vale, increasing
the total number of women and the number of black people in leadership
positions.
Policy
Executive Directors Compensation Policy
