Compensation
As a global company, Vale knows that attracting the best professionals, retaining talents,
motivating and engaging professionals who hold strategic positions, especially Executive Officers, Board
of Directors, and Committees, is a critical challenge for the Company's success at all times.
Therefore, the market is always the benchmark, within a global competition perspective, and Vale thus
considers, for purposes of determining the compensation of its management, the compensation policies and
practices adopted by the top mining companies, as well as other large global companies from other
industries.
Therefore, the annual compensation proposal is prepared on the basis of these market
principles, also taking into account the responsibilities of each member, the time devoted to their
duties, their professional competence and reputation and the value of their services in the market.
It also considers the market practices in the localities where the Company operates, its
alignment with the short and long-term strategy, its return to shareholders and the sustainability of
its business. Such proposal is prepared with the support of the
People,
Compensation and Governance Committee,
composed of 4 members of the Board of Directors, one of them independent and
specialized in corporate governance and another is an external member specializing in management and
consulting experience in human resources who makes recommendations to the Board of Directors regarding
the annual global compensation of the Executive Officers. The Board of Directors deliberates and submits
the proposal for approval, in an aggregated manner, at the Annual Shareholders' Meeting, under the
provisions of Article 10, Paragraph 4, of the Company's Bylaws. Once the aggregate compensation has
been approved, it is the responsibility of the Board of Directors, with the support of the Personnel and
Governance Committee, to distribute it among the Management.
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 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 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:
In addition to the short-term compensation, the long-term compensation will include ESG
indicators, to further reinforce Vale’s concern with health and safety and ESG themes.
Starting in 2020, part of the long-term variable compensation will include 10%
of Health and Safety targets and 10% of Sustainability targets, showing Vale's commitment and focus
on long-term sustainable development and achieving excellence in issues related to Environment, Social
and Governance practices (ESG).
The Health and Safety metrics are intended to promote the effective management of high
potential injuries, so that Vale can address the risks more effectively in addition to monitoring the
actual frequency and severity of accidents. This marks a critical shift in the focus of indicators from
a reactive to a proactive approach.
One of Vale's Safety Indicator is High Potential recordable Injuries
(N2)[1]. It is important to highlight that in the last decade, non-serious injuries and
fatalities, in workplace, have decreased but fatal injuries have decreased at a much slower rate. The
precursors of Fatalities and Lives changed exist in most organizations and can be identified and
measured. New paradigms need to be addressed to influence the improvement of the results of changed
lives and fatalities. During the case-by-case analysis of all incidents, a recurrence of systemic themes
was identified by which a percentage of incidents initially reported as non-severe had potential for
something significantly worse. Thus, an evaluation began not only of the actual severity, but also of
the potential of accidents.
To manage serious injuries and fatalities more effectively it is important for Vale to be
able to measure more than just the frequency and severity of these cases.
We must effectively measure our exposure to the types of incidents that can generate
serious injuries and fatalities. This marks a critical shift in focus from lagging indicators to leading
indicators for a more proactive approach to preventing serious injuries and fatalities.
The Sustainability metric is based on Vale’s 2030 commitments that encompass: (i)
reduction of greenhouse gas emissions in line with the Paris Agreement; (ii) 100% of clean energy
self-generation globally; (iii) reduction of new water collection by 10%; (iv) recovery and protection
500,000 ha of degraded land beyond Vale’s boundaries; (v) socioeconomic contribution to health care,
education and income generation (vi) 100% of ESG Gaps completed.
[1]N2 – Number of Incidents that
has real severity classified as recordable (Medical Treatment, Work Restriction and Lost time -
according to OSHA) and with fatality potential (High Potential).
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 Named Executive Officers
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.
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
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 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).
For
more information about Vale's compensation access our Reference
Form 2020
Compensation Discussion and Analysis
The compensation proposed for the year 2021 sums up R$ 270,154,462, including charges, 34%
and 39% higher than the compensation proposed and executed in 2020, respectively. The compensation
proposed for the year 2021 sums up R$ 202,759,896, excluding charges, 12% and 15% higher than the
compensation proposed and executed in 2020, respectively, mainly due to the following factors related to
the Executive Board:
- Based on the Company’s organizational readjustment, aiming at greater alignment with the company’s
strategy, equaling the full level of responsibility and accountability, it was considered for the
2021 proposal the forecast of 10 positions of statutory directors in comparison with the forecast of
7 positions for statutory directors provided for in the 2020 budget;
- Increased amount for the short-term variable compensation program (Annual Bonus) due to the results
of the targets with payment in the year 2021;
- Increased amount for the share-based variable compensation programs (Matching and VSP), mainly
impacted by Vale’s share price increase;
- The proposal that demonstrates the charges considers the incidence of social security charges on the
share-based compensation programs (Matching and VSP), which was suspended at the end of 2017, based
on the provisions of the Brazilian Labor Reform, which attributed the characteristic of exempt
premium . In 2020, after the legislative evolution of the topic, in particular the revocation of MP
905/2019, the Company, supported by external opinions, concluded that the exemption was not
applicable, with retroactive payment and a change in the procedure for future payments being
recommended. Thus, for 2021, charges were budgeted for both the current cycles (2021) and for the
cycles already closed and paid in previous years (retroactive to 2018, 2019 and 2020.
Named Executive Officers Compensation Discussion and Analysis
Fixed compensation
2020 budget versus 2020 actual
The monthly base fee paid in 2020 was 17% lower than expected for 2020, due to (i)
considered, for the purposes of the 2020 proposal, the premise that the Base Metals Executive Director
would be a statutory position, however, the said position was made effective as non-statutory, and (ii)
budget referring to a former Executive Officer with expected departure in the 3rd quarter of 2020 and
effective termination in the 2nd quarter, generating savings.
As for the total Fixed Compensation, the amount paid in 2020 was 16% below the provided
for the same year.
| Compensation estimate for 2020 vs. 2020 actual (R$) |
2020E
|
2020A
|
| No. of members receiving compensation |
7.51 |
6.35 |
| Salary or pro-labore |
27,050,295 |
22,404,890 |
| Salary or average pro-labore |
3,601,903 |
3,528,329 |
| Direct and indirect benefits |
7,706,654 |
6,730,674 |
| Others |
5,410,059 |
4,480,978 |
| Total including charges |
40,167,008 |
33,616,542 |
| Total excluding charges |
34,756,949 |
29,135,564 |
Last three years' analysis and 2020 expected fixed compensation
The total fixed compensation paid in 2020, excluding charges, was 12% lower than in 2019
and 6% higher than in 2018, in line with the number of active executives in each of these years.
When comparing the average base fee per executive, 2020 was 2% lower than 2019 and 3%
higher than 2018, which demonstrates a flat behavior of the average number of fees paid by the Company
to executives.
The basic fee expected for payment in 2021 was 29% higher than that actually paid in 2020
due to the higher number of executives budgeted for 2021. However, when comparing the average base fee
per executive, the budget for 2021 shows a 14% reduction in average, in view of the recent
organizational readjustment and forecast of hiring new executives throughout 2021.
Variable compensation (short- and long-term)
In 2019, as part of the crisis response, the Board of Directors made the decision to
suspend the variable compensation of its executives, which was the correct decision considering the
truly exceptional circumstances. As Vale evolves with the reparation program and the investigation has
progressed, in 2020 the Board resumed variable compensation payments for executives who were not
involved in investigations on the dam rupture.
The statutory officers who were removed from the Company for legal reasons after the
Brumadinho dam rupture remain with their variable compensation suspended until all legal matters are
officially settled.
Specifically, for long-term variable compensation (Matching and VSP), in 2020 the
executive compensation mix was adjusted to give more focus and relevance to these components, aiming at
greater alignment to the international executive market and proximity to shareholders’ interests. In
addition to bringing Vale’s compensation profile closer to the international market, the adjustment in
the compensation mix also came as one of the developments of the annual executive performance evaluation
process.
Annual bonus targets
The 2020 Annual Bonus Goals Panel had 30% metrics related to Risk Management and HSEC
(Health, Safety, Environment and Communities). Vale has segregated the Health and Safety goal from the
Risk Management goal, in line with the conservative approach to monitoring the theme.
It is important to highlight that, as of 2020, Vale adjusted the goals of the areas of
Health, Safety, Geotechnics, Reparation and Compliance, removing the financial and production results of
the panel, leaving executives and other employees of these areas fully involved in the mission of
reducing and mitigating operational risks without the impact of financial results.
Results of the 2020 Goals Panel
As for financial indicators, in 2020 the EBTIDA-Sustaining without Ferrous and Base Metals
adjustments reached its maximum result, while coal was zeroed due to lower prices and volumes. Adjusted
EBITDA-Sustaining only scored for the Base Metals business, but below expectations; and for other
business, it was not reached.
The Health indicator (5%) was achieved in its entirety for most businesses in 2020, but
safety (5%) was zeroed out for all Vale executives, given the four fatal incidents that occurred in
2020.
The Indicators of Operational Risk Management and Low Carbon exceeded the established
target range, indicating that we are on the right track according to plans initially outlined by Vale.
2020 estimate versus 2020 actual
The variable compensation (composed of the Annual Bonus, the Matching and VSP programs and
the due charges) actually paid in 2020 was in line (less than 1% above) with the variable compensation
expected for this same year.
| Compensation estimate for 2020 vs. actual in 2020 (R$) |
2020E |
2020A |
| Annual bonus |
36,710,046 |
36,629,008 |
| Share-based Compensation (VSP) |
15,965,097 |
16,097,816 |
| Share-based Compensation (Matching) |
29,463,312 |
29,894,388 |
| Others |
7,671,924 |
8,241,471 |
| Termination of position |
35,453,358 |
39,473,869 |
| Total including charges |
130,170,677 |
131,804,890 |
| Total excluding charges |
117,591,813 |
122,095,081 |
Analysis of the last three years and variable remuneration expected for 2021
The variable compensation paid in 2020 increased due to the fact that, in 2020, payments
were concentrated on both the variable remuneration suspended in 2019 and the one due in 2020.
As for the amount budgeted for the year 2021, when compared to that realized in 2020, the
increase in the Annual Bonus (14%) is due to the results obtained above expectations, both global /
collective, as well as individual; the increase in the Matching and VSP programs (44%) is mainly due to
the impact of the increase in Vale’s share price; and the 6-fold increase in the amount of INSS charges
(represented in “others”).
The incidence of social security charges on share-based compensation programs (Matching
and PAV) is considered, which was suspended in late 2017, based on the Brazilian Labor Reform provision,
which attributed the characteristic of exempt premium. In 2020, after the legislative evolution of the
topic, in particular the revocation of MP 905/2019, the Company, supported by external opinions,
concluded that the exemption was not applicable, with retroactive payment and a change in the procedure
for future payments being recommended. Thus, for 2021, charges were budgeted for both the current cycles
(2021) and for the cycles already closed and paid in previous years (retroactive to 2018, 2019 and
2020).
Variable compensation (R$) - Statutory Officers
|
2018A |
2019A ¹ |
2020A |
2021E |
| Annual bonus |
31,237,935 |
- |
36,629,008 |
41,700,179 |
| Share-based Compensation (VSP) |
9,704,915 |
25,676,497 |
16,097,816 |
23,586,492 |
| Share-based Compensation (Matching) |
9,917,159 |
- |
29,894,388 |
42,555,299 |
| Others |
14,983,080 |
3,885,703 |
9,709,809 |
71,075,032 |
| Termination of position |
68,346,722 |
17,899,948 |
39,473,869 |
17,945,244 |
| Total including charges |
134,189,811 |
47,462,149 |
131,804,890 |
196,862,246 |
| Total excluding charges |
119,206,731 |
46,335,066 |
122,095,081
|
141,652,392 |
| Variable Compensation Normalized (R$) - Statutory Officers |
2018A |
2019A |
2020A |
2021E |
| Annual bonus |
31,237,935 |
17,580,362 |
19,048,646 |
41,700,179 |
| Share-based Compensation (VSP) |
9,704,915 |
25,676,497 |
16,097,816 |
23,586,492 |
| Share-based Compensation (Matching) |
9,917,158 |
7,614,066 |
22,280,322 |
42,555,299 |
| Others |
14,983,080 |
7,401,776 |
6,193,737 |
71,075,032 |
| Termination of position |
68,346,722 |
17,899,948 |
39,473,869 |
17,945,244 |
| Total including charges |
134,189,810 |
76,172,650 |
103,094,390 |
196,862,246 |
| Total excluding charges |
119,206,730 |
72,081,219 |
96,769,063 |
141,652,392 |
¹ Based on compensation
executed in 2020.
Virtual Share Program
The VSP was submitted for approval at the Shareholders’ Meeting so that, as from the 2021
concession, it will be changed to a Real Share Program, with the payment of virtual dividends on the
number of shares units that the executive will be entitled to as an award at the end of the cycle, after
the application of the performance factor - TSR and ESG.
The proposed change strengthens the feeling of ownership and the engagement of the
participating executives, in addition to aligning their actions with the interests of shareholders. The
plan will be renamed to “Vale’s Stock Plan”. For documents related to the plan, visit
www.vale.com/investors
2021 Annual Bonus Panel
For 2021, the Company gives a greater focus on targets related to critical objectives, so
that Vale can reach the defined aspirations, in order to reinforce a more integrated performance among
areas. In this sense, the 2021 Bonus Panel included the collective indicators related to Cultural
Transformation, Productivity and Vale Management Model (VPS).
In addition, the EBITDA – Sustaining Indicator without adjustments was removed from the
panel, remaining as a Payment trigger and a Spending Limit. We reiterate that health, safety,
geotechnics, repair and compliance areas do not have the financial and productivity results in their
goal panel.
Policy
Executive Directors Compensation Policy
