The departure of former CEO Van Boxmeer will cost Heineken millions
When Jean-François van Boxmeer retired as CEO of Heineken in 2020 after fifteen years, he was given more than the proverbial book voucher and bottle of wine. The Belgian top executive received a severance package of 5.5 million euros in total, discovered The Financial Times in the annual report of the brewer.
It is a remarkably high amount. Severance payments and severance pay have been restricted at Dutch listed companies for years. Why did Van Boxmeer receive such a generous golden handshake? And how exceptional is his compensation?
Under the leadership of Van Boxmeer (59), who joined Heineken as a trainee in 1984, the company grew into the second largest brewery in the world. While the turnover was 11 billion euros when he took office in 2005, in 2019 more than 28 billion came in.
Last year Van Boxmeer thought it was “a logical” moment to hand over the scepter to a “new generation”, by which he meant his successor Dolf van den Brink. As a farewell payment, Van Boxmeer received an annual salary – an amount of 1.25 million euros – and another 4 million euros in bonuses, paid in cash. In addition, he can still claim long-term incentives until 2022.
The total amount that this will yield Van Boxmeer amply exceeds the standard from a set of agreements to which the business community committed itself in 2003. This code, drawn up by the Tabaksblat Committee, states that a departing director may receive a maximum of one year’s salary. So no bonuses and other perks. And quite different from usual: departing directors could often count on several annual salaries, or continued payment until their retirement.
Deviating from the code is allowed, provided a company explains why. That is what Heineken has done. Van Boxmeer’s contract contained agreements about his severance pay, can be read in the annual report, and that contract already existed when the remuneration code came into effect in 2003. Heineken therefore had to exceed the standard in its own words.
The fact that Van Boxmeer apparently had comfortable agreements in his contract is typical for Heineken, says remuneration advisor Hein Haenen of consultancy firm Focus Orange. “The company has traditionally taken good care of successful executives.”
Initially, Heineken was still frugal, especially in the time of Freddy Heineken, who was director until the late 1980s. But as the company internationalized, the brewer “catched up quickly,” Haenen says. “You get bigger and you start competing directly with merged companies like AB InBev. Then you also have to pay at that level.” Result: Van Boxmeer saw his total remuneration increase sixfold between 2005 and 2014.
Heineken is not the only Dutch multinational that had to raise salaries to compete internationally, but it is pretty much the only group that until Van Boxmeer still worked with such generous severance payments. “You only see this in very exceptional cases,” says Haenen. “And then companies use the same argument as now: sorry, it was in the contract.”
The fact that high departure premiums are no longer common is also due to investors. Haenen: “They say: you can pay for performance, but we are not going to serve cake when someone leaves.”
Van Boxmeer’s compensation is indeed a ‘very striking outlier’, says director Rients Abma of Eumedion, the interest group for institutional investors. “The vast majority of Dutch listed companies adhere to the code.” This is also apparent from the most recent annual report of the committee that monitors compliance: 92 percent of companies gave departing directors no more than one year’s salary. Incidentally, there are no sanctions for companies that violate the guidelines.
In tax terms, Van Boxmeer’s severance package also has consequences for Heineken. The Tax and Customs Administration finds 559,000 euros still a reasonable amount for a departure premium, anything above that is “excessive” and falls under a tax rate of 75 percent.
Heineken can therefore expect a substantial additional tax assessment, not only for the departure premium, but also for Van Boxmeer’s long-term bonuses. The group has set aside a total of 7 million euros. The tax will be lower for current CEO Dolf van den Brink. He will receive a maximum of one year’s salary when he leaves, according to the annual report.