Annual report 2014

Compensation of Directors and Officers

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Corporate Governance

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3.3. Compensation of Directors and Officers

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General

The compensation policy for Corporate Officers is devised by the

Corporate Governance, Nominations and Remuneration Committee and

approved by the Supervisory Board.

Its purpose, in both the short-term and long-term, is to better align the

compensation of Corporate Officers and executives with shareholder

interests. With this in mind, close attention has been paid to three major

elements:

the quantitative balance of the compensation, with attention

given to variable and long-term factors to contribute to the group’s

development and growth;

the quality of the criteria attached to setting the annual variable

portion. These criteria are based on both quantitative and qualitative

targets proposed by the Corporate Governance, Nominations and

Remuneration Committee and set by the Supervisory Board, taking

particular account of the issues defined in the Company’s corporate

social responsibility (CSR) policy; and

the group’s long-term development, through the grant of performance

shares subject to internal criteria that differ from those applied to the

variable portion of compensation, and external criteria to strengthen

the alignment of management interests and those of shareholders.

This policy is supported by the setting of compensation for the

management of the major subsidiaries, with distinct weightings and

criteria adapted to their operations.

Lastly, in accordance with the governance rules applied within the group,

Corporate Officers and executives waive the payment of Directors’

attendance fees in subsidiaries in which they hold Director positions.

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Compensation Elements

Fixed Portion

Each year, upon the proposal of the Corporate Governance, Nominations

and Remuneration Committee, the Supervisory Board sets the

compensation of each Corporate Officer, taking into account his or her

personal situation and comparative studies carried out by independent

firms.

Annual Variable Portion

This is based on precise and adjusted quantitative and qualitative

criteria. In order to provide dynamic support to the group’s efforts, the

weight of the quantitative and qualitative criteria respectively applied

to the annual variable portion of compensation is set by the Corporate

Governance, Nominations and Remuneration Committee as a reflection

of the importance of and progress made in strategic efforts.

Quantitative Criteria

These are based on the financial indicators that the Corporate

Governance, Nominations and Remuneration has deemed most relevant

for the assessment of the financial performance of the group and its major

subsidiaries, whose business is based largely on the same economic

model: the sale of content and services. These financial indicators are

adjusted net income of the group and operating cash flow. They allow for

the accurate measurement of the performance and income recorded by

each business unit.

Qualitative Criteria

These are based on a series of priority actions assigned to corporate

management. These priority actions are defined as a function of strategy

at group level and the action plans approved for each business unit.

These criteria allow assessment of the capacity of officers to implement

and complete planned sales or acquisitions, undertake the necessary

strategic realignments in an increasingly competitive environment, and

identify new directions with regard to offerings of content and services.

The priority actions for Vivendi SA’s corporate management in 2014 were

as follows: (i) finalize the separation of SFR from the Vivendi group under

the best possible conditions; (ii) prepare the governance and management

of each entity; (iii) contribute to the collaboration between Vivendi’s

subsidiaries and; (iv) develop and seek certification for action taken on

the group’s societal challenges.

Lastly, these qualitative criteria take into account the extent of the

group’s commitments to corporate social responsibility (CSR): promoting

cultural diversity, knowledge sharing, protecting and empowering young

people, and the protection of personal data. CSR activities are certified

by an independent specialized agency.

Weighting of the Variable Portion

Until June 24, 2014, the rate was 120% of fixed compensation if the

targets were achieved, with a maximum of 200% if the targets were

substantially exceeded. As from June 24, 2014, these rates were reduced

to 100% and 150%, respectively. The factors of the variable portion are

based on the fulfillment of precise, demanding and verifiable criteria.

These include financial targets and implementing priority initiatives.

Given the importance of non-financial efforts to the group in 2014, the

weighting given to financial criteria was set at 50% (30% linked to the

group share of adjusted net income and 20% linked to operating cash

flow), and the weighting given to priority initiatives was 50%, distributed

among several qualitative criteria (see above) and at differentiated

percentages, including 5% linked to corporate social responsibility (CSR).

Grant of Performance Shares

Purpose

Annual compensation is supplemented by a deferred factor in the longer-

term objectives: the granting of performance shares, which vest subject

to internal and external performance criteria applicable to both corporate

management as well as all other beneficiaries. The Supervisory Board,

upon the recommendation of the Corporate Governance, Nominations and

Remuneration Committee, approves criteria for the grant of performance

shares and sets the limits (threshold, target and maximum) for calculating

the level of performance to be achieved, to determine whether the

granted shares are to vest completely or partially.

To better assess long-term performance, internal financial criteria

different from those used in setting the variable portion of the

compensation of senior management, and external criteria to take into

account the alignment of the interests of management with those of the

shareholders, have been applied.

For corporate management and the senior officers of Vivendi SA, the

internal indicator (with a weighting of 70%) is the group’s EBITA margin

(adjusted operating income).

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Annual Report 2014