The long-term incentive programme is designed to promote the
collective performance of Executive Management and align the interests
of executives and shareholders. It further ensures a balance between
short-term achievements and long-term thinking. It may result in a
maximum payout per year equal to 24 months' fixed base salary plus
Each year in January the Board decides whether to establish a
long-term incentive programme for that calendar year. The long-term
incentive programme is based on the degree of achievement of the
planned economic value creation and on the degree of achievement of
the planned level of sales growth.
Aligned with Novo Nordisk's long-term financial targets, the
calculation of economic value creation is based on reported operating
profit after tax reduced by a weighted average cost of capital
(WACC)-based return requirement on average invested capital. For
executives the LTIP operates with a yearly maximum share allocation
per executive equal to 18 months' fixed base salary plus pension
contribution for the chief executive officer and 13.5 months’ fixed
base salary plus pension contribution for the executive vice
presidents. The Board of directors determines at the beginning of each
year the maximum allocation per participant for the given year.
Further, the Board of Director identifies a number of significant
research and development projects and key sustainability projects and
the allocation per executive may, subject to the Board's assessment,
be reduced in the event of lower-than-planned performance on these
research and development projects and key sustainability projects.
Targets for non-financial performance related to sustainability and
research and development projects may include achievement of certain
milestones within set dates. Finally, the Board of Directors
determines the expected average annual sales growth which shall be
used as basis when finally calculating the size of the allocation at
the end of the three-year vesting period given that the allocation can
be reduced or increased by up to 30% depending on the average sales
growth in the three-year vesting period.
Once the allocation per executive has been approved by the Board,
the total cash amount is converted into Novo Nordisk B shares at
market price. The market price is calculated as the average trading
price for Novo Nordisk B shares on Nasdaq Copenhagen in the open
trading window following the release of financial results for the year
prior to the relevant performance year, i.e. in the open trading
window following immediately after the Board’s approval of the
The shares are allocated to the executives according to their base
salary as per 1 April in the performance year.
The shares allocated per executive for a given year will be locked
up for three years before they are transferred to individual
executives. If an executive resigns during the vesting period, his or
her allocated shares will be removed. At the end of the vesting period
the allocation of shares will be reduced or increased by up to 30%
depending on whether the actual average annual sales growth in the
three-year vesting period is lower or higher compared to the expected
average annual sales growth. The allocation cannot exceed 24 months’
fixed base salary plus pension contribution for the chief executive
officer and 18 months’ fixed base salary plus pension contribution for
the executive vice presidents.
In the vesting period the market value of the allocated shares per
executive will change dependent upon the development in the Novo
Nordisk B share price, aligning the interests of the executives with
those of shareholders.
No dividends are paid on allocated shares in the vesting period and
the allocated shares are administered as part of Novo Nordisk’s
holding of treasury shares.
Novo Nordisk continuously covers its obligations under the long-term
incentive programme through its holding of treasury shares.
Long-term incentives are subject to recovery or
"claw-back" by Novo Nordisk, provided the remuneration was
paid on the basis of data which proved to be manifestly misstated.
Claw-back in relation to the long-term incentives is possible up to 12
months after the release of the shares to the executives (i.e. four
years after allocation).