The Company’s compensation strategy, since 2019, when the Long-Term Incentive Plans (ILP) were approved at the Shareholders’ Meeting, is to concentrate most of the compensation package in variables that are subject to the achievement of long- and short-term performance goals. These variables have goals adhering to Oi’s business plan, thereby intending to align the interests of management and other executives with the mission, the strategy and the interests of shareholders. The definitions and implementation of the Company’s compensation strategy are monitored and overseen by the Board of Directors through its People, Nomination and Governance Committee.
THE COMPANY’S COMPENSATION STRATEGY AIMS TO:
- Attract, retain, and encourage the executives’ high performance for the development and execution of the company’s business strategies;
- Provide competitive compensation in relation to that of comparable markets;
- Align the interests of the company’s management with that of shareholders and stakeholders; and
- Be simple, transparent and easy to understand.
At the same time, the compensation strategy is adequate for the Company’s current situation, as it is undergoing a profound transformation process, which requires flexibility to attract and retain appropriate talents in order to achieve the goals and terms established in the Strategic Plan and maintain the efficient execution of the Company’s business. Therefore, it seeks to adapt to the fact that Oi faces challenges recognizably greater than the market’s average.
1 – BOARD OF DIRECTORS COMPENSATION:
The company’s governance structure, with no controlling shareholder, and it’s status as a company undergoing judicial reorganization, requires a Board of Directors working close to the management and with a prominent role in defining and monitoring the strategy’s execution. Due to these conditions, the Board members are required to dedicate more time than the average observed in the market.
The members of the Board of Directors and of the respective Advisory Committees receive fixed monthly fees. Additionally, to align the interests of Board members with that of the Company’s shareholders and adjust the compensation of the Company’s Board of Directors to that of the comparable market, we formulated a share-based long-term incentive plan for the Board of Directors (Stock Granting Plan to Board of Directors).
1.1 – FIXED COMPENSATION:
The board members’ fixed compensation includes fees paid on a monthly basis, which vary according to the role performed by the member at the Board and the Committees.
The members of the Board of Directors making up the advisory committees receive an additional fixed amount every month for the activities performed at said committee. This additional payment is based on the additional percentage paid by companies with size and capital structure similar to those of Oi, in line with the Company’s compensation strategy.
1.2 – VARIABLE COMPENSATION – LONG-TERM INCENTIVE:
The share-based long-term incentive plan for members of the Board of Directors aims at granting shares to board members as part of their compensation, seeking to promote high engagement and commitment levels for the achievement of the Company’s strategic goals and to adjust the compensation of Oi’s Board of Directors to that of the comparable market, without cash consumption. However, the implementation of the approved plan was suspended by court decision until the Company’s judicial recovery is concluded.
The right to receive portions related to the plan is subject to performance conditions and to conditions bound to the Company’s Board of Directors during the period between the grant date and date of transfer of shares to the beneficiaries (vesting periods).
The share-based long-term incentive plan for members of the Board of Directors is managed by the Board itself. However, this prerogative is only applicable to possible cases not covered herein. All items of the Plan that are defined and approved at the Extraordinary Shareholders’ Meeting may only be amended after new submission to the Board.
2 – STATUTORY EXECUTIVE BOARD COMPENSATION:
The Company’s executive compensation strategy aims to accomplish the objectives considered relevant by its shareholders, that is, attract and retain talents necessary, and align their interests to the execution of Oi’s long-term strategy. Thus, it is intended to provide competitive gains in relation to that of the market, with a relevant portion of the total linked to performance, whether by the achievement of corporate and individual goals established on an annual basis, as well as the medium and long-term goals of the share-based program.
Oi’s compensation strategy is to position the total compensation in the third quartile of the comparable market by means of a more aggressive approach to variable portions, especially the share-based long-term incentive, as shown in the following chart:
2.1 – FIXED COMPENSATION:
Statutory Officers’ fixed annual compensation includes 12 monthly payments and may be adjusted according to the results of compensation researches conducted on a regular basis. Adjustments will be subject to evaluation by the Human Resources Department and the Board (by means of its People, Nomination and Governance Committee), aiming at maintaining the Company’s competitive strategy.
2.2 – VARIABLE COMPENSATION:
Variable compensation paid to Statutory Officers is based on long- and short-term incentive programs, according to the detailed information as follows:
2.2.1 – SHORT-TERM INCENTIVE (“BONUS”) – STI:
It includes the Company’s annual profit sharing, based on the achievement of performance goals established through measurable indicators and targets arising from the business plan and the annual budget approved by the Board of Directors.
This incentive aims to encourage and pay statutory officers bonuses based on the results obtained with the year’s business plan, recognize their individual performance, and ensure competitivity in relation to the market.
Besides recognizing and rewarding executives for their performance, the short-term incentive program is a tool to ensure focus on key results indicators that guarantee excellence in the execution of the business plan.
The program provides that, annually, after the approval of the business plan and the budget, the key results, financial and/or operational excellence indicators get to be defined and measured, for the purposes of remuneration.
2.2.2 – LONG-TERM INCENTIVES (“SHARE-BASED COMPENSATION”) – LTI:
Similarly to the Stock Granting Plan to Board of Directors, the share-based long-term incentive plan for executives (Stock Granting Plan to Executives) aims to grant shares to executives, seeking to promote high engagement and commitment levels for the achievement of the Company’s strategic goals, thereby ensuring alignment with the interests of the Company and its shareholders in the medium and long term. At the same time, it allows the Company to offer competitive compensation to executives in relation to the comparable market, with the smaller Company’s cash consumption.
3 – FISCAL COUNCIL COMPENSATION:
3.1 – FIXED COMPENSATION:
The Fiscal Council’s compensation consists exclusively of fixed monthly fees, aiming at remunerating each member within the scope of services assigned to the Company’s Fiscal Council. Alternate members will only be remunerated when they replace sitting members due to their vacancy, impediment or absence. Oi proposes that the compensation of the members of the Fiscal Council be a percentage of the fixed average compensation attributed to Statutory Officers. The compensation of the members of the Fiscal Council is set by the Shareholders’ Meeting that elects said members, pursuant to paragraph 3 of article 162 of Brazilian Corporate Law.
3.2 – VARIABLE COMPENSATION:
The members of the Fiscal Council are not entitled to variable compensation.
4 – COMPENSATION OF THE COMPANY’S MANAGEMENT AND THE MEMBERS OF THE FISCAL COUNCIL FOR THE 2022FY:
The Company’s Management approved, for the current fiscal year, at the Annual Shareholders’ Meeting held on April 29, 2022, the overall annual compensation for management and members of the Fiscal Council in the total amount of eighty-four million, forty-seven thousand, eight hundred and sicty-eight reais and sixty-four centavos (R$84,047,868.64), divided as follows:
(i) up to nineteen million, three hundres and ninety-two thousand, nine hundred and sicty-eight reais and twenty-eight centavos (R$19,392,968.28) for the Board of Directors (*), distributed as follows:
(ii) up to sixty-three million, six hundred and fifty-two thousand, one hundred and ninety reais and thirty-six centavos (R$63,652,190.36) (*) for the Statutory Executive Board, distributed as follows:
(a) up to thirty-five million, five hundred and seventy-four thousand, four hundred and fourty-seven reais and seventy four centavos (R$35,574,447.74) (*) as a recurring portion of the statutory officers’ compensation package. This portion includes fixed compensation, long- and short-term incentives and benefits:
(b) up to twenty-six million, six hundred and eighty-three thousand, five hundred and eighty-two reais and eighteen centavos (R$26,683,582.18) (*) as an extraordinary bonus due to Divestment Projects. It is important to note that the aforementioned award was included in the global amount approved by the shareholders at the Annual General Meeting of 2021 (“AGM21”). However, as the Company had clarified on the occasion of the AGM21, that the payment of the extraordinary award was conditioned to the value measured and the cash-in of the financial resources of the Divestment Projects. Thus, considering that the payment of the award has not yet taken place – due to the postponement of the closing of the transactions, previously scheduled for the end of 2021 and now scheduled for the second quarter of this year, after obtaining the necessary regulatory approvals -, it was included again in the global budget proposal for 2022 the amount currently foreseen for the payment of the award mentioned above.
(c) the value of one million, three hundred and ninety-four thousand, one hundred and sixty reais and fourty-four centavos (R$1,394,160.44) related to the termination carried out in Jnauary, 2022.
(iii) one million, two thousand and seven hundred and ten reais (R$1,002,710.00) for the Fiscal Council (*), corresponding to the minimum amount set forth in paragraph 3 of article
(*) Data provided in accordance with the Compensation Policy planned for 2022, considering CVM Board’s guideline, i.e. employers’ payroll charges are not included in “benefits of any nature” referred to in article 152 of Brazilian Corporate Law, excluding the overall or individual compensation amounts subject to approval by the Shareholders’ Meeting.