The Company’s compensation strategy, especially as of 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;
- Seek to align the interests of the company’s management with that of shareholders and other executives; 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 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 members of the Board of Directors and of the respective Advisory Committees receive fixed monthly fees. Additionally, in order 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 include 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 amounts 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.
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 management compensation strategy aims to accomplish the objectives considered relevant by its shareholders, that is, attract and retain talents necessary for transformation and business continuity, and align the shareholders’ objectives with the long-term strategic plan. Thus, the compensation strategy aims to provide competitive gains in relation to that of the comparable market, with a relevant portion of the total compensation linked to performance conditions, especially the achievement of corporate and individual goals established on an annual basis, and the appreciation of shares in the long-term incentive.
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 Company’s Human Resources Department and the Board of Directors (by means of its People, Nomination and Governance Committee), aiming at maintaining the Company’s compensation competitive in relation to that of the comparable market.
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 that they receive competitive compensation 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.
As previously mentioned, the Company’s senior management strategy is to position the total compensation in the market’s third quartile in order to obtain results that are in line with the business plan. The program may create an opportunity for additional gains due to superior results produced by the business and the executives’ individual performance.
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, without consuming cash.
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 responsibilities assigned to the Company’s Fiscal Council. Alternate members will be remunerated only 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 2021FY:
The Company’s Management approved, for the current fiscal year, at the Annual Shareholders’ Meeting held on April 30, 2021, the overall annual compensation for management and members of the Fiscal Council in the total amount of ninety-two million, eight hundred and forty-four thousand, six hundred and thirty-nine reais and twenty-eight centavos (R$92,844,639.28), divided as follows:
(i) up to fourteen million, five thousand, nine hundred and thirty reais and forty-one centavos (R$14,005,930.41) for the Board of Directors (*), distributed as follows:
(ii) up to seventy-seven million, seven hundred and sixty-one thousand, seven hundred and eight reais and eighty-seven centavos (R$77,761,708.87) (*) for the Statutory Executive Board, distributed as follows:
(a) up to forty-eight million, two hundred and nineteen thousand, seven hundred and ninety-two reais and six centavos (R$48,219,792.06) (*) 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-nine million, five hundred and forty-one thousand, nine hundred and sixteen reais and eighty-one centavos (R$29,541,916.81) (*) as an extraordinary bonus due to Divestment Projects.
(iii) one million and seventy-seven thousand reais (R$1,077,000.00) 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 2021, considering CVM Board’s latest 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. For comparison purposes with the 2020 data, the estimated amount of charges in 2021 is R$1,212,098.13 for the Board of Directors; R$2,538,000.00 for the Statutory Executive Board; and R$215,400.00 for the Fiscal Council.