Compensation - ESG
Compensation
As a global company, Vale knows that a critical challenge for the Company’s long-term success is to attract the best professionals, retain talent, motivate and involve leaders who occupy strategic positions, especially members of the Executive Committee, members of the Board of Directors, Fiscal Council and Advisory Committees.
The annual compensation proposal presented by the Board of Directors36 considers global market practices, alignment with short and long-term strategies, return to shareholders, and the sustainability of the Company’s business.
The proposal also reflects the responsibilities of each member of management, their competence and the value of their services. It also aims at attracting executives with high-level professional qualifications and skills that are critical to Vale’s challenges.
In preparing the annual compensation proposal, the Board of Directors is supported by: (a) the People and Remuneration Committee, to evaluate the compensation strategy of the Executive Committee and the proposal for distribution of the global annual budget for management compensation, and (b) the Nomination and Governance Committee, to evaluate the compensation strategy of the Board of Directors, its Advisory Committees and Fiscal Council.
Compensation of the Board of Directors, Advisory Committees and Fiscal Council
• Fixed Compensation
Base fee: The compensation consists exclusively of the payment of a fixed monthly amount (fees), with the aim of remunerating the services of each member of the Board of Directors of the Company, within the scope of the responsibility assigned to its members. The Company has a single alternate member of the Board of Directors, a vacancy occupied by a member elected by Vale employees, as provided for in its Articles of Incorporation. Said alternate member will be compensated at 50% of the compensation assigned monthly to the full member for each meeting he attends, limiting his monthly fee to the ceiling of 100% of the full member’s fees, regardless of the number of participations in meetings in the month.
Direct and Indirect Benefits: Members of the Board of Directors are not entitled to direct or indirect benefits, except for receiving life insurance.
Participation in Committees: Members of the Board of Directors who are also members of Advisory Committees receive, in addition to their remuneration as members of the Board of Directors, the monthly remuneration attributed to members of the Committees.
• Variable Compensation, Benefits and Others: Members of the Board of Directors are not entitled to other types of remuneration or benefits, including bonuses, profit sharing, remuneration for participation in meetings, commissions, postemployment benefits, benefits motivated by the termination of the exercise of the position and remuneration based on in shares. Members of the Board of Directors are entitled to reimbursement of travel and subsistence expenses necessary for the performance of their duties.
Fiscal Council’s Compensation
• Fixed Compensation
Base fee: The compensation consists exclusively of the payment of a fixed monthly amount (fees), with the objective of remunerating the services of each member of the Fiscal Council, within the scope of the responsibility assigned to the Fiscal Council. The compensation of the Fiscal Council corresponds to 10% of the fixed average remuneration attributed to the members of the Company’s Executive Committee on a monthly basis.In the event of a vacancy, the full member of the Fiscal Council is not remunerated, while the alternate member will be remunerated only in cases where he/she exercises the activities of member of the Fiscal Council due to vacancy, impediment or absence of the respective full member.
Direct and Indirect Benefits: The members of the Fiscal Council are not entitled to direct and indirect benefits.
Participation in Committees: Members of the Fiscal Council are not entitled to representation or remuneration for participating in Committees.
• Variable Compensation, Benefits and Others: Members of the Fiscal Council are not entitled to other types of remuneration or benefits, including bonuses, profit sharing, remuneration for participation in meetings, commissions, post-employment benefits, benefits motivated by the termination of the exercise of the position and remuneration based on in shares. Members of the Fiscal Council are entitled to reimbursement of travel and subsistence expenses necessary for the performance of their duties.
The main elements of compensation include fixed compensation, short-term variable compensation (Annual Bonus), and share-based variable compensation (long-term incentives - Matching and VSP). The Company also offers private pension, benefits aligned with the local market and spot payments, capable of acting as extraordinary mechanisms of attraction, retention and/or incentives for initiatives or deliveries relevant to the Company, when applicable, such as bonuses for hiring new executives.
• Base-fee: fixed monthly fee, component not associated with performance.
• Direct and Indirect Benefits: benefits package compatible with market practices, which includes meal voucher, medical and dental care, hospital care, supplementary pension, life insurance and use of car owned by Vale with driver service.
Short-term variable compensation
Short-term variable compensation is based on performance goals of different natures, which are an important management tool and have been increasingly relevant to the evolution and implementation of the Company’s main strategic plans. It is associated with economic and financial, health and safety, sustainability and strategic goals.
Long-term variable compensation
Long-term variable compensation programs are comprised of Matching (program in the Restricted Shares modality) and VSP - Vale Shares Plan (program in the Performance Shares modality) and are applicable only to the company's leadership levels, excluding Board of Directors, Fiscal Council and Advisory Committees, that would not be entitled to any type of variable compensation.
Vale's long-term compensation is associated with the performance of the common share, thus is directly related to the return given to shareholders. In the case of VSP, compensation is calculated as a direct function of Vale's Total Shareholder Return (TSR) indicator, which takes into account stock price fluctuations and dividends (or interest on equity) paid to shareholders over the plan period.
It is worth noting that, in 2019, the maintenance of share ownership was implemented, in which the executive must accumulate and hold on their Vale shares in the amount equivalent to at least thirty-six (36) honorary fees to the CEO and twenty-four (24) honorary fees for the Executive Directors. Shares may be accumulated through the share-based variable compensation programs offered by the Company throughout their terms.
Vale Shares Plan (VSP)
The VSP program was recently revised to provide more adherence with international market practices, regarding performance share plans, and, mainly, to bring more alignment to the return expected by shareholders.
The plan is described in detail below, considering the grant carried out in 2023. The main performance metric, with 75% of weight, remains Vale’s TSR versus the TSR of the other companies that make up the peer group.
The TSR that measures the return that an investment provides to the investor/shareholder, considering the fluctuation of the share price and the distribution of dividends, based on a period.
TSR = (Final Price* - Starting Price**+ Dividend - Dividends or IOC distributed in the period) / Starting Price**
*Average price weighted by traded volume,considering 30 trading days prior to the final date
**Average price weighted by traded volume,considering 30 trading days prior to start date
A relative TSR is used, by comparing Vale’s TSR to the TSRs of large mining peers and similar companies. The VSP peer group and the award curve for the TSR portion, after revisions for effectiveness in 2023, are as follows:
If absolute TSR Vale is negative, the maximum is 150%.
The ESG metric, with a weight of 25%, includes: (i) global Health & Safety indicator (10%), which effectively measures our exposure to the types of incidents that can lead to serious injuries and fatalities – High Potential Incidents (N2), with the goal of zeroing N2 incidents by 2025, according to the curve presented to the market in 2020; and (ii) Sustainability (15%), with metrics related to the strategic pillar of Climate Change, measured by the reduction of greenhouse gas emissions, with 10%, and the commitment to be in the Top 3 in the social requirements of the main external evaluations (DJSI Performance), with 5%.
After the three-year cycle, the program is awarded conditioned to the achievement of the performance factor (TSR + ESG) and considering, at least, the same number of shares originally granted. On the gross amount paid, there is Withholding Income Tax.
The award at the end of the cycle, conditioned to the achievement of the performance factor, from the cycle granted in 2021, is now made through the delivery of Common Shares issued by the Company, after the end of the cycle and the additional payment related to virtual dividends, conditional on the distribution of dividends or interest on shareholders’ equity by the Company, to be paid at the end of the cycle.
Historical summary
Long-Term Incentive – Matching Program
Matching is the long-term variable compensation program that works as a deferral of the annual bonus, converting part of the payment into shares. Participation and retention of shares are mandatory for the Executive Committee, conditions are at the discretion of eligible leaders. Executives must use their own resources to acquire the Company’s common shares and must retain them for a minimum cycle of three years.
The executive who has not reached the minimum shareholding position is prohibited from transacting with the shares in his/her possession, even after the end of the Matching Program cycles of which he/ she is a part.
In addition to rewards at the end of each cycle, the Matching Program has made additional payments during cycles (virtual dividends) since 2019.
Evolutions in executive compensation
Vale’s Executive Compensation has been constantly improved. In recent years, the Company has been actively listening to investors and has carried out market research and data and performance metrics analysis to advance its compensation practices, contributing to the strategy execution, competitiveness, alignment with shareholders’ interests and Vale’s cultural transformation.
Compensation mix
The compensation mix is adjusted according to the international executive market profile and the developments of the annual executive performance evaluation process, in line with investor expectations.
Fixed Compensation
Base fee: this is the monthly fixed fee, which aims to attract and retain executives with experience and capacity compatible with the scope and responsibility of the position assigned to them in the Company’s management. These components are not associated with Vale’s performance.
Direct and Indirect Benefits: Executives are entitled to a benefits package compatible with market practices, which includes medical, hospital and dental care, supplementary pension plans and life insurance. The benefits, in addition to being in line with market practices, are intended to support executives and their dependents in key areas, such as healthcare and housing.
Direct and Indirect Benefits: Executives are entitled to a benefits package compatible with market practices, which includes medical, hospital and dental care, supplementary pension plans and life insurance. The benefits, in addition to being in line with market practices, are intended to support executives and their dependents in key areas, such as healthcare and housing.
Participation in Committees: Executives are not entitled to compensation for participation in executive committees.
Compensation of the Non-Named Executive Officers
These are employees of the Company with an employment relationship and may be responsible for global corporate functions or business units, or for regional or local corporate functions, or for areas or operating systems in the Company's various businesses.
Fixed Compensation
Base fee: They are entitled to receive a monthly fixed amount, defined on the basis of the Company structure of positions, which is aligned to the market practices and the purpose of which, according to the employment agreement signed with each executive, is to remunerate the services provided within the scope of responsibility assigned to each one in the different activities of the Company.
Direct and Indirect Benefits: They are entitled to a package of benefits compatible with market practices including Medical-Hospital-Dental Care, Complementary Pension (Valia) and Life Insurance. The benefits, in addition to being aligned with market practices, are intended to support executives and their dependents in key areas, such as health care and housing.
Participation in Committees: They are not entitled to compensation for participation in committees.
Variable Compensation
Profit sharing: Refers to Short Term Variable Compensation (annual), based on the Company’s results and defined through indicators and targets, derived from the strategic planning and annual budget approved by the Board of Directors.
Vale Shares Program ('VSP'): The rules and conditions of the VSP offered to these stakeholders are the same as those applied to the Named Executive Officers.
Matching: The rules and conditions of Matching offered to these stakeholders are the same as those applied to the Statutory Officers except for the voluntary rule (for non-statutory leaders, participation in the program is voluntary).
It should be noted that the Stock Ownership Guidelines (SOG) rule does not apply to this group.
The annual global compensation for 2023 proposed for approval at the Meeting totals R$ 225,099,389.00 (two hundred and twenty-five million, ninety-nine thousand, three hundred and eighty-nine reais), without charges, including statutory members of the Executive Committee, Board of Directors, Fiscal Council and Advisory Committees. The proposal for 2023 was lower than the approved remuneration for 2022.
Compensation history 2020-2023P for the Board of Directors, Advisory Committees and Fiscal Council
The compensation proposed for 2023 is in line with the compensation paid in previous years, with occasional variations resulting from adjustments in the composition and mix of compensation applied to positions on Boards and Committees. Board compensation is always based on market research, ensuring attractiveness and alignment with the market, being, in recent years, the main external factor for variation in remuneration, as well as the performance of the Independent Extraordinary Advisory Committees until 2021.
We present below the execution history of the last 3 years and the proposal for the current year:
The fixed compensation proposed for 2023 is in line with the fixed compensation paid in the previous year (reduction of 4%) and is higher than the fixed compensations practiced in 2020 and 2021 (increase of 31% and 14%, respectively), mainly due to the increase in the number of statutory executives over these years.
We present below the average fixed compensation, considering the ratio between the fixed compensation and the total number of active executives in each of the years:
Short-term variable compensation (Annual Bonus) - Executive Committee
The short-term variable compensation (“VR”) (referring to the Annual Bonus program) proposed for 2023 is in line with the short-term VR carried out in the previous year (an increase of only 2%)
In 2019, as part of the response to the tragedy in Brumadinho, the Board of Directors suspended the payment of the Bonus to its executives.
In 2020, with the evolution of the repair program and the advancement of investigations related to the collapse, the Board resumed payments, retroactive to the year of suspension, for executives who were not involved in investigations into the dam breach. Thus, in 2020, two amounts of Annual Bonus were paid to executives:
• One relating to the payment to be effectively made in 2020, referring to the 2019 financial year;
• Another related to the payment that should have been made in 2019, referring to the 2018 financial year, but which was suspended due to the Brumadinho collapse.
We present below the values of the Annual Bonus vs. Performance presented each year. Bearing in mind that the Performance of the Annual Bonus program is made up of the following factors:
• Overall result obtained by Vale;
• Result achieved in the executives’ goal panel; It is
• Result referring to individual performance evaluations.
In order to eliminate the “double” effect of the year 2020, the chart below considers only the payment effectively related to 2020, that is, excluding the retroactive amount that was not paid in the previous year due to the accident.
Annual Bonus Program
Based on the graphic analysis, it is possible to observe short-term RV values aligned with the Performance presented by the Company in each year. Specifically for 2021, the value is lower than in subsequent years (2022 and 2023) due to the number of active executives and, mainly, to the average salary or pro-labore, which was lower than in other years.
For further information and details about Vale's compensation practices, click here.
2022 Goal Panel
The Goal Panel for the Annual Bonus for 2022 maintained greater focus and weight on collective targets, reinforcing a more integrated approach. It includes goals related to Vale Ambitions: Benchmark in Safety, Best and Most Reliable Operator, Talent Driven Organization, Leader in Sustainable Mining, Reference in Creating and Sharing Value.
Note: Since 2020, the Health, Safety, Geotechnics, Repair and Compliance areas do not have indicators of financial and production results in their goal panel, leaving the executives and employees of these areas fully dedicated to the mission of preventing and mitigating operational risks.
The collective goals can be global in scope or adjusted for each member of the Executive Board, considering their role in the Company, except for the People and Sustainability goal.
The results of all targets are converted into points, using a scale which establishes:
• 0.50 point as a minimum result;
• 1.00 point as expected result for the year;
• 1.50 point as a maximum result
2022 Goal Panel Results
• The results of the Operational Risk Management, VPS, Sustainability and DE&I targets exceeded the expectations established for the year.
• Global EBITDA (adjusted for price and exchange rate) was below the forecast set for the year, impacted by lower volumes and higher unit costs in Iron Solutions and Metals for Energy Transition. There was also an impact from the new provision for expenses with de-characterization of dams and Brumadinho expenses. The impacts were partially offset by better freight performance.
• We made advances in the health and safety strategy to prevent events with high potential, however, we still had fatalities and life changes throughout 2022. Connected with the commitment to be a reference company in safety, we maintained the penalty strategy for Executives involved in accidents and their entire leadership, including members of the Executive Committee.
Less than 0.50 points
Between 0.50 and 0.99 points
Between 1.00 and 1.50 points
In general, the specific result of the executives for the 2022 cycle was satisfactory, except for the CEO, executives of the Operational, Sustainability areas, the performance reflects Vale’s overall result, which was not expressive, falling below expectations for the year, which was directly impacted by the results for the Base Metals and Production Capacity goals.
2023 Goal Panel
For 2023, significant improvements were approved in relation to the higher short-term goals for the executives, such as more efficiency in the allocation of capital cost, the increase in the financial portion and the inclusion of production volume for some executives, making them more aligned with the production commitment assumed for the 2023 Cycle.
We remain committed to fostering a diverse pipeline at Vale, increasing the total number of women and the number of blacks in leadership positions. We also continue to pursue our Ambition of ‘Being a Reference Company in Safety’ and ‘Leader in Sustainable Mining’, maintaining themes related to Occupational Safety and in the Communities where we operate. And, to help the Company expand the safety concept, we have included a process safety indicator for Cycle 2023, evolved from the risk management process, started in 2020.
As financial goals, the indicators of EBITDA (adjusted) and Fixed Expenditure were maintained, to continue reinforcing Vale’s direction in the creating and sharing of value.
Compensation of Executive Comittee, Councils and Comittees
Total compensation (%) - From 2016 to 2018
Total compensation (%)
Fiscal Year 2018
|
|
Board of Directors
|
Fiscal Council
|
Statutory Board of Executive Officers
|
Non- Statutory Board
|
Committees
|
|
|---|---|---|---|---|---|---|
|
Monthly Fixed Compensation
|
|
|
|
|
|
|
|
Salary or pro-labore
|
86.54%
|
83.33%
|
12.37%
|
20.80%
|
86.65%
|
|
|
Direct and Indirect Benefits
|
|
-
|
4.24%
|
5.49%
|
-
|
|
Other
|
13.46%
|
16.67%
|
2.60%
|
5.26%
|
13.35%
|
|---|---|---|---|---|---|
|
Variable Compensation
|
|
|
|
|
|
|
Bonus
|
-
|
-
|
18.81%
|
-
|
-
|
|
Profit Sharing
|
-
|
-
|
-
|
32.76%
|
-
|
|
Other
|
-
|
-
|
9.02%
|
6.55%
|
-
|
|
Termination of Position
|
-
|
-
|
41.15%
|
-
|
-
|
|
Share-based Compensation
|
-
|
-
|
11.81%
|
29.14%
|
-
|
|
Total
|
100%
|
100%
|
100%
|
100%
|
100%
|
Fiscal Year 2017
|
|
Board of Directors
|
Fiscal Council
|
Statutory Board of Executive Officers
|
Non- Statutory Board
|
Committees
|
|
|---|---|---|---|---|---|---|
|
Monthly Fixed Compensation
|
|
|
|
|
|
|
|
Salary or pro-labore
|
87.16%
|
83.33%
|
14.17%
|
34.81%
|
83.83%
|
|
|
Direct and Indirect Benefits
|
|
-
|
3.88%
|
5.56%
|
-
|
|
Other
|
12.84%
|
16.67%
|
3.08%
|
|
16.17%
|
|
|---|---|---|---|---|---|---|
|
Variable Compensation
|
|
|
|
|
|
|
|
Bonus
|
-
|
-
|
16.00%
|
27.27%
|
-
|
|
|
Other
|
-
|
-
|
12.78%
|
8.59%
|
-
|
|
|
Termination of Position
|
-
|
-
|
39.91%
|
-
|
-
|
|
|
Share-based Compensation
|
-
|
-
|
10.17%
|
15.69%
|
-
|
|
|
Total
|
100%
|
100%
|
100%
|
100%
|
100%
|
Fiscal Year 2016
|
|
Board of Directors
|
Fiscal Council
|
Statutory Board of Executive Officers
|
Non- Statutory Board
|
Committees
|
|
|---|---|---|---|---|---|---|
|
Monthly Fixed Compensation
|
|
|
|
|
|
|
|
Salary or pro-labore
|
92.83%
|
90.44%
|
41.55%
|
67.81%
|
95.24%
|
|
|
Direct and Indirect Benefits
|
|
-
|
11.03%
|
8.26%
|
-
|
|
Other
|
7.17%
|
9.56%
|
8.53%
|
15.21%
|
4.76%
|
|---|---|---|---|---|---|
|
Variable Compensation
|
|
|
|
|
|
|
Other
|
-
|
-
|
4.95%
|
1.45%
|
-
|
|
Termination of Position
|
-
|
-
|
28.03%
|
-
|
-
|
|
Share-based Compensation
|
-
|
-
|
5.91%
|
7.27%
|
-
|
|
Total
|
100%
|
100%
|
100%
|
100%
|
100%
|
For more information about Vale's compensation access our Reference Form 2019
Total compensation ($) - From 2016 to 2019
Total compensation ($)
Fiscal Year 2019
Total compensation of the Board of Directors, Statutory Board of Executive Officers and Fiscal Council
Total compensation estimated for the current year December 31st, 2019 - Annual Amounts
|
|
Board of Directors
|
Fiscal Council
|
Statutory Board of Executive Officers
|
Total
|
|---|---|---|---|---|
|
Total number of members
|
13.67
|
5.00
|
6.00
|
24.67
|
|
No. of members receiving compensation
|
13.67
|
5.00
|
6.00
|
24.67
|
|---|---|---|---|---|
|
Annual fixed compensation
|
|
|
|
|
|
Salary or pro-labore
|
7,679,188.00
|
1,816,801.02
|
21,801,612.41
|
31,297,601.43
|
|
Direct and Indirect Benefits
|
0.00
|
0.00
|
8,675,163.30
|
8,675,163.30
|
|
Other
|
1,199,687.00
|
363,360.20
|
4,490,099.79
|
6,053,146.99
|
|
Description of other fixed compensations
|
Social contribution charges under Vale’s responsibility - INSS
|
Social contribution charges under Vale’s responsibility - INSS
|
Social contribution charges under Vale’s responsibility - INSS
|
|
|
|---|---|---|---|---|---|
|
Variable Compensation
|
|
|
|
|
|
|
Other
|
0.00
|
0.00
|
2,636,113.32
|
2,636,113.32
|
|
|
Description of other variable compensations
|
|
|
|
|
|
|
Termination of Position
|
0.00
|
0.00
|
21,999,445.33
|
21,999,445.33
|
|
|
Share-based. including options
|
0.00
|
0.00
|
25,676,497.22
|
25,676,497.22
|
|
|
Total compensation
|
8,878,875.00
|
2,180,161.22
|
85,278,931.36
|
96,337,967.58
|
Fiscal Year 2018
Total compensation of the Board of Directors, Statutory Board of Executive Officers and Fiscal Council
Total compensation estimated for the current year December 31st, 2018 - Annual Amounts
|
|
Board of Directors
|
Fiscal Council
|
Statutory Board of Executive Officers
|
Total
|
|---|---|---|---|---|
|
Total number of members
|
12.08
|
5.00
|
6.00
|
23.08
|
|
No. of members receiving compensation
|
12.08
|
5.00
|
6.00
|
23.08
|
|---|---|---|---|---|
|
Annual fixed compensation
|
|
|
|
|
|
Salary or pro-labore
|
6,608,146.89
|
1,705,551.75
|
20,543,646.36
|
28,857,345.00
|
|
Direct and Indirect Benefits
|
0.00
|
0.00
|
7,050,290.66
|
7,050,290.66
|
|
Other
|
1,028,229.38
|
341,110.35
|
4,317,265.39
|
5,686,605.12
|
|
Description of other fixed compensations
|
Social contribution charges under Vale’s responsibility - INSS
|
Social contribution charges under Vale’s responsibility - INSS
|
Social contribution charges under Vale’s responsibility - INSS
|
|
|
|---|---|---|---|---|---|
|
Variable Compensation
|
|
|
|
|
|
|
Bonus
|
0.00
|
0.00
|
31,237,934.71
|
31,237,934.71
|
|
|
Other
|
0.00
|
0.00
|
14,983,080.22
|
14,983,080.22
|
|
|
Description of other variable compensations
|
|
|
|
|
|
|
Termination of Position
|
0.00
|
0.00
|
68,346,721.83
|
68,346,721.83
|
|
|
Share-based. including options
|
0.00
|
0.00
|
19,622,073.35
|
19,622,073.35
|
|
|
Total compensation
|
7,636,376.27
|
2,046,662.10
|
166,101,012.52
|