The remuneration of the members of the Executive Board is determined by their tasks and their own individual performance as well as by the success of the company. The amount of remuneration is based overall on the level customary in the comparable business environment. The peer group used in 2018 was formed from companies represented on the German Mid-Cap index MDAX of Deutsche Börse AG to which Salzgitter AG belonged at the time.
In the financial year 2018, remuneration consisted of the following components:
The Executive Board remuneration has been given a new structure, effective as from 2019. Remuneration almost fully reflects the most recent recommendations of the German Corporate Governance Code and now consists of the following components.
Variable remuneration is based on the achieving of objectives. It consists, on the one hand, of an annual bonus and, on the other, of an annual performance bonus (performance cash award). Regarding the bonus for a one-year period, a target bonus is agreed in the Executive Board member’s employment contract, along with a target amount for the performance bonus.
The commitments for the company pension scheme (pension commitments) vary:
For the period up until December 31, 2018, all Executive Board members received a commitment for payment of a pension the amount of which depends on the length of service to the Group and is capped at a maximum of 60 % of the fixed basic salary (defined benefit commitment). Payment can be drawn once the age of 65 has been reached. In respect of Executive Board member Prof. Dr.-Ing. Heinz Jörg Fuhrmann, this commitment also applies to the period after December 31, 2018. In the context of this commitment, Prof. Fuhrmann will be deemed eligible for payments as if he had already reached the age of 65 if he retires before having reached the age of 65. The pension commitments in favor of Executive Board members Burkhard Becker and Michael Kieckbusch as of December 31, 2018, have been fixed as of this date and, as of January 1, 2019, supplemented by new, defined contribution commitments (see below). Should the company not offer a contract to Mr. Becker for a further term of office upon expiration of his current employment contract, the company waives the assertion of actuarial reductions in the event of the premature receipt of benefits, as well as the pro rata reduction of the entitlement over time for the event of his withdrawal from the company in a non-lapsable entitlement without immediate subsequent benefit eligibility.
For the period starting January 1, 2019, Executive Board members Burkhard Becker and Michael Kieckbusch were given a commitment by the company that it will make a certain amount of money available on a personal pension account (defined contribution commitment) for each year of Executive Board activity. A guaranteed annual interest credit will also be taken account of on the personal pension account. This interest credit will be based on the maximum technical interest rate of the life assurance industry in accordance with the actuarial reserve ordinance (DeckRV; guaranteed interest). The amount will be invested similar to the life cycle model established within the Salzgitter Group in the conditions for deferred compensation (SZAG model), while taking account of the securities designated by the Investment Committee for the Salzgitter Group’s company pension. If the investment generates higher interest after tax compared with the guaranteed interest, this will be credited when benefits become due.
If the Executive Board member leaves the service of the company and enters into the statutory pension insurance scheme either on or before reaching the statutory retirement age, the Executive Board member will receive the credit on the pension account as a one-off retirement asset or, upon application, in ten annual instalments. If the Executive Board member leaves the company before reaching the statutory retirement age, the Board member shall be granted a vested claim on the basis of the pension account in accordance with the legal provisions of the German Company Pensions Act. The Executive Board Member shall, upon application, receive premature retirement assets upon reaching the age of 62 at the earliest.
In the event of termination of Executive Board member activities due to a change of control, the Board members are entitled to settlement in the amount of overall remuneration for the remaining term of their contracts of employment. This settlement is, however, capped to the value of three years of remuneration. Should Executive Board activities be terminated without an important reason, the Executive Board members are entitled to the remuneration agreed until expiry of the contract. However, this entitlement is restricted to the amount of two years’ remuneration (fixed and variable components). No benefits were granted or pledged by external parties to the individual members of the Executive Board in the financial year 2019 or the previous year for their activities as Executive Board members.