The remuneration system for members of the Management Board

Management Board remuneration consists of a fixed salary and 2 variable components: performance-based compensation (short-term incentive) and a long-term incentive. The Company also offers pension provisions and supplemental benefits. In the course of the refinement of the remuneration system in October 2010, a change was made to the relative weighting of the remuneration components (fixed salary, short-term incentive and long-term incentive). The relative weight of the long-term incentive was increased and the overall remuneration system was focused more strongly on sustainable company growth. To ensure the individual performance orientation of Management Board remuneration, the Supervisory Board of METRO AG now also reserves the general right to reduce or increase the weight of the individual short-term incentive by up to 30 percent, respectively, at its discretion.

Effective 1 January 2012, the employment contracts of all current members of the Management Board were revised to reflect the new remuneration system. As a result, year-on-year comparisons of the variable components are limited.

The remuneration system for the Management Board of METRO AG complied and continues to comply with the require­ments of the German Stock Corporation Act (AktG) and the recommendations of the German Corporate Governance Code. Total remuneration and the individual compensation components are geared appropriately to the responsibilities of each individual member of the Board, his or her personal performance and the Company’s economic situation, and fulfil legal stipulations regarding customary remuneration. The incentives serve as an inducement for the Management Board to increase the Company’s value and are designed to generate sustainable, long-term company growth. In the financial year 2012, the individual components of Management Board remuneration were as follows:

Fixed salary

The fixed salary is contractually set and is paid in 12 monthly instalments.

Performance-based compensation (short-term incentive)

The short-term incentive for members of the Management Board is determined mainly by the development of return on capital employed (RoCE) and net earnings. The use of the key ratio net earnings in combination with RoCE rewards positive developments in METRO GROUP earnings. EBIT is divided by capital employed to determine RoCE. Net earnings principally amount to profit for the period. The Supervisory Board may resolve an adjustment for special items.

In accordance with the new remuneration system, active members of the Management Board receive between €500 and €833 per 0.01 percentage point of RoCE above a minimum value of 7 percent. For each additional €1 million in net earnings, they receive an additional €304 to €506. The amounts are set by the Supervisory Board of METRO AG based on the Company’s strategy and medium-term targets, are regularly reviewed and are adjusted if necessary. The payout of the performance-based compensation granted for RoCE and net earnings is capped each year. The following individual values were determined as the basis for Management Board remuneration in 2012:

  Download XLS (16 kB)

€ p. a.

Amount per 0.01 percentage points of RoCE above 7 percent

Amount per €1 million in net earnings

Payout cap

1

Member of the Management Board until 31 March 2012

Olaf Koch

833

506

3,900,000

Mark Frese

500

304

2,080,000

Heiko Hutmacher

500

304

2,080,000

Frans W. H. Muller

625

380

2,600,000

Joël Saveuse1

1,400

850

2,600,000

The short-term incentive for Mr Saveuse was also tied to the business targets of the Real sales line (target value for EBITaC – EBIT after cost of capital – at the Real Group). Determined from the degree of target attainment, an EBITaC factor is multiplied by the agreed-upon base bonus. The EBITaC-based remuneration for Mr Saveuse was generally capped at €2.7 million per year. The annual payout of the base bonus (€900,000) was guaranteed. Payouts of the short-term incentive derived from the RoCE and net earnings of METRO GROUP were credited against the performance-based compensation of Mr Saveuse in accordance with the EBITaC of the Real Group.

The performance-based compensation of members of the Management Board is generally paid out in the financial year following the approval of the annual financial statements. Mr Saveuse, who left the Management Board on 31 March 2012, received performance-based compensation in April 2012 for the period of 1 January 2012 to 31 March 2012. The payout was determined on the basis of estimates.

Share-based compensation (long-term incentive)

The long-term incentive is a compensation component with long-term incentive effect. It is designed to achieve sustainable growth in the Company’s value.

Performance share plan 2009–2013

By resolution of the Personnel Committee of the Supervisory Board and with the approval of the Supervisory Board, METRO AG introduced a 5-year performance share plan in 2009. A target value is set for each member of the Management Board. To determine the target number of performance shares, the target value is divided by the share price upon allotment. The key factor is the average price of the METRO share during the 3 months leading up to the allotment date. A performance share entitles its holder to a cash payment matching the price of the METRO share on the payment date. Here, too, the determining factor is the average price of the METRO share during the 3 months leading up to the allotment date.

Based on the relative performance of the METRO share compared to the median of the DAX 30 and Dow Jones Euro STOXX Retail indices – total return – the final number of payable performance shares is determined after the end of a performance period of at least 3 and at most 4.25 years. It corresponds to the target number of shares when an equal performance with said stock market indices is achieved. Up to an outperformance of 60 percent, the number increases on a straight-line basis to a maximum of 200 percent of the target amount. Up to an underperformance of 30 percent, the number is accordingly reduced to a minimum of 50 percent. In the case of a higher underperformance, the number is reduced to 0.

Payment can be made at 6 possible times. The earliest payment date is 3 years after allotment of the performance shares. From this time, payment can be made every 3 months. The members of the Management Board can choose the date upon which their performance shares are paid out. An allotment with multiple payout dates is not permitted. The payout cap amounts to 5 times the target value.

When the performance share plan was introduced, share ownership guidelines also went into effect: as a precondition for the payout of performance shares, the members of the Management Board are obliged to undertake a significant continuous self-financed investment in METRO shares up to the end of the 3-year blocking period. This ensures that, as shareholders, they will directly participate in share price gains as well as potential losses of the METRO share. Their investment in Company shares promotes the long-term structure and orientation towards sustainable development of the remuneration system and results in a healthy balance of the various remuneration elements. The self-financed investment applies to the entire term of the performance share plan.

Pension provisions

In 2009, company pension provisions were introduced for members of the Management Board. These provisions consist of direct benefits with a defined contribution component and a performance-based component.

The defined contribution component is financed by the Management Board and the Company based on an apportionment of “7 + 7 + 7”. When a member of the Management Board makes a contribution of 7 percent of his or her defined basis for assessment, the Company will contribute the same amount. Depending on the economic situation, the Company will pay the same amount again. In view of the macroeconomic environment, the additional amount was again suspended in the reporting year. The performance-based component is congruently reinsured by Hamburger Pensionsrückdeckungskasse VVaG (HPR). The interest rate for the contributions is paid in accordance with the profit-sharing system of the HPR with a guarantee applying to the paid-in contribution. When a member of the Management Board leaves the Company before retirement age, the contributions retain the level they have reached.

An entitlement to pension benefits exists

  • if the working relationship ends with or after the reaching of standard retirement age as it applies to the German state pension scheme,
  • as early retirement benefits, if the working relationship ends at the age of 60 or afterwards and before the stand­ard retirement age,
  • as disability benefits, if the working relationship ends before the standard retirement age is reached and preconditions have been fulfilled,
  • as surviving dependants’ benefits, if the working relationship is ended by the person’s death.

Payment can be made in the form of capital, instalments or a life-long pension. A minimum benefit is granted in the case of invalidity or death. In such instances, the total amount of contributions that would have been credited to the member of the Management Board for every calendar year up to a credit period of 10 years, but limited to the point when the individual turns 60, will be added to the benefits balance. This performance-based component is not reinsured, but will be provided directly by the Company when the benefit case occurs.

Further benefits in case of an end to employment

The active members of the Management Board receive no additional benefits beyond the described pension provisions should their employment end. In particular, no retirement payments will be granted. In the event of the death of a member of the Management Board during active service, his or her surviving dependants will be paid the fixed salary for the month in which the death occurred as well as for an additional 6 months.

Supplemental benefits

The supplemental benefits granted to members of the Management Board include non-cash benefits and expense allowances (e.g. company car).

Other

The members of the Management Board of METRO AG are not entitled to additional remuneration or special benefits as a result of a change of control.

Long-term incentives in the financial year 2012

The target value for the 2012 tranche is €1.6 million for Mr Koch, €0.96 million each for Messrs Frese and Hutmacher and €1.2 million for Mr Muller. Under conditions laid out by the performance share plan, Mr Koch received 54,832 performance shares, Messrs Frese and Hutmacher each received 32,899 performance shares and Mr Muller received 41,124 performance shares. At the time of granting, a share unit was valued at €29.18. The performance shares that were distributed do not represent a fixed number of rights in the sense of §§ 285 Sentence 1 No. 9 a Sentence 4 of the German Commercial Code (HGB) or of 314 Section 1 No. 6 a Sentence 4 of the German Commercial Code (HGB). Rather, they were a target amount. Under the conditions of the performance share plan, entitlements cannot be described with a particular fixed number at the time of granting. The value of the performance shares distributed in 2012 was calculated by external experts using recognised financial-mathematical methods (Monte Carlo simulation). The specified self-financed investment amounted to €0.5 million for Mr Koch, €0.32 million each for Messrs Frese and Hutmacher and €0.4 million for Mr Muller.

In addition to the tranche from the performance share plan distributed in the financial year 2012, Messrs Koch and Muller possess rights from the tranches from 2010 and 2011. Mr Muller also possesses rights from the tranche from 2009. Mr Frese possesses rights from the tranches from 2009, 2010 and 2011 as a result of his previous service within METRO GROUP prior to his appointment to the Management Board. Mr Saveuse, who left the Management Board as of the close of business on 31 March 2012, received no performance shares in 2012. He received compensation for the performance shares granted in 2009, 2010 and 2011 within the context of a severance agreement.

Additional information on the details of this severance agreement is provided below in the section “Services after the end of employment in the financial year 2012.”.

Enlarge table
Download XLS (19 kB)

Remuneration of the Management Board in the financial year 20121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long Term Incentive

 

 

Tsd. €

Financial year

Fixed salary

Supplemental benefits

Short-term incentive2

Value of granted tranches2

(Payout from tranches granted in the past)

Total3

(Effective salary3)

1

Statements pursuant to § 285 Sentence 1 No. 9 a and § 314 Section 1 No. 6 a of the German Commercial Code (HGB) (excl. pension provisions)

2

Shown here is the fair value at the time of granting the tranche

3

Total of columns fixed salary, supplemental benefits, STI and payouts from tranches granted in the past

4

Chairman of the Management Board since 1 January 2012

5

Member of the Management Board since 1 January 2012

6

Member of the Management Board since 1 October 2011

7

Member of the Management Board until 31 March 2012; short-term incentive based on an estimate in accordance with the contract termination agreement

8

Total of columns fixed salary, supplemental benefits, STI and value of granted tranches

9

Reported figures for 2011 relate to active members of the Management Board in the financial year 2012

Olaf Koch5

2011

800

26

1,199

295

(0)

2,320

(2,025)

2012

1,200

63

75

1,522

(0)

2,860

(1,338)

Mark Frese6

2011

0

0

0

0

(0)

0

(0)

2012

720

142

38

913

(0)

1,813

(900)

Heiko Hutmacher7

2011

180

23

107

0

(0)

310

(310)

2012

720

186

31

913

(0)

1,850

(937)

Frans W. H. Muller

2011

842

184

967

709

(6)

2,702

(1,999)

2012

900

124

39

1,142

(0)

2,205

(1,063)

Joël Saveuse8

2011

1,000

29

1,199

295

(6)

2,523

(2,234)

2012

250

9

328

0

(0)

587

(587)

Total9

2011

2,822

262

3,472

1,299

(12)

7,855

(6,568)

2012

3,790

524

511

4,490

(0)

9,315

(4,825)

  Download XLS (16 kB)

Performance share plan (tranches 2009 – 2012)

 

 

 

 

Tranche

End of the blocking period

3-month average price before allotment

Number of Management Board performance shares as of 31/12/2012

2009

August 2012

€36.67

18,407

2010

August 2013

€42.91

27,382

2011

August 2014

€41.73

44,932

2012

April 2015

€29.18

161,754

The blocking period for the 2009 tranche ended in August 2012. No payouts from this tranche were made to members of the Management Board in the financial year 2012.

In the financial year 2012, the value of existing tranches of share-based remuneration programmes changed. The Company’s expenses for Mr Koch amounted to €0.063 million, for Mr Frese €0.021 million and for Mr Hutmacher €0.052 million. With regard to Mr Muller, €0.042 million was recorded. No measurable changes in value were recorded with regard to Mr Saveuse’s shares before he left the Management Board.

Services after the end of employment in the financial year 2012 (incl. pension provisions)

In the financial year 2012, a total of €5.1 million (previous year: €6.0 million) was used for remuneration of the active members of the Management Board of METRO AG for benefits to be provided after the end of their employment. Of this total, approximately €0.176 million was allotted to Mr Koch for pension provisions. Mr Frese was allotted approximately €0.134 million, Mr Hutmacher approximately €0.135 million, Mr Muller approximately €0.139 million and Mr Saveuse approximately €0.028 million.

During the financial year 2012, an agreement was concluded to prematurely terminate the employment contract of Mr Saveuse, who left the Management Board by mutual agreement as of the close of business on 31 March 2012. A severance package agreement valued at €4.502 million was concluded with Mr Saveuse for the remainder of his employment contract (1 April 2012 to 30 April 2013). It covers entitlements of Mr Saveuse and makes allowance for the development of performance- and share-based payment drawing from conservative estimates. The initial €0.5 million payment from the severance package, for which a provision was created in 2012, will be made in April 2013 provided that the non-competition agreement has been upheld.

Total compensation of former members of the Management Board in 2012

Benefits totalling €8.3 million (previous year: €9.4 million) were provided to former members of the Management Boards of METRO AG and the companies that were merged into METRO AG as well as to their surviving dependants. The described benefits for Mr Saveuse after the end of employment in the financial year 2012 are included in this figure.

The cash value of provisions for current pensions and pension entitlements amounted to €55.1 million (previous year: €47.8 million).