German Corporate Governance Code

G. Remuneration of Management Board and Supervisory Board

I. Remuneration of the Management Board
Principle 23

The Supervisory Board decides upon a clear and understandable system for Management Board remuneration, and on this basis determines the actual remuneration for each Management Board member.

The General Meeting generally adopts advisory resolutions concerning the approval of the remuneration system for Management Board members, prepared by the Supervisory Board, as well as proposing resolutions on the approval of the remuneration report for the preceding financial year.

The remuneration structure of listed companies is to be oriented towards the company’s sustainable and long-term development. Management Board remuneration is to be set in a way that promotes the corporate strategy and the company’s long-term development.

1. Determining the remuneration system

The remuneration system shall define in particular:

  • how the target total remuneration is determined for each Management Board member, and the amount that the total remuneration must not exceed (maximum remuneration);
  • the proportion of (i) fixed remuneration and (ii) short-term and long-term variable remuneration in the target total remuneration;
  • the financial and non-financial performance criteria relevant for the granting of variable remuneration components;
  • what kind of relationship exists between achieving previously agreed performance criteria and variable remuneration; and
  • when and in what form Management Board members have access to variable remuneration components, which they have been granted.
2. Determining total remuneration
G.2 The Supervisory Board shall set the specific target total remuneration for each Management Board member on the basis of the remuneration system. This shall be appropriate to the Management Board member’s own tasks and performance as well as to the enterprises’ overall situation and performance, and it shall not exceed the usual level of remuneration without specific reasons.
G.3 In order to assess whether the specific total remuneration of Management Board members is in line with usual levels compared to other enterprises, the Supervisory Board shall determine an appropriate peer group of other third-party entities, and shall disclose the composition of that group. The peer-group comparison shall be applied with a sense of perspective, in order to prevent an automatic upward trend.
G.4 To ascertain whether remuneration is in line with usual levels within the enterprise itself, the Supervisory Board shall take into account the relationship between Management Board remuneration and the remuneration of senior managers and the workforce as a whole, and how remuneration has developed over time.
G.5 If the Supervisory Board calls upon an external remuneration expert to develop the remuneration system, and to evaluate whether the remuneration is appropriate, it shall ensure that the expert is independent from both the Management Board and the enterprise.
3. Determining the total amount of variable remuneration components
G.6 The share of variable remuneration achieved as a result of reaching long-term targets shall exceed the share from short-term targets.
G.7 Referring to the forthcoming financial year, the Supervisory Board shall establish performance criteria for each Management Board member covering all variable remuneration components; besides operating targets, such performance criteria shall be geared mainly to strategic goals. The Supervisory Board shall determine to what extent individual targets for each Management Board member – or targets for the Management Board as a whole – are decisive for the variable remuneration components.
G.8 Subsequent changes to the target values or comparison parameters shall be excluded.
G.9 After the end of every financial year, the Supervisory Board shall establish the amount of individual variable remuneration to be granted, depending on target achievement. The target achievement shall be comprehensible in terms of both its rationale and amount.
G.10 Taking the respective tax burden into consideration, Management Board members’ variable remuneration shall be predominantly invested in company shares by the respective Management Board member or shall be granted predominantly as share-based remuneration. Granted long-term variable remuneration components shall be accessible to Management Board members only after a period of four years.
G.11 The Supervisory Board shall have the possibility to account for extraordinary developments to an appropriate extent. It shall be permitted to retain or reclaim variable remuneration, if justified.
4. Benefits granted at contract termination
Recommendations and suggestion:
G.12 If a Management Board member’s contract is terminated, the disbursement of any remaining variable remuneration components attributable to the period up until contract termination shall be based on the originally agreed targets and comparison parameters, and on the due dates or holding periods stipulated in the contract.
G.13 Any payments made to a Management Board member due to early termination of their Management Board activity shall not exceed twice the annual remuneration (severance cap) and shall not constitute remuneration for more than the remaining term of the employment contract. If post-contractual non-compete clauses apply, the severance payments shall be taken into account in the calculation of any compensation payments.
G.14 Change of control clauses that commit to benefits in the case of early termination of a Management Board member’s contract due to a change of control should not be agreed upon.
5. Other Provisions
G.15 If Management Board members are also members of intra-group Supervisory Boards, then the remuneration shall be taken into account.
G.16 If Supervisory Board memberships are assumed at non-group entities, the Supervisory Board shall decide whether and to what extent the remuneration from such memberships shall be taken into account.
II. Remuneration of the Supervisory Board
Principle 24 Supervisory Board members receive remuneration appropriate to their tasks and the situation of the company. Such remuneration is specified by resolution of the General Meeting, or in the Articles of Association, if applicable.
Recommendations and suggestion:
G.17 Remuneration for Supervisory Board membership shall take appropriate account of the larger time commitment of the Chair and the Deputy Chair of the Supervisory Board as well as of the Chair and the members of committees.
G.18 Supervisory Board remuneration should be fixed remuneration. If members of the Supervisory Board are granted performance-related remuneration, it shall be geared to the long-term development of the company.
III. Reporting
Principle 25 The Management Board and the Supervisory Board prepare an annual remuneration report, in accordance with statutory provisions.