(Part of the Combined Management Report)
As part of the reorganization of the Company’s Board of Management, the remuneration system for the members of the Board of Management was revised by the Supervisory Board with the assistance of an independent, external advi- sor and resolved by the Supervisory Board on December 19, 2013. The remuneration for the members of the Board of Management was changed on January 1, 2014. As a rule, the individual agreements for the Board members are identical. Different characteristics have been agreed in some cases with respect to the company retirement benefits, the max- imum total remuneration and the provisions in the event of termination of a Board member’s contract. These differ- ences take into account the respective Board member’s situation on the date when the remuneration system was changed.
As part of this revision, to fulfill the regulatory require- ments, the following objectives in particular were considered: ɋ Harmonization of the remuneration system
for Board members ɋ Reduction in complexity
ɋ Focus on sustained effectiveness of remuneration systems
The fundamental system for the new remuneration for the Board of Management is described below.
Structure of remuneration for the Board of Management
The remuneration for the members of the Board of Manage- ment includes both non-performance related salary and non-cash payments as well as benefit commitments and performance-related (variable) components.
The non-performance related components include a fixed annual salary (basic remuneration) as well as incidental payments and an annual contribution to retirement benefits. The basic remuneration is paid in twelve equal installments at the end of each month. This totals €630,000 per year for Dr. Köhler, €465,000 for Mr. Muth, and €465,000 for
Dr. Wingefeld.The incidental payments mostly comprise the use of a company car, including use of the pool of chauffeurs, accident insurance, as well as D&O insurance with a deduct- ible according to the Aktiengesetz (AktG – German Public Limited Companies Act) and the German Corporate Gover- nance Code (GCGC).
The performance-related components comprise annual variable remuneration (SGL Carbon SE Bonus Plan) and a multi-year variable remuneration component (SGL Carbon SE Performance Share Plan).
SGL Carbon SE Bonus Plan
The annual variable remuneration for the members of the Board of Management is measured based on a target bonus defined individually for each Board member (Dr. Köhler €420,000, Mr. Muth €558,000, and Dr. Wingefeld €350,000 per year). The amount paid out depends on financial and indi- vidual performance targets being reached during a fiscal year. In determining the annual variable remuneration, as a rule, the Supervisory Board sets two financial performance tar- gets, which can vary from year to year. These carry an equal weighting of 50%. Depending on the target, these can be reached at between 0% and 200%. The requirements for this target achievement increases from 120% onwards.
In order to determine the annual variable remuneration, the value resulting from the financial performance targets is multiplied by a discretionary performance factor of between 0.7 and 1.3 (see graph). The Supervisory Board determines the discretionary performance factor using the individual degree of target achievement for various personal targets that are set at the start of the year for each member of the Board.
The payout is capped at 200% of the target bonus.
31 Management Corporate Governance and Compliance Report
SGL Carbon SE Performance Share Plan
Members of the Board of Management are entitled to multi- year variable remuneration in the form of the SGL Carbon SE Performance Share plan (SGL PSP). SGL PSP aims to honor the company’s sustained, long term growth. This is mapped using the multi-year ROCE (performance target) and share price. One tranche of the plan is granted each year. The Supervisory Board sets the target ROCE including the relevant minimum and maximum threshold for a period of four years. Upon granting, an allocation value in euros has been set for each Board member (Dr. Köhler €700,000, Mr. Muth €993,900, and Dr. Wingefeld €545,000 per year). This is used to calcu- late a preliminary number of virtual shares (performance share units, PSU) every year. The number of preliminary
PSUs is calculated at the start of the corresponding period by dividing the allocation value by the fair value per share for the PSU. This fair value is computed by an inde- pendent third party.
After a period of four years, the degree of ROCE-target attainment is identified. A payment is only made if at least the lowest ROCE target is reached. The final number of PSUs is limited and can be between 0% and 150% of the pre- liminary number of PSUs. The possible amount paid is defined by the final number of PSUs multiplied with the rounded share price at the end of the 4-year performance period. The rounded share price is the average share price for 60 trading days at the end of the 4-year performance period. The total amount to be paid out is capped at 200% of the allocation value on the date granted (Cap). Payouts are made in cash.
Amount of payout Target
bonus Discretionary factor (0.7 – 1.3)
Target 1:
e. g. 2014 EBITDA 50%
Target 2:
e. g. 2014 Net debt 50%
Amount of payout
Avg. share price Final number PSUs
Company retirement benefits
Members of the Board of Management to be newly appointed will receive company retirement benefits in the form of a defined-contribution scheme. This includes retirement ben- efits upon reaching statutory retirement age, invalidity and death. There is entitlement to premature payment when the Board member reaches the age of 62.
For the duration of their employment and for each past ser- vice year, SGL Carbon SE pays a benefit contribution into a benefits account for each member of the Board of Manage- ment. The benefit account is interest bearing until benefits start to be paid. If the investment in the benefit account should bear higher interest than the respective applicable guaranteed interest rate in the life insurance sector, this is also credited to the benefit account in the event that an insured event occurs (surplus). In the event of invalidity or death prior to the age-related insured event, the benefits account is credited with contributions up to the age of 60, however the replenishment is limited to a maximum of ten contribution payments. The payout in an insured event is made as a one-off payment or, upon application, in ten annual installments.
The company retirement benefits plan for Dr. Köhler has been migrated to the new system. The former system con- tinues to apply for Mr. Muth and Dr. Wingefeld.
Shareholding requirements
The members of the Board of Management are obliged to permanently hold a fixed number of shares of SGL Carbon SE for their tenure as Board member. For the CEO the number of shares to be held corresponds to his/her annual base sal- ary. For the other members of the Board of Management,
the number of shares to be held corresponds to 85% of their annual base salary. This number is identified based on a rounded share price. The number of shares to be held must be built up successively over four years, to the extent that the member of the Board of Management does not yet ful- fill the shareholding requirement.
The Supervisory Board is entitled to re-determine the number of shares to be held when the Board of Management is re-appointed in line with the described method.
Maximum total remuneration
As part of the changes to the contracts, the target remuner- ation (basic remuneration plus 100% target achievement for all variable targets plus retirement benefits) will be reduced significantly from January 1, 2014 (see table above):
The contract for the CFO Mr. Muth has been changed in principle with effect from January 1, 2014, however the amount is identical to that in the previous contract. Dr. Köhler will receive for the first time on January 1, 2017 a defined contri- bution for the period relating to 2016.
In addition, it was resolved to set maximum total remuner- ation for 2014. That means that the annual gross remuner- ation of the members of the Board of Management of SGL Carbon SE (including contributions to the company pension scheme) is subject to a cap, considering all of the remuneration components. The maximum amount of the annual maximum remuneration from fiscal year 2014 is €3,600,000 for Dr. Köhler, €2,854,900 for Mr. Muth, and €3,100,000 for Dr. Wingefeld.
€
Chief Executive Officer Chief Financial Officer Member of the Board of Management
2013 2014 2013 2014 2013 2014
Direct Target Remuneration 2,965,000 1,780,000 2,067,933 2,044,900 2,067,933 1,390,000
Retirement benefits 593,000 0 762,000 810,000 658,000 699,000
Target Remuneration 3,558,000 1,780,000 2,829,933 2,854,900 2,725,933 2,089,000
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Payments in the event of termination of activities
If the appointment of the Board member as a member of the Board of Management is prematurely terminated – be this by mutual consent, cancellation, resignation or by ter- mination as a result of company law proceedings under the UmwG – the Board members receive maximum compensa- tion of two annual salaries in line with the German Corpo- rate Governance Code. If the residual period of the employ- ment contract for the member of the Board of Management is less than two years, the compensation is generally reduced and is to be calculated on a pro rata basis. The amount of the annual remuneration to be paid is governed by the total amount of the fixed salary and the variable remuneration components, based on targets being 100% achieved without non-cash compensation and other inci- dental payments for the last full fiscal year prior to the end of the employment agreement for the Board member. As a rule, the Board members are subject to a one-year ban on competition after their contract ends. As compensation, the company pays the members of the Board of Manage- ment compensation of 50% of their last target remunera- tion for the duration of the prohibition on competition. Other income of the Board member is netted with this com- pensation.
In the event of a change of control, there is separate regu- lation for Board members (see Note 36) in the notes to the consolidated financial statements.