Remuneration of the board of management

The annual remuneration paid to the members of DEUTZ AG’s Board of Management consists of fixed and variable components as well as a pension benefit contribution. The fixed component is paid monthly as basic salary. The variable component is performance-related and consists of two parts: the first is a bonus that is based on attainment of specific targets; the other comes in the form of virtual performance shares that offer a long-term incentive. For the pension contribution, an amount is paid into a benevolent fund; there is no other entitlement to a pension or surviving dependants’ pension.

The calculation of the annual bonus is based on the degree of attainment of annual performance targets (short-term targets). The number, content and weighting of the short-term targets are set annually by the Supervisory Board at its due discretion after consulting with the respective Board of Management member. The minimum level of target attainment for the payment of a bonus is 75 per cent; the maximum level of target attainment relevant to the payment of the bonus is 150 per cent. The highest amount that can be paid as a bonus in the case of maximum target attainment is determined by the respective service contract. Only 60 per cent of the annual bonus is paid out at the end of the year. The rest of the bonus is paid out in two equal instalments of 20 per cent, subject to the attainment of further medium-term financial targets (medium-term targets), at the end of a further one year and two years, whereby the amount that is paid out is based on the level of attainment of these medium-term targets (to a maximum of 150 per cent). The highest permissible amounts for these further payments are also contractually agreed. The targets for all payments are set at the beginning of the year for which the bonus is to be paid.

Details regarding the virtual performance shares are set forth in a long-term incentive plan for the Board of Management (LTI plan BoM), which forms part of the contractual agreements with the Board of Management members. The number of virtual performance shares allocated to a Board of Management member is calculated each year on the basis of the contractually specified euro amount divided by a reference price. The reference price is the average closing price of DEUTZ AG shares in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange during the 60 trading days preceding the grant date. Virtual performance shares represent an entitlement to payment of a cash amount in accordance with the provisions of the LTI plan BoM. The cash amount per virtual performance share corresponds to the average closing price of DEUTZ shares in Xetra trading (or a comparable successor system) on the Frankfurt Stock Exchange during the last 60 trading days prior to the expiry of a vesting period of four years after the grant date, and is limited to a maximum of 1.5 times the reference price. Entitlement to the cash payment only arises, however, if either the market price of DEUTZ shares has increased by at least 30 per cent relative to the reference price or the market price of DEUTZ shares has outperformed the MDAX (or a future index replacing the MDAX) by at least 10 percentage points during the vesting period. A further requirement is that the Board of Management member makes a personal investment by holding one DEUTZ share for every 20 virtual performance shares received.

The variable remuneration is designed in a way that the majority of it is measured against performance over several years. The overall remuneration structure is designed to support the sustainable growth of the Company.

Additional benefits received by the members of the Board of Management include, in particular, a company car and allowances towards insurance policies.

If the employment contract of a member of the Board of Management is terminated prematurely without good cause, the member of the Board of Management receives a severance payment equivalent to the total remuneration for the period until the original termination date of his or her contract of employment up to a maximum of two years. For the purpose of this severance payment, the amount of total remuneration is determined by the total remuneration paid for the last full financial year, or the anticipated total remuneration for the then current financial year, if appropriate (cap on severance pay in accordance with article 4.2.3 of the German Corporate Governance Code).

In connection with the premature termination of his Board of Management contract with effect from 31 December 2016, Dr Leube was granted a severance payment of €1,743 thousand in 2016. The severance payment reflects the total amount of remuneration that he would have received for the original remaining term of the contract. It includes performance-based components of €803 thousand and was paid in full in 2016. In accordance with Dr Leube’s contract, an amount of €150 thousand was also paid into a benevolent fund in respect of 2017 on his behalf.

The service contracts of the Board of Management members Dr Ing Helmut Leube and Dr Margarete Haase stipulate a special provision in the event of a change of control. Further details can be found in the section ‘Disclosures pursuant to sections 289 (4) and 315 (4) HGB’.

The table below presents the total remuneration of the Board of Management in accordance with the recommendation in the German Corporate Governance Code dated 5 May 2015. In line with this recommendation, the benefits granted in 2016 and those actually paid are reported separately.

The following table shows the breakdown of benefits granted to members of the Board of Management:

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Benefits granted                        
  Dr Ing Helmut Leube
Chairman of the Board of Management
Dr Margarete Haase Michael Wellenzohn
  Retired on 31 December 2016                
  2015 2016 2016 (min) 2016 (max) 2015 2016 2016 (min) 2016 (max) 2015 2016 2016 (min) 2016 (max)
€ thousand                        
Fixed remuneration 725 725 725 725 580 580 580 580 420 520 520 520
Additional benefits 1) 175 173 173 173 147 146 146 146 111 109 109 109
Total 900 898 898 898 727 726 726 726 531 629 629 629
One-year variable remuneration 2) 360 360 540 270 270 405 210 255 383
Multi-year variable remuneration                        
2016–2017 deferral 240 180 140
2017–2018 deferral 240 360 180 270 170 255
LTI 2015–2019 3) 222 166 144
LTI 2016–2020 3) 207 300 155 225 160 233
Total 822 807 1,200 616 605 900 494 585 870
Total remuneration 1,722 1,705 898 2,098 1,343 1,331 726 1,626 1,025 1,214 629 1,499
Instead of the target values for one-year variable remuneration and for deferrals from one-year variable remuneration required under the German Corporate Governance Code (DCGK), the figures in the table below for total remuneration indicate the remuneration figures that are required to be disclosed under the applicable accounting standards. For the one-year variable remuneration, these represent the provision for the annual bonus for 2016, adjusted for any over- or under-allocation in the previous year. With regard to the deferrals from the one-year variable remuneration, the figures represent the amounts vested and recognised in provisions in 2016.
One-year variable remuneration 227     138 242     107 188    
2014–2015 deferral 26     20     13    
2015–2016 deferral 23     17 18     14 14    
Total remuneration 1,398 1,105     1,068 1,141     809 991    
1) Includes payment into a life insurance policy.
2) The figures given for one-year variable remuneration and for deferrals from one-year variable remuneration represent the amount granted for full achievement of targets.
3) Share-based remuneration represents the fair value of the options on the date of grant. In 2016, the Board of Management members were granted a total of 147,577 options (2015: 125,657 options). Of this total, 58,446 options were granted to Dr Leube (2015: 52,357 options), 43,835 options to Dr Haase (2015: 39,268 options) and 45,296 options to Mr Wellenzohn (2015: 34,032 options). Please refer to Note 31 in the consolidated financial statements for a description of the structure of the share-based remuneration agreements. General contractual conditions are identical for all members of the Board of Management.

The following table shows the breakdown of benefits actually paid to members of the Board of Management:

Benefits paid            
  Dr Ing Helmut Leube
Chairman of the
Board of Management
Dr Margarete Haase Michael Wellenzohn
  2016 2015 2016 2015 2016 2015
€ thousand            
Fixed remuneration 725 725 580 580 520 420
Additional benefits 173 175 146 147 109 111
Total 898 900 726 727 629 531
One-year variable remuneration 227 138 107
Multi-year variable remuneration            
2014–2015 deferral 28 60 21 45 13 29
2015–2016 deferral 23 17 14
Total 51 287 38 183 27 136
Total remuneration 949 1,187 764 910 656 667

The total expense for share-based payments recognised in the reporting year amounted to €367 thousand for Dr  Leube (2015: €92 thousand), €275 thousand for Dr Haase (2015: €90 thousand) and €242 thousand for Mr Wellenzohn (2015: €73 thousand).