Remuneration

In order to give Board of Management compensation a more long-term basis and to meet the expected requirements of the legislative procedure regarding the Second Shareholder Rights Directive Implementation Act (ARUG II), which was still ongoing at the time, and to comply with certain recommendations of the proposed new version of the GCGC, the Supervisory Board adjusted the Board of Management members’ service contracts in fiscal year 2019 with retroactive effect as of January 1, 2019. The following changes were made:

• The total compensation for the members of the Board of Management was capped.
• The size of the contributions to the company pension plan and the size of compensation in kind were capped to a certain percentage of the annual base salary.
• The Supervisory Board’s granting of an ad hoc discretionary bonus to recognize special achievements or to create an additional performance incentive was limited to a maximum amount.
• The LTPB was altered to assess target attainment over three consecutive fiscal years instead of two.
• The Supervisory Board reserves the right to withhold or reclaim (“claw-back”) the granted variable compensation in full or in part in the event of grave dereliction of duty.

Now that the legislative procedure regarding ARUG II has been concluded and on the basis of the new version of the GCGC of December 16, 2019, published in this context but not yet in force, the Supervisory Board will revise the compensation system over the course of 2020 and present it for the approval of the 2021 Annual Stockholders’ Meeting in accordance with the requirements of ARUG II (“say on pay”).

(fiscal 2019)

The compensation of the Supervisory Board is governed by Section 12 of the company’s articles of association. The members of the Supervisory Board of LANXESS AG receive fixed compensation of €80 thousand per year. The Chairman of the Supervisory Board receives three times, and the Vice Chairman one and a half times, this amount. Serving as the chair or a member of Supervisory Board committees is compensated separately in accordance with the German Corporate Governance Code.

Compensation of committees/mandates

Supervisory Board members who belong to a committee receive one half of the fixed compensation amount in addition. The chair of the Audit Committee receives a further half. Supervisory Board members who chair a committee other than the Audit Committee receive a further quarter. However, no member may receive in total more than three times the fixed compensation amount. Supervisory Board members are reimbursed for their expenses in addition and also receive an attendance allowance of €1.5 thousand for each Supervisory Board meeting and each committee meeting they attend, with the exception of meetings of the Committee formed pursuant to Section 27, Paragraph 3, of the German Codetermination Act and meetings of the Nominations Committee. With respect to their membership on the supervisory boards of LANXESS Group companies, the members of the Supervisory Board are remunerated only for their service on the Supervisory Board of LANXESS Deutschland GmbH in the amount of €5 thousand each.

Long-term incentive compensation

The Supervisory Board members also receive a long-term incentive based on the company’s performance during the standard term of an individual’s membership on the Supervisory Board (five years). Unlike the fixed compensation component, this variable compensation component is not paid every year, but only once at the end of the standard term of office. If a Supervisory Board member serves a shorter term, the amount is prorated.

Payment of the variable compensation depends on how LANXESS’s stock performs relative to the Dow Jones STOXX 600 ChemicalsSM during a member’s five-year term. The average price of LANXESS stock and the average level of the index during the 90 trading days prior to the Annual Stockholders’ Meeting at which the Supervisory Board members were elected are each compared with the respective average for the 90 trading days prior to the Annual Stockholders’ Meeting at the conclusion of which the members’ terms end. The variable compensation is only payable if the stock has outperformed the benchmark index.

The exact amount of the variable compensation depends on the extent to which the stock price outperformed the benchmark index in the preceding five years. If LANXESS stock has outperformed the Dow Jones STOXX 600 ChemicalsSM by up to ten percentage points, the variable compensation amounts to €50 thousand for this five-year period; if it has outperformed the index by between 10 and 20 percentage points, €100 thousand is paid, and if the degree of outperformance is greater than this, the compensation is €150 thousand.

LANXESS AG’s Annual Stockholders’ Meeting on May 23, 2019, resolved to change the Supervisory Board compensation to fixed compensation only. The former performance-based variable compensation, for which the relevant assessment period ends at the end of the company’s Annual Stockholders’ Meeting in 2020, was abolished. Despite the discontinuation of the performance-
based compensation, the fixed compensation was not increased.

No variable compensation was paid out in fiscal year 2019.

The expected compensation payable for the current terms of office of Supervisory Board members was valued at €1,670 thousand (previous year: €1,310 thousand) as of December 31, 2019, and recognized as a provision.

None of the members of the Supervisory Board received benefits for services provided personally during the reporting period. No loans or advances were granted to members of the Supervisory Board during the reporting year.