Remuneration 2020
Fundamentals of the Board of Management compensation system
The structure of the compensation system and the level of compensation for the members of the Board of Management are determined by the Supervisory Board, after preparation by the Presidial Committee. The appropriateness of the compensation is regularly reviewed by an external personnel consulting company. Such a review was last conducted in fiscal year 2019. In this review, the compensation of the Board of Management was compared with that of the companies listed in the MDAX and with that of selected chemical peer companies[1]). These companies were selected by the Supervisory Board on the basis of their comparability with regard to business model, sales, market capitalization, total assets and headcount. The criteria for determining the appropriateness of the compensation for an individual Board of Management member include, in particular, his duties, his personal performance, the economic situation, and the success and sustainable growth of the LANXESS Group. In addition, consideration is also given to compensation at comparable companies and the company’s overall compensation structure with regard to the ratio between the compensation of the Board of Management and that of LANXESS’s senior executives and the rest of the workforce, both overall and in terms of time.
The aim of the compensation system is to support successful and sustainable corporate governance. LANXESS’s compensation structure is therefore designed to provide the motivation to successfully work toward sustainable corporate development. Two of the three variable components are measured according to corporate performance over several years, and thus set long-term incentives. Because one of these multi-year compensation components measures stock price development compared with an index, the management’s objectives are aligned with the direct interests of the shareholders.
The compensation system that applied to the past fiscal year 2020 was approved by the Annual Stockholders’ Meeting of LANXESS AG in 2010.
In fiscal year 2020, the Supervisory Board revised and updated the compensation system on the basis of the Second Shareholder Rights Directive Implementation Act (ARUG II) and the new version of the German Corporate Governance Code (GCGC) of December 16, 2019. This new compensation system has applied since January 1, 2021. The Board of Management and Supervisory Board will present it for the approval of the 2021 Annual Stockholders’ Meeting in accordance with the requirements of ARUG II (“say on pay”).
[1]) The reference group comprised the following companies: AkzoNobel, Beiersdorf, Clariant, Covestro, Evonik, Henkel, K+S, Linde, Lonza, Merck, Royal DSM, Solvay, Symrise, Wacker Chemie.
Components of the compensation
The components of the compensation for members of the Board of Management are the base salary; the short-term and long-term variable components, which are the Annual Performance Payment (APP), the Long-Term Stock Performance Plan (LTSP) and the Long-Term Performance Bonus (LTPB); and a retirement pension. The three variable components APP, LTSP and LTPB are linked to LANXESS’s annual performance and performance over a number of years and thus reward the sustainable, value-oriented development of the company. The average compensation mix of 31% annual base salary and 69% variable compensation components, assuming 100% target attainment, is strongly aligned with the company’s performance and long-term value creation.
(fiscal year 2020)
The compensation of the Supervisory Board is governed by Section 12 of the company’s articles of association. It was last adjusted by the 2020 Annual Stockholders’ Meeting in order to appropriately account for the increased significance of the Nominations Committee and the associated time commitment.
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. Supervisory Board members who belong to a
committee other than the Nominations Committee receive one half of the fixed
compensation amount in addition. Supervisory Board members who belong to the
Nominations Committee receive one eighth 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. No additional compensation is granted for membership in the
Committee to be formed pursuant to Section 27 Paragraph 3 of the
German Codetermination Act or for chairing the Nominations Committee. 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. 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.
LANXESS AG’s Annual Stockholders’
Meeting on May 23, 2019, resolved to change the Supervisory Board compensation
to fixed compensation only. The former long-term, sustainability-focused
variable compensation component was rescinded, without the fixed compensation
being increased at the same time. The assessment period for calculating the
variable compensation provided for in the articles of association until the
2020 Annual Stockholders’ Meeting ended at the end of the 2020 Annual
Stockholders’ Meeting. Payment of the variable compensation until the end of
the assessment period depended on how LANXESS’s stock performed 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 were 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 ended. The variable compensation was
only payable if the stock had outperformed the benchmark index. No variable
compensation was paid out in fiscal year 2020. The provision for the variable
compensation component was reversed and was valued at €0 thousand
(previous year: €1,670 thousand) as of December 31, 2020.
In May 2020, the Supervisory Board
members serving at that time voluntarily waived 20% of their fixed compensation
for fiscal year 2020 in response to the challenges of the coronavirus pandemic.
The Supervisory Board members’ waiver did not include the compensation for
their committee work.
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.
