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METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 8. REMUNERATION REPORT A severance package agreement was also concluded with Mr Unger, who amicably agreed to leave the Management Board as at 30 September 2010. This agreement includes both a fixed and a variable component. The fixed component covers the entitlements of Mr Unger arising from his employment contract and makes allowance for the growth of performanceand share-based remuneration components based on conservative estimates. In 2010, the variable components of the severance agreement resulted in additional remuneration derived from the Company’s business success and can also result in further compensation from 2011 to 2012. As a variable severance agreement, Mr Unger is entitled to – in a manner similar to the agreement with Mr Mierdorf – the potential difference between total performance-based remuneration that he would have received as a member of the Management Board and the amount already paid as part of the severance agreement. Mr Unger was also granted secretarial support for an appropriate transitional period. Agreements to terminate the employment contracts of members of the Management Board in 2010 Severance agreements €1,000 Fixed component Variable component 2010 Additions to provisions for variable component in subsequent years 1 Zygmunt Mierdorf 13,007 329 2,544 Thomas Unger 6,179 114 1,269 1 discounting according to IFRS Total compensation of former members of the Management Board in 2010 Benefits totalling €27.4 million (previous year: €4.3 million) were provided to former members of the Management Boards of METRO AG and the companies that were merged into METRO AG as well as to their surviving dependants. The described benefits provided after the end of employment in the financial year 2010 to Zygmunt Mierdorf and Thomas Unger who left their positions on the Management Board are included in this figure. The cash value of provisions for current pensions and pension entitlements amounted to €48.3 million (previous year: €47.4 million). Outlook: continued refinement of the remuneration system for the Management Board Acting upon the recommendation of its Personnel Committee, the Supervisory Board of METRO AG decided in the finan- → p. 114 cial year 2010 to refine the remuneration system for the ManagementBoard.Asbefore,remunerationfortheManagement Board will consist of a fixed salary and two variable components: performance-based compensation (short-term incentive) and the long-term incentive. Pension provisions and supplemental benefits will also continue to be provided. A change was made to the relative weighting of the remuneration components (fixed salary, short-term incentive and long-term incentive). The future ratio of these components will be 30 : 30 : 40. To achieve this ratio, the fixed salary for an ordinary member of the Management Board will generally total €900,000 (previous total €800,000). The short-term incentive based on the performance metrics RoCE and net earnings was lowered. As a rule, an ordinary member of the Management Board now receives €625 (previous total: €1,400) per 0.01 percentage points of RoCE exceeding 7 percent and €380 (previous total: €850) per €1 million of net earnings. To maintain the personal performance aspect of Management Board remuneration, the Supervisory Board of METRO AG retains the general right to reduce the individual short-term incentive based on RoCE and net earnings by up to 30 percent or to increase it by up to 30 percent each year as it sees fit. The payout for the short-term incentive based on net earnings and RoCE continues to be capped at €2.6 million a year for an ordinary member of the Management Board. The target value of the annual long-term incentive regularly totals €1.2 million (previous total €0.5 million) for an ordinary member of the Management Board. The payout cap continues to be five times the target value. In a reflection of the new weighting of the fixed salary, shortterm incentive and long-term incentive, the assessment level for pension provisions was redefined as well. It now totals €1.8 million (previous total: €1.6 million) for an ordinary member of the Management Board. The pending changes in the remuneration system for the Management Board do not apply to the current employment contracts of members of the Management Board of METRO AG. In October 2010, a new employment contract was concluded with Mr Muller. This contract will take effect on 1 August 2011 and incorporates the new remuneration system.
METRO GROUP : ANNUAL REPORT 2010 : BUSINESS → GROUP MANAGEMENT REPORT : 8. REMUNERATION REPORT The benchmark figures used in the new remuneration system are based on mid-range company planning, which is subject to change. In accordance with laws and in the interest of the Company, the Supervisory Board is obligated to set the amount of Management Board remuneration in individual instances and not rely solely on fixed specifications. For this reason, the terms contained in the future employment contracts of members of the Management Board of METRO AG can deviate from the rules described here. As a supplementary change to the new remuneration system, the Supervisory Board decided in October 2010 that the appointment periods and the length of the employment contracts of members of the Management Board will generally be three years in future. The modified remuneration system for members of the Management Board complies with the requirements of the German Stock Corporation Act and the recommendations of the German Corporate Governance Code. Pursuant to § 120 Section 4 of the act, the Management Board and the Supervisory Board of METRO AG will submit the remuneration system to the Annual General Meeting in 2011 for approval. Share-based compensation of executives Pursuant to the recommendation in Subsection 7.1.3 of the German Corporate Governance Code, the share-based compensation of executives of METRO GROUP will also be reported in the following section. Share bonus programme 2004–2008 In addition to members of the Management Board, other executives of METRO AG as well as managing directors and executives of METRO GROUP companies are eligible for this programme. The conditions of the tranches for 2007 to 2008 are shown in the following table: Tranche Due date Base price Target price Total manager target bonus 2008 July 2011 €41.92 €48.21 €15,635,000 2007 July 2010 €61.61 €70.85 Expired Performance share plan 2009–2013 The performance share plan 2009–2013 applies not only to the members of the Management Board, but also to other executives of METRO AG as well as to managing directors → p. 115 and executives of METRO GROUP companies. Under this scheme, eligible managers are given an individual target amount for the performance share plan (target value) in accordance with the significance of their functional responsibilities. The additional rules of this plan correspond to provisions for the Management Board. with the performance share plan, the share ownership guidelines were also applied to this group of eligible individuals. The required investment volume generally amounts to about 50 percent of the individual target value. The value of the performance shares allotted in 2010 amounted to a total of €25.0 million (previous year: €31.6 million) at the time of the allotment and was calculated by external experts using recognised financial-mathematical methods (Monte Carlo simulation). The conditions are shown in the following table: Tranche End of the blocking period Three-month average share price prior to allotment date Number of manager performance shares 2010 August 2013 €42.91 718,015 2009 August 2012 €36.67 737,115 Compensation of members of the Supervisory Board Remuneration of members of the Supervisory Board is regulated by § 13 of METRO AG’s Articles of Association. In add-ition to reimbursement of cash expenses, the members of the Supervisory Board of METRO AG receive a fixed payment and a performance-based payment. Fixed compensation amounts to €35,000 for every ordinary member of the Board. The performance-based remuneration component is based on earnings before taxes and minority interests (EBT) in the METRO AG financial statements. Each member of the Supervisory Board receives €600 per €25 million in EBT exceeding an average EBT of €100 million for the financial year 2010 and the two preceding years. For the financial year 2010, performance-based remuneration totalled €30,360 for each ordinary member. The sales tax payable to the fixed and performance-based compensation is reimbursed to the members of the Supervisory Board in accordance with § 13 Section 5 of METRO AG’s Articles of Association.
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