2011 Annual Report - OTCIQ.com

The Supervisory Board, at its discretion, determines the
degree to which Board of Management members have met
the targets of the individual-performance portion of their
annual bonus. In making this determination, the Supervisory
Board pays particular attention to the criteria of Section 87
of the AktG and to the Code.
The maximum bonus that can be attained is 200 percent of the
target bonus. The minimum bonus paid is equal to 30 percent
of the target bonus (except in the case of Mrs. Stachelhaus
and Mr. Kildahl, who were appointed to the Board of Management
in 2010).
Thirty percent of the total annual bonus (individual target
attainment multiplied by the value-added factor) is based on
target achievement for the prior financial year (a single-year
performance metric). The remaining 70 percent of the total
annual bonus (EBITDA target attainment multiplied by the
value-added factor) is calculated as follows: Half (that is, 35 percent
of the total annual bonus) is based on the prior financial
year. The other half (that is, the other 35 percent of the total
annual bonus) is a three-year performance metric based on
EBITDA target attainment and the value-added factor for the
previous financial year and the two subsequent years. This
portion of the annual bonus will be calculated and paid out
based on target attainment for the previous financial year.
However, this portion of the bonus is preliminary and is subject
to partial repayment if there are negative developments in
the subsequent years. This portion of the annual bonus is definitively
set at the end of the two-year period following the
baseline year. If the three-year average for target attainment
is higher than the preliminary calculation for the one-year
period, then Board of Management members receive an additional
bonus payment (bonus). If it is lower, they are required
to pay back the resulting difference or have it deducted from
their next bonus (malus or negative bonus).
Since 2010, more than 60 percent of the Board of Management’s
variable compensation (which consists of the annual bonus
and long-term variable compensation) is based on long-term
performance metrics, thereby ensuring that this variable
compensation is sustainable. The sustainability requirement
is also reflected by the fact that the Supervisory Board considers
the criteria of Section 87 of the AktG and the Code when
it determines the individual performance portion of the
annual bonus.
CEO Letter
E.ON Stock
Combined Group Management Report
Consolidated Financial Statements
Corporate Governance Report
Supervisory Board and Board of Management
Tables and Explanations
Long-Term Variable Compensation
The long-term variable compensation component that Board
of Management members receive is stock-based compensation
under the E.ON Share Performance Plan. The Supervisory
Board decides each year on the allocation of new tranches,
including the respective targets and the number of rights
granted to individual members of the Board of Management.
To ensure that this compensation is sustainable within the
meaning of VorstAG, all performance rights allocated under
the plan since 2010 have a vesting period of four years.
The dependence of this compensation on E.ON’s stock price
serves to bring together management’s and shareholders’
interests and objectives. This effect is enhanced by the requirement
that Board of Management members have to invest in
E.ON stock themselves. The factoring in of an internal valueadded
factor underscores the plan’s close alignment with
the Company’s interests. Payout under the plan only occurs if
minimum internal target parameters, which are set by the
Supervisory Board prior to allocation, are achieved.
Starting with the sixth tranche of performance rights allocated
in 2011, the value of performance rights is based in part on a
60-day average of E.ON’s stock price and in part on the average
ratio of ROACE to WACC plus, per tranche, a premium stipulated
by the Supervisory Board. If this hurdle is not reached, the
value-added factor is 0 percent, and there is no payout. If
the hurdle is reached, the value-added factor is 75 percent. If
the hurdle is exceeded, a linear function is used to calculate the
value-added factor, which is limited to a 150-percent maximum.
Extraordinary events and changes in E.ON’s portfolio (acquisitions
and disposals of significant assets or government
interventions such as the forced shutdown of some nuclear
power stations in Germany) are not factored into the determination
of the value-added factor.
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