Remuneration, participation and loans

Content and method of determining compensation
The compensation of members of the Board of Directors, except for the Delegate of the Board of Directors, is set out in Article 18 of the Articles of Incorporation. This states that, in return for their work, the members of the Board of Directors shall receive a fixed compensation independent of retained earnings. This is paid annually in cash after the Shareholders’ General Meeting. The remuneration paid to the members of the Board of Directors is assessed by the Chairman and Delegate of the Board of Directors. The compensation is reviewed annually and adjusted as necessary.

All components of the compensation of the Delegate of the Board of Directors are decided on annually by the Chairman of the Board of Directors. The Delegate of the Board of Directors determines the compensation of the Executive Committee annually.

The Delegate of the Board of Directors and the members of the Executive Committee (management) are paid in accordance with their individual employment contracts. The compensation comprises a fixed and a variable remuneration, as well as social security and pension payments. The company also provides members of the management with a company car for business and private use. The fixed remuneration is determined based on job profile, qualifications and market conditions. The annual variable compensation level for members of the Executive Committee, except the CEO, COO and CFO, is determined based on income and return on capital targets, the basic features of which are as follows: the return on capital targets are derived from the weighted average costs of capital (WACC), which also correspond to the required minimum return on new projects and investments in the Phoenix Mecano Group. For these Executive Committee members, variable remuneration is capped at 140% of the target bonus. There is no penalty system. Typically, a total of 80% to 90% of the variable remuneration components are based on quantitative targets, half relating to income (EBIT) and half to return on capital employed (ROCE). 10% to 20% are based on personal, qualitative targets, set annually by the Delegate of the Board of Directors. Achievement of these targets is assessed by the Delegate in a discretionary decision. For the CEO, COO and CFO, the variable compensation is based on the Group’s result of the period less a minimum return on equity. Variable remuneration typically accounts for between 20% and 50% of the total, and in some cases may exceed this. In the reporting year, the management’s variable remuneration amounted to between 11% and 50% of the fixed remuneration. The variable remuneration of the Delegate of the Board of Directors is detailed in the Phoenix Mecano AG financial report on page 151. In 2009, the model was expanded to include a long-term component. Under this system, variable remuneration components of Executive Committee members, excluding the CEO, COO and CFO, over a three-year period will only be paid if the respective division’s return on capital employed (ROCE) is higher than 15% (12% in some cases).

If this minimum rate of return is not achieved within a three-year period, the entitlement to variable remuneration is lost without substitution.

There are no participation programmes for members of the Board of Directors and/or the Executive Committee. Accordingly, during the year under review no shares, convertible loans, options, participation certificates or such like were issued or awarded to members of the Board of Directors, management or employees.

Neither external consultants not benchmark studies are consulted when setting compensation.

Remuneration of former members of the Group’s bodies
The Phoenix Mecano Group’s consolidated statement of income for 2011 includes no remuneration for former members of the Group’s bodies who left in the preceding period or before.

Share allocations during the reporting year
No shares were allocated.

Options
No options were organised.

Additional fees and allowances
No additional fees or allowances were owed or paid out to members of the Group’s bodies or persons closely connected to them.

Loans to corporate officers
No loans were made to corporate officers.

Maximum overall remuneration
The maximum overall remuneration is listed in the section entitled “Remuneration of serving members of the Group’s bodies” (see table below, further information can be found in the Phoenix Mecano AG financial report on page 151).

More information can be found in the Phoenix Mecano AG Financial Report in the Annual Report 2011.