Remuneration of the Executive and Supervisory Boards

The remuneration report contains the principles regarding the remuneration of Vossloh AG’s Executive Board members and specifies the amount and structure of the Executive Board’s income. In addition, the report describes principles and the amount of the Supervisory Board remuneration.

Principles of Executive Board remuneration

Goals. The aim of the Executive Board remuneration system is the fair remuneration of Vossloh AG’s Executive Board members in accordance with their areas of activity and responsibility and in compliance with legal requirements.

Criteria for the appropriate level of remuneration for Executive Board members are based on each member’s function and personal performance, Vossloh AG’s economic situation, success and future prospects, and customary remuneration polices, while also taking the remuneration structure of the company and comparable corporations into account.

Classification of Executive Board member remuneration for 2016. The annual remuneration is a fixed basic salary plus variable remuneration. The variable remuneration is calculated on the basis of target remuneration defined for each Executive Board member in the case of 100 percent target attainment in terms of performance targets set by the Supervisory Board.

The details of the remuneration system are:

Basic remuneration is a fixed sum, based on the yearly salary and area of responsibility of each Executive Board member and is to be payed in twelve equal monthly installments. In addition, Executive Board members receive non-cash fringe benefits as payments in kind (PIK), which are primarily in the form of private company car use.

The performance targets of the variable remuneration are set and regularly reviewed by the Supervisory Board and are based either on financial performance indicators or personal targets. 45 percent of the target remuneration is calculated using annual performance targets (one-year bonus); the larger portion of 55 percent of the target remuneration is determined according to the achievement of multi-year performance targets (multi-year bonus). In the event of 100 percent target attainment, the variable remuneration equals the basic remuneration. The potential target attainment is capped at double the base value.

In addition, the Supervisory Board may use its discretion to set an extra bonus allocation for extraordinary performance and development.

The performance targets for the one-year bonus in financial year 2016 are EBIT, sales and working capital intensity of the Vossloh Group. The performance targets for the multi-year bonus are average sales growth and average ROCE. In addition, the Supervisory Board granted Executive Board members special bonuses for their extraordinary performance in 2015/2016, especially in connection with the successful realignment and transformation of the Vossloh Group. These comprised €550,000 for Dr. h.c. Hans M. Schabert, €385,000 for Mr. Oliver Schuster and €287,000 for Mr. Volker Schenk.

Executive Board remuneration in financial year 2016

Remuneration for the Executive Board has been assigned by name and are in compliance with the recommendations of the German Corporate Governance Code. The benefits granted also include accrued amounts for variable remuneration components that will not be paid out until 2017 and 2018. Payments in kind (PIK) cover private company car use in the amount recognized for tax purposes. No separate remuneration was received for services performed on behalf of subsidiaries. The special bonus granted for extraordinary performance is recognized within the specified multi-year variable remuneration for each period.

   Variable remuneration  
  Fixed remuneration1Fringe benefitsTotalOne-year variable remunerationMulti-year variable
remuneration
TotalBenefit expensesTotal remuneration
Benefits granted     2014 & 20152015 & 201632016 & 20174   
Dr. h.c. Hans M. Schabert
Chairman of the Executive
Board since April 1, 2014
2015500,00014,736514,736343,993306,317461,658-1,111,968212,5941,839,298
2016500,00014,736514,736252,835-100,669785,2871,138,792(54,401)*1,599,127
2016 Min.500,00014,736514,7360--00(54,401)*460,335
2016 Max.500,00014,736514,736450,000--550,0001,000,000(54,401)*1,460,335
Oliver Schuster
Executive Board Member since March 1, 2014
2015525,00021,970546,97065,795214,422305,661-585,878144,3801,277,228
2016350,00021,970371,970176,985-70,468549,701797,154161,0711,330,195
2016 Min.350,00021,970371,9700--00161,071533,041
2016 Max.350,00021,970371,970315,000--385,000700,000161,0711,233,041
Volker Schenk
Executive Board Member since May 1, 2014
2015350,00011,461361,461240,795214,422213,161-668,378141,1911,171,030
2016350,00011,485361,485176,985-70,468451,701699,154157,4731,218,112
2016 Min.350,00011,485361,4850--00157,473518,958
2016 Max.350,00011,485361,485315,000--385,000700,000157,4731,218,958

*The negative pension expenses resulted from the actuarial consideration of the Executive Board duties of Dr. h.c. Schabert.

1 Of this, €175.000 (Mr. Schuster) is a guaranteed bonus for 2015.

2 The grant of multi-year variable remuneration is dependent on the achievement of performance targets for the year in question. Target fulfillment is measured after the expiry of the contractually-defined multi-year period. The benefits were calculated on the basis of the most likely value and recognized as a provision, provided the contract was still valid.

3 The actual benefits granted for 2015 include a multi-year specified special bonus in the amount of €300,000 for Dr. h.c. Schabert, €192,500 for Mr. Schuster and €100,000 for Mr. Schenk.

4 The actual benefits granted for 2016 include a multi-year specified special bonus in the amount of €550,000 for Dr. h.c. Schabert, €385,000 for Mr. Schuster and €287,000 for Mr. Schenk.

The table below shows the receipt of remuneration in the reporting year and the previous year in accordance with the recommendations of the German Corporate Governance Code. The paid amounts for the one-year variable remuneration were allocated to the years in which they were received by the respective Executive Board members.

 Fixed remunerationFringe benefitsTotalOne-year variable remunerationMulti-year variable
remuneration2
TotalBenefit expensesTotal remuneration
Receipt     2014 & 20152015 & 20162016 & 2017   
Dr. h.c. Hans M. Schabert
Chairman of the Executive
Board since April 1, 2014
2015500,00014,736514,736187,500---187,500212,594914,830
2016500,00014,736514,736343,993306,317300,000-950,310(54,401)1,410,645
Oliver Schuster
Executive Board Member since March 1, 2014
2015525,00021,970546,97072,917---72,917144,380764,267
2016350,00021,970371,97065,795214,422192,500-472,717161,0711,005,758
Volker Schenk
Executive Board Member since May 1, 2014
2015350,00011,461361,461-----141,191502,652
2016350,00011,485361,485240,795214,422100,000-555,217157,4731,074,175

1 including the multi-year specified special bonuses received in each year

Entitlements in accordance with German GAAP (Commercial Code provisions) are as follows:

 Amount accrued for the financial yearPresent value of pension obligation
Dr. h.c. Hans M. Schabert
Chairman of the Executive Board
2015165,303258,487
2016(29,076)*229,411
Oliver Schuster
Member of the Executive Board
2015107,512171,938
201694,424266,362
Volker Schenk
Member of the Executive Board
2015103,862155,360
201694,382249,742

*The negative amount accrued for the financial year resulted from the actuarial consideration of the Executive Board duties of Dr. h.c. Schabert.

Commitments in the event of termination of duties

Retirement benefits. The members of the Executive Board have been granted entitlements to defined retirement benefits in the form of pension payments upon reaching the retirement age of 63. Depending on the years of service on the Executive Board, annual pension benefits after a minimum three-year Executive Board membership amount to one percent, or in the case of a first time contract renewal two percent, up to a maximum of 40 percent of the pensionable annual basic remuneration. In financial year 2016, a total of €159,730 was provided for the accrued balance of Executive Board members (previous year: €376,677). Upon the death of an active or former member of the Executive Board, the pension entitlement or the most recent pension paid to the surviving spouse is reduced to a maximum 60 percent.

Commitments in the event of early termination of duties. In the case of early termination of services provided by mutual consent, the Executive Board employment contracts guarantee the payment of a base salary, with a set maximum limit of two years’ salary compensation. No payment obligations are made in the event of an early termination of Executive Board duties due to a change of control.

Loans to Executive Board members. In 2016, no advances or loans were granted to any Executive Board members of Vossloh AG.

Remuneration to former Executive Board members of Vossloh AG and their surviving dependants. The remuneration in the form of pension payments to former executive officers and their surviving dependents totaled €1,105,236 (previous year: €1,082,407). Current retirement pensions are subject to adjustment respective to the collective pay trend of salaried employees in the metal and electrical industries of North Rhine-Westphalia. Pension obligations to former executive officers and members of management, as well as their surviving dependants amounted to €18,802,278 (previous year: €19,070,851). Employer pension liability insurance policies totaling €10,784,849 (previous year: €10,930,434) are pledged in each beneficiary’s favor. The balance of these pension obligations is covered by provisions.

Supervisory Board remuneration

Supervisory Board remuneration 2016. The remuneration of members of the Supervisory Board is to be determined by the Annual General Meeting and governed by the company’s articles of incorporation. The remuneration system is in compliance with German law and takes into account the responsibilities and duties of Supervisory Board members.

By resolution of the Annual General Meeting on May 28, 2014, the Supervisory Board’s remuneration was changed to an entirely fixed annual fee. Through this change, the independence required for the Supervisory Board to carry out its monitoring function was further strengthened.

Supervisory Board members receive a fixed annual remuneration for duties performed of €40,000 (gross) to be payed after the conclusion of the financial year. The Supervisory Board Chairman receives 300.0 percent and the vice-chairman 150.0 percent of the above fee. Membership for each committee is compensated by a premium of 25.0 percent each of the aforementioned remuneration amounts. The Audit Committee Chairman receives three times the additional Audit Committee membership fee. If the Supervisory Board Chairman is also a committee member, no additional fee is to be payed for his activities on the committee. At the meeting of the Supervisory Board on September 24, 2015, the members of the Nomination Committee unanimously declared that they would waive the remuneration stipulated by the Articles of Incorporation for their work on the Nomination Committee.

For financial year 2016, Supervisory Board members received a total remuneration of €410,000 for financial year 2016, (previous year: €393,334).

The table below itemizes the fees allocable to each Supervisory Board member

 20162015
Heinz Hermann Thiele (Chairman)120,000120,000
Ulrich M. Harnacke100,00060,000
Ursus Zinsli 50,00061,667
Dr.-Ing. Wolfgang Schlosser 40,00051,667
Michael Ulrich60,00060,000
Silvia Maisch 40,00040,000
Total410,000393,334

Loans to Supervisory Board members. In financial year 2016, no advances or loans were granted to any Executive Board members.

Consulting Contracts. In financial year 2016, a consulting contract was concluded with Mr. Ursus Zinsli, from which he received €44,000.