Compensation system for the Board of Management

A new compensation system has been implemented for the Board of Management of Dürr AG effective January 1, 2021. It was prepared under the guidance of the Supervisory Board’s Personnel Committee and adopted by the Supervisory Board on September 30, 2020. The three members of the Board of Management agreed to an amendment to their service contracts, such that the new compensation system can be applied from the beginning of 2021. The new compensation system was submitted to the Annual General Meeting on May 7, 2021 for approval by the shareholders and adopted by a large majority. Details of the new compensation system can be found in our → Annual Report 2020 or in the → invitation to the Annual General Meeting.

In 2020, the compensation of the Board of Management was still based on the old system that has been in place since 2010 as described below.

The compensation for the Board of Management consists of non-performance-related and performance-related (variable) components. The non-performance-related component is made up of the basic compensation (fixed compensation) payable in equal monthly installments, plus fringe benefits. The latter include the use of a company car, for example.

Performance-related compensation is based on short-term and long-term incentives; special bonuses may also be paid. The short-term incentive (STI) is calculated by multiplying the Group's earnings before tax minus €100 million by an individually defined factor. The STI payment is subject to a cap and is only applicable if the Group's EBT exceeds the minimum threshold of €100 million.

Temporary adjustments in 2020

With a view to the great importance of having sufficient liquidity to overcome the crisis, the Supervisory Board in 2020 made temporary adjustments to the compensation system for the Board of Management. On May 28, it decided to tie part of the Board of Management’s variable compensation for the year 2020 to the target of securing liquidity. Moreover, the Supervisory Board took account of the fact that, while the extraordinary economic impact of the pandemic was beyond the Board of Management’s control, its variable compensation would have been unreasonably impacted without adjustments to the compensation system. For this reason, the modifications made by the Supervisory Board to the compensation system aimed to reasonably limit the reduction in the variable compensation payable to the Board of Management. In this way, the Supervisory Board considered the decline in earnings caused by the pandemic as well as the special challenges faced by the Board of Management in mitigating its consequences for the Dürr Group. Specifically, the Supervisory Board made the following adjustments in 2020:

• A liquidity-related target was temporarily added to the variable compensation system. The cash key performance indicator (KPI) defined for this purpose provided for a one-off payment to the members of the Board of Management, provided that total liquidity (cash and cash equivalents plus time deposits) exceeded a minimum threshold of €300 million as of December 31, 2020. The amount of the one-off payment was tied to the amount by which total liquidity exceeded the minimum threshold and was capped at €700 million, beyond which there was no further increase in the one-off payment. Total liquidity of €300 million or less corresponded to a target achievement of 0%. The target achievement equaled 100% for total liquidity of €500 million and was capped at 140% upon total liquidity reaching €700 million. As total liquidity amounted to €1,019.0 million as of December 31, 2020, each member of the Board of Management therefore received the individually determined maximum amount for the cash key performance indicator.
   
• In the STI system, the minimum threshold of €100 million described above for earnings before tax (EBT) was temporarily suspended. This created the basis for making an STI payment to the members of the Board of Management even in the case of an EBT of less than €100 million. The individual factors for determining the STI amounts were not modified in connection with the temporary adjustment. The cap for the STI payment for 2020 was 90% of the STI amount for 2019.

The compensation payable under the long-term incentive (LTI) scheme is based on the development of Dürr’s share price and the Group’s average EBIT margin over a three-year period (LTI period). The LTI scheme operates on a rolling basis. Each year a specified number of virtual Dürr shares are issued, known as performance share units. In 2020, the following performance share units were issued: 50,000 for Ralf W. Dieter, 10,000 for Dr. Jochen Weyrauch, 8,000 for Mr. Paasivaara and 5,640 for Mr. Heinrich. The amount payable at the end of the three-year LTI period is calculated by multiplying the number of performance share units by a share price multiplier and an EBIT multiplier. The LTI payment and the EBIT multiplier are subject to caps.