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Compensation of the Board of Management

(fiscal 2018)


Structure of the compensation


The structure of the compensation system and the level of
compensation for the members of the Board of Management are
determined by the Supervisory Board, after preparation by the
Presidial Committee. The appropriateness of the compensation is
regularly reviewed by an external personnel consulting company.
The criteria for determining the appropriateness of the compensation
for an individual Board of Management member include,
in particular, his duties, his personal performance, the economic
situation, and the success and sustainable growth of the LANXESS
Group. In addition, consideration is also given to compensation at
comparable companies and the company’s overall compensation
structure with regard to the ratio between the compensation of the
Board of Management and that of LANXESS’s senior executives
and the rest of the workforce, both overall and in terms of time.
The compensation structure is also designed to be competitive
in the international market for highly qualified executives and
provide the motivation to successfully work toward sustainable
corporate development. Two of the three variable components
are measured according to corporate performance over several
years, and thus set long-term incentives.

The compensation system that was introduced for members
of the Board of Management in 2010 was approved by the Annual
Stockholders’ Meeting of LANXESS AG on May 28, 2010, with
a majority of 99.10% of the capital represented. The company
intends to allow the 2020 Annual Stockholders’ Meeting to vote on
the compensation system after the ongoing legislative procedure
regarding the Second Shareholder Rights Directive Implementation
Act (ARUG II) is complete and the new version of the German
Corporate Governance Code (GCGC) is adopted.

Components of the compensation

The components of the compensation for members of the
Board of Management are the base salary; the short-term and
long-term variable components, which are the Annual Performance
Payment (APP), the Long-Term Stock Performance Plan (LTSP)
and the Long-Term Performance Bonus (LTPB); and a retirement
pension. The three variable components APP, LTSP and LTPB
are linked to LANXESS’s annual performance and performance
over a number of years. The average compensation mix of 33%
annual base salary and 67% variable compensation components,
assuming 100% target attainment, is strongly aligned with the
company’s performance and long-term value creation. The present
service contracts for members of the Board of Management
set out the annual base salary and caps on the amounts for the
variable compensation components. Currently, the contracts do
not provide for a separate cap, exceeding the aforementioned,
on total compensation, even taking into account a possible discretionary
bonus.
Changes to the existing Board of Management contracts are
planned in the near future. Please see “Other” in the compensation
report for details.

 

The Supervisory Board intends, with the consent of the members
of the Board of Management, to amend the members of
the Board of Management’s service contracts for 2019, in order
among other things to more closely meet the demand for long-term
Board of Management compensation. The following changes are
to be made in particular:

›› The total compensation for the members of the Board of
Management is to be capped in the future.
›› The size of the contributions to the company pension plan
and the compensation in kind is not to exceed a defined
proportion of the annual base salary.
›› The Supervisory Board’s granting of an ad hoc discretionary
bonus to recognize special achievements or to create an
additional
performance incentive is to be limited to a maximum
amount.
›› The LTPB is to be altered in the future to assess target attainment
in three consecutive fiscal years.
›› The Supervisory Board reserves the right to withhold or
reclaim (“claw-back”) the granted variable compensation in
full or in part in the event of grave dereliction of duty.


The company  intends to allow the 2020 Annual Stockholders’ Meeting to vote on the compensation system after the ongoing legislative procedure regarding the Second Shareholder Rights Directive Implementation Act (ARUG II) is complete and the new version of the German Corporate Governance Code (GCGC) is adopted.