Compensation Report

Report on Executive Board Compensation

The following compensation report is part of the combined management report and of the audited consolidated financial statements.

The full Supervisory Board, following preparation by the Executive Committee, is responsible for determining the individual compensation paid to members of Wacker Chemie AG’s Executive Board.

The compensation system in effect since January 1, 2010 is in accordance with the legal requirements of the German Act on the Appropriateness of Management Board Compensation (VorstAG) as per August 2009.

The Executive Board’s compensation was comprised of the following key components:

(I) A fixed annual salary:

The fixed annual salary is paid monthly in identical installments.

(II) A variable, performance-related bonus:

The amount of the variable bonus, which is paid annually and retrospectively, depends on the attainment of agreed annual Group targets set by the Supervisory Board for all Executive Board members with regard to the following key indicators: business value contribution, cash flow and target return. The bonus is calculated based on goal achievement in 2011, as well as on average overall target attainment for 2010 and 2009. The calculated goal bonus in the event of 100-percent target attainment during the evaluation period amounts to 180 percent of the average annual base salary in the last year of the evaluation period, whereas the maximum bonus totals 220 percent of the average annual base salary in the last year of the evaluation period. Thus, the Supervisory Board has the discretion to increase or reduce the calculated bonus based on overall recognition of all circumstances, including individual performance within a specified framework. The Executive Board members are obligated to purchase Wacker Chemie AG shares in the amount of 15 percent of their annual gross bonus. A holding period of two years is in effect for these shares. In 2010, shares already held were eligible for inclusion in this mandatory share investment.

(III) A contribution to retirement benefits:

The members of the Executive Board become entitled to the payment of an annual retirement pension should the event insured against occur, i.e. when the member in question reaches retirement age or becomes afflicted by permanent occupational disability. Before the event insured against occurs, Dr. Rudolf Staudigl, Dr. Joachim Rauhut and Dr. Wilhelm Sittenthaler have a basic entitlement to the premature payment of an annual pension if they leave the Executive Board against their will without good cause or if they, of their own accord, cease their activity for good cause, the company being responsible for said cause. The amount of the retirement pension, which, like the fixed annual salary, is not performance related, is determined by the amount of the last annual salary to be drawn and the duration of Executive Board membership. A percentage of the base salary is defined as a basic amount and adjusted by means of an annual percentage rate of increase for each year of service.

The company grants the members of the Executive Board appropriate insurance coverage, in particular D&O insurance, with a deductible in accordance with “VorstAG” stipulations.

The table below lists the current level of each Executive Board member’s compensation:

Report on Supervisory Board Compensation

The compensation of Wacker Chemie AG’s Supervisory Board members is governed by the company’s Articles of Association.

In accordance with the compensation system in effect until December 31, 2010, the members of the Supervisory Board received for their work fixed annual compensation in the amount of €25,000 payable upon the fiscal year’s expiration. Supervisory Board members who joined, or departed from, the Supervisory Board during the ongoing fiscal year under review received the appropriate pro rata compensation.

In addition to their fixed compensation, the members of the Supervisory Board received performance-related compensation for the past fiscal year based on the percentage return on assets¹ after the annual financial statements had been adopted. The performance-related compensation could have been between zero and 125 percent of the fixed annual compensation.

The compensation system in effect until the end of fiscal 2010 was revised by a resolution of the Annual Shareholders’ Meeting of May 18, 2011, effective January 1, 2011, and the Articles of Association were adjusted accordingly.

The aim was to ensure that Supervisory Board members maintain a high level of independence and take account of the work load – irrespective of business success – and the risk of liability for Supervisory Board members. For further details, refer to Declaration of Conformity – section f

The following changes were enacted:

i) The performance-related compensation for Supervisory Board members was rescinded.
ii) The fixed compensation for Supervisory Board members and flat fees were increased.

In return for their work, the members of the Supervisory Board receive fixed annual compensation in the amount of €70,000 payable when the fiscal year expires. Supervisory Board members who join, or depart from, the Supervisory Board during the ongoing fiscal year receive the appropriate pro rata compensation.

According to both the old and new arrangement, compensation is multiplied by a factor of 3 for the Chairman of the Supervisory Board, by a factor of 2 for the Vice Chairman and for committee chairmen, and by a factor of 1.5 for members of committees. This arrangement does not take account of double and multiple functions.

The members of the Supervisory Board are compensated for any outlays incurred in connection with the execution of their duties with an annual lump sum of €18,000 (2010: €12,000). They are additionally refunded any VAT payable on their compensation.

The company grants the members of the Supervisory Board appropriate insurance coverage; in particular, the company concludes a D&O insurance policy for the benefit of the Supervisory Board’s members.

¹ Definition of the return on assets for this purpose: the percentage ratio of earnings before interest and taxes to the capital employed in accordance with IFRS consolidated financial statements, with the capital employed corresponding to the total of current and noncurrent assets less liquidity.