Compensation Report

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

Compensation System for the Executive Board

On the basis of preparatory input from the Executive Committee, the full Supervisory Board is responsible for determining the individual compensation paid to members of Wacker Chemie AG’s Executive Board.

In accordance with the Executive Board compensation system in effect since January 1, 2010, the Executive Board’s compensation comprises the following key components:

(I) A fixed annual salary:

The fixed annual salary is paid in equal monthly installments.

(II) A variable, performance-related bonus:

The amount of the variable bonus (long-term bonus), which is paid annually and in arrears, depends on the achievement of agreed annual Group targets set by the Supervisory Board for all Executive Board members. The bonus is calculated based on target achievement in the reporting year, as well as on average overall target achievement in the two years prior to the reporting year. The targets are based on the following key indicators: business value contribution, cash flow, target return, and return on capital employed (ROCE). The computational target bonus in the event of 100-percent target achievement during the evaluation period depends on the Executive Board member in question and amounts to either 180 percent or 140 percent of the average annual base salary in the last year of the evaluation period. The maximum bonus, too, depends on the specific Board member and amounts to either 220 percent or 180 percent of the average annual base salary in the last year of the evaluation period. The Supervisory Board thus has the discretion to increase or reduce the calculated bonus by as much as 30 percent, taking into account all circumstances and the Executive Board member’s individual performance. The Executive Board members are obligated to purchase Wacker Chemie AG shares for an amount equal to 15 percent of their annual gross bonus and to hold these for at least two years. First of all, the annual gross bonus is calculated, 15 percent of which is invested in shares. Any taxes payable are deducted from the remaining 85 percent of the annual gross bonus and the net amount disbursed to the Executive Board members. As a result, around 30 percent of the annual net bonus is accounted for by the stock component and has a forward-looking, multiyear assessment basis. The exact percentage depends on each Executive Board member’s personal tax situation.

(III) A contribution to retirement benefits:

The members of the Executive Board are entitled to payment of an annual retirement pension should the event insured against occur, i. e. reaching retirement age or suffering permanent occupational disability. The amount of the pension is calculated on the basis of the last pensionable fixed annual salary received and the length of Executive Board membership. A percentage of the pensionable base salary is defined as a basic amount and adjusted by means of an annual percentage rate of increase for each year of service. Entitlement to a pension presupposes at least five years of service on the Executive Board. Since 2016, increases in the annual salaries of Dr. Rudolf Staudigl and Auguste Willems have taken the form of additional fixed, non-pensionable salary components and thus have no influence on the calculation of their pensions – though they do have an effect on the calculation of their long-term bonuses (see (II) above).

The company grants the members of the Executive Board appropriate insurance coverage, in particular D & O insurance, with a deductible as stipulated in the German Stock Corporation Act (AktG).

If they leave the company, Executive Board members are subject to a twelve-month obligatory waiting period, during which they are paid competitive-restriction compensation. The competitive-restriction compensation is calculated as 50 percent of the member’s latest overall annual compensation (average of the last three years). Any pension received is set off against the competitive-restriction compensation.

If Executive Board membership is prematurely terminated without good cause, the contracts with Executive Board members specify that any compensatory payments shall be limited to a maximum of two full annual salaries. This is referred to as the severance payment cap.

Total Compensation for the Members of the Executive Board for 2018

The current level of each Executive Board member’s compensation is listed in the tables below, which follow the model tables recommended by the German Corporate Governance Code.

With effect from October 1, 2018, Dr. Rudolf Staudigl’s gross fixed annual salary was increased from €840,000 to €880,000. This increase took the form of an additional fixed, non-pensionable salary component and thus has no influence on the calculation of his pension. It is taken into account, however, when calculating the long-term bonus.

With effect from November 1, 2018, Dr. Christian Hartel’s gross fixed annual salary was increased from €400,000 to €580,000. At the same time, the parameters for the target bonus were amended as follows: as of November 1, 2018, the computational target bonus in the event of 100-percent target achievement during the evaluation period amounts to 180 percent (January through October 2018: 140 percent) of the average annual base salary. The maximum bonus amounts to 220 percent (January through October 2018: 180 percent) of the average annual base salary.

All of the above-mentioned increases applied pro rata temporis for the year 2018.

The following table shows the payments for fiscal 2018 from fixed compensation, additional benefits and variable compensation, as well as pension expenses.

The following table shows the value of compensation and benefits granted for fiscal 2018. It also lists the minimum and maximum attainable values.

Compensation of Supervisory Board Members

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

In return for their work, the members of the Supervisory Board receive fixed annual compensation in the amount of €90,000, payable when the fiscal year expires, and are additionally refunded any VAT payable on their compensation. Supervisory Board members who join, or depart from, the Supervisory Board during the fiscal year receive the corresponding compensation pro rata temporis.

The 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 chairs of committees, and by a factor of 1.5 for members of committees. Multiple functions are ignored in this calculation.

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 €20,000 and are also reimbursed for any VAT payable on that lump sum.

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 members.