Remuneration scheme for the Supervisory Board
For each full financial year of their membership on the Supervisory Board, members of the Supervisory Board receive fixed compensation in the amount of EUR 20,000.00 plus the premiums for appropriate D&O insurance. The Chairman‘s Deputy receives 1.5 times this fixed fee, and the Chairman of the Supervisory Board receives a fixed fee in the amount of TEUR 175 for each financial year.
In addition, members of the Audit Committee receive separate compensation. The Chair receives EUR 75,000.00, and each member, except the Chair of the Supervisory Board, receives EUR 5,000.00. The members of the HR Committee receive an attendance fee of EUR 500.00 per meeting.
No variable remuneration based on the company’s success or other criteria is granted.
For further information we refer to our Annual Report 2018 page 71ff.
Remuneration scheme for the Management Board
Basic remuneration system
The members of the TAG Management Board receive a basic remuneration that is not contingent on performance, as well as a variable remuneration, which is paid out partly in cash and partly in the form of TAG shares. The non-performance-based remuneration takes the form of a fixed annual salary paid out in twelve equal monthly instalments. Some members of the Management Board use a company car, which is taxed accordingly as a non-cash benefit. The members of the Management Board also receive further benefits as other remuneration, some of which are classified as non-cash benefits and are taxed accordingly. In particular, these include a Bahn-Card (for discounted rail travel), accident and liability insurance, private use of communications devices, and compensation for expenses incurred during business travel. The contracts with the members of the Management Board do not provide for any pension entitlements. Some Management Board members still have pension entitlements from a time before they began to work for the TAG Group. While these are non-forfeitable, they do not entail any new claims since then.
Members of the Management Board are not entitled to claim any additional bonuses or duplicate remuneration if they simultaneously serve on the Management Board or Supervisory Board of other companies in the Group. Variable remuneration is determined solely at TAG Immobilien AG level and charged to TAG Immobilien AG. All ancillary activities are subject to approval. Upon the ordinary termination of office of any member of the Management Board, such member is entitled to payment of any part of the variable remuneration not yet paid out to them, or to any share-based compensation not yet allocated to them. In the event of any change of control, i.e. if a single shareholder or several shareholders acting jointly acquire a majority of the voting rights or a controlling influence over TAG, the members of the Management Board are entitled to terminate their service contract subject to advance notice of six months (special right of termination). If this special right of termination is exercised, the Company undertakes to pay a gross settlement amount on the date of departure that is equal to the annual gross salary, provided that the service contract still has a remaining period of at least 24 months as of the date of termination. If the remaining term is shorter at the time of termination of the Management Board contract, the Management Board contracts contain provisions that provide either as a gross compensation the amount that is the gross salary for the remainder of the remaining term, or a gross settlement that is reduced pro rata temporis over the last 24 months based on a full gross annual salary. In the event of a premature termination of Management Board contracts for other reasons, the contracts contain the provision that the compensation payable to them is to be capped at a value equalling two annual salaries and shall not exceed the amount due for the remaining period of the contract.
Details of the variable remuneration
The variable remuneration scheme in force since the 2018 financial year differentiates between the
- Short Term Incentive Plan (STIP), which is based on the development of financial KPIs and is intended as an immediately payable cash compensation, and the
- Long Term Incentive Plan (LTIP), which is assessed on total shareholder return (TSR, as the sum of the share price increase plus dividends paid in the given financial year) in a three-year period and is paid in TAG shares.
The STIP is determined on the basis of the following criteria:
- Increase in EPRA NAV per share in the financial year (after elimination of the dividend paid in the financial year); each EUR 0.01 increase in the NAV per share is multiplied by EUR 750.00)
- Increase in FFO I per share in the financial year (each EUR 0.01 increase in the FFO I per share is multiplied by EUR 7,500.00)
- Increase in EBT per share in the financial year, not taking into account the results from the revaluation of the investment properties and from the revaluation of derivative financial instruments into account (each EUR 0.01 increase in the EBT per share is multiplied by EUR 3,000.00)
The STIP cash remuneration is paid out in full following the Supervisory Board’s resolution on the variable remuneration of the financial year in question, and is capped at TEUR 125 p. a. This is also the target figure for the STIP, which corresponds to an average increase of around 6.5% in the above criteria for determining the variable remuneration according to the STIP in a year-on-year comparison between 2017 and 2018.
The multi-year variable compensation (LTIP), on the other hand, is granted in TAG shares, the number of which is assessed based on the TSR over a three-year period. The TSR performance is assessed on the one hand based on the performance of the TAG share in a three-year period that begins anew each year, and on the other hand relative to the performance of a selected group of competitors (peer group) during this period. The basis for calculating the share price performance is the volume-weighted average price (VWAP) of the TAG share over a period of two months prior to the reporting date of the financial year at the beginning and the end of a three-year period.
To ensure that the valuation basis relates to the future, the target TSR for the three-year performance period is set at 30%:
- If the actual TSR corresponds to the target TSR, the LTIP amounts to TEUR 150 p. a.
- If the actual TSR is above or below the target TSR, the amount is calculated or adjusted linearly in accordance with the target TSR (an actual TSR of 20%, for example, results in an LTIP of 20/30 x TEUR 150 = TEUR 100).
- If the actual TSR is negative, the LTIP is TEUR 0.
The actual TSR is compared with the result of the peer group and, if the actual TSR is at least 2% better or 2% worse, this is taken into account by making allowances or deductions. If the actual TSR is better than the performance of the peer group, a supplement of 25% is applied, and in the case of a poorer performance a deduction of 25% is applied. The peer group is made up of listed real estate companies that, as portfolio holders, have substantial residential real estate in Germany. The peer group currently comprises the following companies: Vonovia SE, Deutsche Wohnen SE, LEG Immobilien AG, Grand City Properties S.A., ADO Properties S.A. and Adler Real Estate AG. The companies are weighted equally.
The variable share-based remuneration in the form of the LTIP is capped at TEUR 300 p. a. The assignment of the TAG shares that the Management Board is entitled to through the LTIP takes place after the end of the respective three-year period following the Supervisory Board’s resolution of the variable remuneration. The basis for calculating the number of TAG shares to be transferred is the VWAP of the TAG share over a period of two months prior to the end of the respective financial year.
In principle, it is not possible to change the parameters relevant to variable remuneration. With regard to the STIP, the Supervisory Board can only change the weighting of the criteria in exceptional cases, if these criteria do not reflect the normal and actual performance of the company and the performance of all or individual criteria is based on causes that are neither foreseeable nor can lie within the area of responsibility of the Management Board members. In exceptional cases, the Supervisory Board may also resolve something different with regard to special situations and/or special performance of the individual Management Board member. The LTIP can only be amended in that the Supervisory Board can change the composition of the peer group if comparability no longer exists due to takeovers or changes in the business models, or if the companies relocate their focus abroad or if the inclusion of a competitor would no longer be appropriate or expedient for other reasons.