✓ audited

Compensation of the Board of Executive Directors

This report meets the disclosure requirements of the German Commercial Code, supplemented by the additional requirements based on the German Act on Disclosure of Management Board Remuneration (Vorstandsvergütungs-Offenlegungsgesetz) as well as the German Act on the Appropriateness of Management Board Remuneration (Gesetz zur Angemessenheit der Vorstandsvergütung), and is aligned with the recommendations of the German Corporate Governance Code.

Based on a proposal by the Personnel Committee, the Supervisory Board determines the amount and structure of compensation of members of the Board. The amount of compensation is determined by the company’s size and financial position, as well as the performance of the Board of Executive Directors. Globally operating companies based in Germany and Europe serve as a reference. A review of the structure and amount of compensation of Board members takes place at regular intervals.

The compensation of Board members comprises:

  1. A fixed annual salary,
  2. An annual variable bonus,
  3. A stock price-based long-term incentive (LTI) program,
  4. Non-monetary compensation and other additional compensation in varying amounts, and
  5. Company pension benefits.

The compensation of the Board of Executive Directors is designed to promote sustainable corporate development. It is marked by a pronounced variability in relation to the performance of the Board of Executive Directors and BASF Group’s return on assets.

The compensation components are shown in detail below:

  1. The annual fixed compensation is paid in equal monthly payments.
  2. The annual variable compensation (variable bonus) is based on the performance of the entire Board and the return on assets. The return on assets is also used to determine the variable compensation of all other employee groups.

    In order to assess the sustainable performance of the Board of Executive Directors, each year the Supervisory Board sets a target agreement with the entire Board of Executive Directors that primarily contains medium and long-term goals.

    The Supervisory Board assesses the achievement of goals in relation to the last three years. A performance factor with a value between 0 and 1.5 is determined on the basis of the goal achievement ascertained by the Supervisory Board. The variable bonus for the prior fiscal year is payable after the Annual Shareholders’ Meeting.

    Board members, like other employee groups, may contribute a portion of their annual variable gross bonus into a deferred compensation program. For members of the Board of Executive Directors, as well as for all other senior executives of the German BASF Group, the maximum amount that can be contributed to this program is €30,000. Board members have taken advantage of this offer to varying degrees.
  3. A share-price-based remuneration program (the long-term incentive, or LTI, program) exists for members of the Board of Executive Directors. It is also offered to all other senior executives of BASF Group. Members of the Board of Executive Directors are subject to a stricter set of rules than are contained in the general program conditions: They are required to participate in the program with at least 10% of their gross bonus. This mandatory investment consisting of BASF shares is subject to a holding period of four years. For any additional voluntary investment of up to 20% of the gross bonus, the general holding period of two years applies. Members of the Board of Executive Directors may only exercise their options at least four years after they have been granted (vesting period). For further details on the LTI program, see Stock-price-based compensation.
  4. Non-monetary compensation and other additional compensation include: delegation allowances, accident insurance premiums and other similar benefits, as well as the personal use of, or benefit from, communication equipment, company cars and security measures made available by the company. The members of the Board did not receive loans or advances from the company in 2012.
  5. For details on the company pension benefits, see Pension benefits.

Based on the principles listed above, individual Board members received the following compensation:

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Total compensation of the Board of Executive Directors (thousand €)

 

Non-performance-related compensation

 

Performance-related compensation

 

 

 

Options granted

 

 

 

Year

Fixed salary

Non-monetary compensation and other additional compensation

 

Variable bonus 1

 

Total cash compensation

 

Number

Market value at option grant date

 

Total compensation (cash compensation plus options granted)

1

The basis for the variable bonus is the return on assets adjusted for special items and the performance factor. These include all contributions made to the deferred compensation program.

2

Payment is made in local currency based on a theoretical net salary in Germany (on a pro rata basis, where applicable).

3

Includes payments to cover additional costs of transfers, such as assumption of prevailing local rental fees.

4

Prior-year figures include compensation for members who left the Board of Executive Directors in 2011.

Dr. Kurt Bock
Chairman (since May 6, 2011)

2012

1,200

142

 

3,174

 

4,516

 

56,004

770

 

5,286

2011

1,044 2

504 3

 

2,948

 

4,496

 

29,460

757

 

5,253

Dr. Martin Brudermüller
Vice Chairman (since May 6, 2011)

2012

868 2

719 3

 

2,111

 

3,698

 

41,184

566

 

4,264

2011

767 2

691 3

 

2,158

 

3,616

 

29,460

757

 

4,373

Dr. Hans-Ulrich Engel

2012

708 2

773 3

 

1,587

 

3,068

 

33,876

466

 

3,534

2011

635 2

525 3

 

1,769

 

2,929

 

29,460

757

 

3,686

Michael Heinz
(since May 6, 2011)

2012

600

335

 

1,587

 

2,522

 

25,860

355

 

2,877

2011

391

148

 

1,179

 

1,718

 

9,912

255

 

1,973

Dr. Andreas Kreimeyer

2012

600

93

 

1,587

 

2,280

 

33,876

466

 

2,746

2011

600

144

 

1,769

 

2,513

 

29,460

757

 

3,270

Dr. Stefan Marcinowski
(until April 27, 2012)

2012

198

31

 

516

 

745

 

27,952

384

 

1,129

2011

600

111

 

1,769

 

2,480

 

29,460

757

 

3,237

Dr. Harald Schwager

2012

600

104

 

1,587

 

2,291

 

33,876

466

 

2,757

2011

600

119

 

1,769

 

2,488

 

29,460

757

 

3,245

Wayne T. Smith
(since April 27, 2012)

2012

375

314 3

 

1,076

 

1,765

 

10,748

148

 

1,913

2011

 

 

 

 

Margret Suckale
(since May 6, 2011)

2012

600

139

 

1,587

 

2,326

 

26,092

359

 

2,685

2011

391

52

 

1,179

 

1,622

 

7,148

184

 

1,806

Total

2012

5,749

2,650

 

14,812

 

23,211

 

289,468

3,980

 

27,191

Total

2011

5,662 4

2,384 4

 

16,309 4

 

24,355 4

 

268,884 4

6,910 4

 

31,265 4

The options granted led to expenses (personnel expense) in 2012. This personnel expense refers to the sum of all options from the LTI programs 2004 to 2012. It is calculated as the difference in the value of the options on December 31, 2012, compared with the value on December 31, 2011, considering the options exercised and granted in 2012. The value of the options is based primarily on the development of the BASF share price and its outperformance compared with the benchmark indices specified for the LTI programs 2004 to 2012.

The personnel expenses reported below are purely accounting figures which do not equate with the actual cash gains should options be exercised. Each member of the Board may decide on the timing and scope of the exercise of options of the individual years, while taking into account the general terms and conditions and ceilings of the LTI program. The personnel expenses for the year 2012 relating to all options issued were as follows: Dr. Kurt Bock €4,525 thousand (2011: €182 thousand); Dr. Martin Brudermüller €5,355 thousand (2011: €182 thousand); Dr. Hans-Ulrich Engel €3,741 thousand (2011: €517 thousand); Michael Heinz €1,661 thousand (2011: €748 thousand); Dr. Andreas Kreimeyer €3,134 thousand (2011: €346 thousand); Dr. Harald Schwager €3,839 thousand (2011: €385 thousand); Wayne T. Smith €698 thousand; and Margret Suckale €532 thousand (2011: €107 thousand).

The members of the Board are covered by loss liability insurance concluded by the company (D&O insurance) which includes a deductible.