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. A holding period of two years applies to these shares.

(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. when they reach retirement age or become afflicted by permanent occupational disability. Before said event occurs, Dr. Rudolf Staudigl has a basic entitlement to the premature payment of an annual pension if he leaves the Executive Board against his will without good cause or if he, of his own accord, ceases his activity for good cause and the company is responsible for said cause. 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.

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 12-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 (in the case of Dr. Rudolf Staudigl, Auguste Willems and Dr. Tobias Ohler) or one full annual salary (in the case of Dr. Christian Hartel). This is referred to as the severance pay cap.

Total Compensation for the Members of the Executive Board for Fiscal 2016

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 (DCGK).

With effect from April 1, 2016, Dr. Rudolf Staudigl’s gross fixed annual salary was increased from €800,000 to €840,000. Also with effect from April 1, 2016, Auguste Willem’s gross fixed annual salary was increased from €580,000 to €610,000. These salary increases were paid pro rata temporis in 2016. Said increases have no effect on calculation of the pension, since they were determined as additional fixed non-pensionable compensation components. They are taken into account, however, when calculating the long-term bonus.

The following table shows the value of compensation and benefits granted for fiscal 2016. It also lists minimum and maximum attainable values.

Compensation and Benefits Granted for the Year Under Review (Targets)

The following table shows the payments for fiscal 2016 from fixed compensation, additional benefits and variable compensation – grouped according to one-year and multiyear variable compensation – as well as pension expenses.

Payments in the Year Under Review

Compensation for Former Members of the Executive Board and Their Surviving Dependents

Pension Obligations for Executive Board Members

Compensation of Supervisory Board Members

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

At the Annual Shareholders’ Meeting of May 20, 2016, it was resolved that both the fixed compensation and the annual lump sum (for outlays) for members of the Supervisory Board would be increased retroactively as of fiscal 2016.

Consequently, as of January 1, 2016, the members of the Supervisory Board receive fixed annual compensation in the amount of €90,000, payable on expiry of the fiscal year, and are also reimbursed for 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.

Supervisory Board Compensation