Reebok 2007 Annual Report Download - page 34

030
ANNUAL REPORT 2007 --- adidas Group
COMPENSATION REPORT 1) In our
C
om
p
ensation Re
p
ort, we summarize the
p
rinci
p
les relevant
f
or determining the compensation of our Executive Board and outline the structure and level
o
f Executive and Supervisory Board compensation. Furthermore, this report contains information
o
n bene
fi
ts which the members o
f
our Executive Board will obtain i
f
they resi
g
n
f
rom o
ffi
ce or
retire. This re
p
ort was
p
re
p
ared in accordance with the re
q
uirements of
G
erman commercial law
a
nd the Executive Board Compensation Disclosure Act (Vorstandsvergütungs- Offenlegungsgesetz
–
VorstOG
)
. Further, it is based on the recommendations of the German Corporate Governance
Code.
E
XECUTIVE BOARD COMPENSATION
THREE COMPONENTS OF COMPENSATION In 2007, the total Executive Board compensation amounted to € 11.127 million.
In accordance with German Corporate Governance Code recommendations, compensation for members of our Executive Board
consists of fi xed and variable components. The latter have risk character and a long-term incentive effect. Compensation is
comprised of (1) a non-performance-related component, (2) a performance-related component, and (3) a share-based component.
The individual components are structured as follows:
- The non-performance-related component includes a fi xed annual salary and other benefi ts. The fi xed annual salary is paid in
monthly installments and is regularly reviewed with regard to prevailing market standards and appropriateness. The review
also takes the fi nancial position of the Group into consideration. Other benefi ts mainly comprise the use of a company car, the
payment of insurance premiums and, in exceptional cases, an adjustment amount paid to equalize tax treatment of personal
income between the USA and Germany. Executive Board members receive no additional compensation for mandates held within
the adidas Group.
- The performance-related component, which comprises the largest portion of Executive Board compensation, consists of a
Performance Bonus as well as a bonus paid on the basis of the Long-Term Incentive Plan (LTIP). Both bonus systems are designed
to provide a direct incentive for Executive Board members to achieve their defi ned targets and to support sustainable value-
oriented management.
-- The amount of the Performance Bonus is linked to the fi xed annual salary and is determined by individual performance of
the respective Executive Board member as well as by the Group’s fi nancial results based on the development of profi ts consid-
ering the budget. The Performance Bonus is payable at the end of each year upon determination of target achievement.
-- The amount of the bonus from the Long-Term Incentive Plan 2006 / 2008 (LTIP Bonus 2006 / 2008) depends upon the attain-
ment of certain cumulative earnings improvements based on income before taxes (IBT) during the three-year period from 2006
to 2008. If targets are met, payment will be due following the approval of the annual consolidated fi nancial statements for the
period ending December 31, 2008.
- The share-based component is comprised of compensation from the Management Share Option Plan (MSOP). Option rights,
which were issued in annual tranches in the years 1999 to 2002, are exercisable over a period of fi ve years following a two-year
vesting period, provided that at least one of the two performance targets, absolute performance or relative performance, has been
attained.  see Note 32, p. 189 Shares are issued with a performance discount depending on target achievement. Subsequent changes
to plan conditions are not possible. No new share option program was proposed at the Annual General Meeting in 2007 and it is
not planned to submit a new proposal in this respect at the Annual General Meeting in May 2008.
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