Reebok 2010 Annual Report Download - page 34

30 To Our Shareholders Compensation Report
Compensation ReportCompensation Report 1 ) 1 )
For the adidas Group, transparent and comprehensible reporting on the compensation of the Executive Board and
Supervisory Board are essential elements of good corporate governance. In the following, we summarise the principles of
the compensation system and outline the structure and level of Executive Board and Supervisory Board compensation. We
are also reporting on the benefits the members of our Executive Board will receive if they resign from office or retire.
1) This Compensation Report is a component of the audited Group Management Report and is also part of the
Corporate Governance Report including the Declaration on Corporate Governance.
Compensation system for Compensation system for
the Executive Boardthe Executive Board
Following preparation by the General
Committee, the compensation system
for our Executive Board and the total
compensation of each member of
the Executive Board is determined
and regularly reviewed by the entire
Supervisory Board. The compensation
system and compensation level are
intended to form an incentive for
sustainable long-term management.
The compensation of the Executive
Board members is designed to reflect
the size and global orientation of the
company as well as its economic
situation and prospects and is orientated
towards the typical structure and level
of executive board compensation at
comparable companies. Taking into
account the compensation structure
at the adidas Group, the tasks and the
contribution of each Executive Board
member to the Group’s success, his
individual performance as well as the
performance of the entire Executive
Board are considered. Thus, an
appropriate level of compensation can be
ensured.
Components of the Components of the
compensation systemcompensation system
The target annual income of our
Executive Board members provides
for a fixed compensation component
amounting to around 35% and a variable,
i.e. performance-related, compensation
component amounting to around 65% in
the case of 100% target achievement.
– The fixed compensation consists
of a contractually agreed,
non-performance-related annual
salary that is paid in twelve monthly
instalments.
– The variable compensation consists
of a Performance Bonus and a
compensation component with
a long-term incentive effect, the
Long-Term Incentive Plan 2009/2011
(LTIP 2009/2011) measured over
a three-year period. The variable
compensation components are
designed in such a way that the
incentive to achieve the sustainable
targets set by the LTIP 2009/2011 is
significantly higher than for achieving
the targets necessary for granting the
Performance Bonus. Corresponding
contractual provisions ensure that this
weighting will also be maintained in the
future.
– The Performance Bonus serves as
compensation for the Executive Board’s
performance in the past financial year
in line with the short-term development
of the company. It is determined by
the Supervisory Board in a two-stage
process: At the beginning of the 2010
financial year, the Supervisory Board
determined as performance criteria
both the business-related criteria
(increase in income before taxes
and retail margin) and the individual
performance of each Executive Board
member and defined explicit targets.
The target achievement of business-
related criteria can be rated with a
maximum of 150%. At the end of the
financial year, the Supervisory Board
stipulates a concrete bonus for each
Executive Board member depending
on the respective degree of target
achievement.
– The bonus resulting from the LTIP
2009/2011 (LTIP Bonus) serves as
compensation for the long-term
performance of the Executive Board in
line with corporate planning.
When determining the LTIP 2009/2011
of the Executive Board members, the
Supervisory Board defined the following
performance criteria with different
weightings:
– Increase of consolidated net income
– Reduction of net debt (adjusted for
non-operating effects)
– Sales growth with regard to the
Reebok, Rockport and Reebok-CCM
Hockey brands
– Absolute and relative share price
development.
When calculating the LTIP Bonus payable
following the three-year period, the
degrees of target achievement of the
performance criteria are accumulated
and multiplied by the individual
target amount. The payout of the
LTIP 2009/2011, which is limited to a
maximum of 150% of the individual target
amount (Cap), will be effected following
the adoption of the annual financial
statements for the period ending on
December 31, 2011. Should the degree
of target achievement for the three-year
period lie below the threshold value of
50%, the Executive Board members are
not entitled to the LTIP Bonus.
A compensation component resulting
from a management share option plan
does not exist and is not planned.