Reebok 2013 Annual Report Download - page 57

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adidas Group
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2013 Annual Report
To Our Shareholders
53
2013
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01.9
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Compensation Report
Compensation Report
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 also report on the benefits which the
members of our Executive Board will receive in case of resignation from office or retirement.
Compensation system for the Executive Board
Following preparation by the Supervisory Board’s 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
and personnel topics dealt with by the Supervisory Board and General
Committee for the year under review are described in the Supervisory
Board Report
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SEE SUPERVISORY BOARD REPORT, P. 42.
The compensation system is geared towards creating an incentive
for successful, sustainably value-oriented corporate development
and management. For determining the Executive Board members’
compensation particularly in terms of its appropriateness, such factors
as the size and global orientation, the economic situation, the success
and outlook of the company are taken into consideration, as well as
the typical level of compensation in comparison with peer companies
and with the compensation structure applicable for other areas of the
company. In addition, the tasks and contribution of each Executive Board
member to the company’s success, their individual performance as
well as the overall performance of the Executive Board are considered
when determining the compensation of the Executive Board. It aims to
appropriately remunerate exceptional performance, while diminishing
overall compensation when targets are not met. Thus, an appropriate
level of compensation can be ensured.
The compensation system for the members of the Executive Board,
which has been applicable since the 2012 financial year, was adopted
by a large majority at the Annual General Meeting on May 10, 2012. The
Supervisory Board considers the compensation of the Executive Board
to be appropriate, both in comparison with the compensation of senior
management and of the employees overall, as well as in terms of its
development over time.
Components of the Executive Board compensation
The total compensation of the Executive Board members – in case
of 100% target achievement – is made up of around one-third fixed
compensation and two-thirds variable, i.e. performance-related
compensation components:
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The annual fixed salary is based on the tasks and responsibilities
of the individual Executive Board member. It is paid in twelve equal
monthly instalments and remains unchanged for three years during
the term of the service contract.
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The variable compensation consists of a Performance Bonus
measured over a one-year period, payable following the adoption
of the annual financial statements of the past financial year, and a
compensation component with a long-term incentive effect (LTIP
Bonus), which is based on the Long-Term Incentive Plan 2012/2014
(LTIP 2012/2014) 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 for granting the
LTIP Bonus is significantly higher than the incentive to achieve the
Performance Bonus. Corresponding contractual regulations ensure
that this weighting will also be maintained in the future. More than
50% of the variable target compensation component is based upon
multi-year performance criteria.
The variable components are structured as follows:
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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
financial year, the Supervisory Board establishes the differently
weighted performance criteria with their respective clear targets,
and determines the individual amount of the Performance Bonus
target amount for each member of the Executive Board, based on
a target achievement of 100% (Bonus target amount). At the end of
the financial year, the Supervisory Board examines the precise target
achievement of each Executive Board member and determines the
amount of Performance Bonus to be paid, depending on the degree of
actual target achievement.
As criteria for the 2013 Performance Bonus the Supervisory Board
established, in addition to the individual performance of each
Executive Board member, the following business-related criteria:
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increase in net income attributable to shareholders,
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improvement of the average operating working capital as a
percentage of sales, and
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improvement of the operating margin in the Retail segment.
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1) This Compensation Report is a component of the Group Management Report and is also part
of the Corporate Governance Report including the Declaration on Corporate Governance.