Remuneration of the Management Board

Remuneration System

The remuneration system and the amount of remuneration of the Management Board are determined by the Supervisory Board on the proposal of the Executive and Nomination Committee.

The criteria used to assess whether the remuneration is appropriate include the duties of the individual Management Board member, his or her personal performance, the economic situation, the company’s success and future outlook and the extent to which such remuneration is standard practice. When determining whether the level of remuneration is standard practice, the company looks at its peer group and the remuneration structure that applies in the rest of the company. Furthermore, we compare ourselves with other listed companies of a similar size. The remuneration structure is oriented towards the sustainable growth of the company.

In addition to fixed remuneration, the members of the Management Board receive variable short-term as well as variable long-term remuneration which takes account of both positive and negative developments. The Supervisory Board can, at their own due discretion, award Management Board members a discretionary bonus for particular achievements, even without a prior agreement. There is no entitlement to these bonuses. In the event that a discretionary bonus is paid, the underlying decision-making criteria are published. Furthermore, the members of the Management Board receive fringe benefits in the form of insurance premiums, as well as the private use of means of communication and company vehicles.

Fixed Remuneration and Fringe Benefits

The fixed remuneration, which contains not only the basic remuneration but also, in varying amounts, the remuneration for assuming mandates at Vonovia Group companies, subsidiaries and participating interests, is paid to the Management Board members in twelve equal monthly installments. In addition to their fixed remuneration, the Management Board members are given the opportunity to pay an annual pension contribution into a deferred compensation scheme. The contribution for Mr. Buch comes to € 355,000, while the contribution for Mr. Freiberg, Dr. Kirsten and Mr. Klinck amounts to € 160,000 in each case. Alternatively, the amount is paid out as cash remuneration.

The fringe benefits include premiums for a term life insurance policy and 50% of health and nursing care insurance contributions, albeit up to the amount of the maximum statutory employer’s share at the most. In the event of illness, salaries continue to be paid for a period of twelve months, but until the end of the employment contract at the latest. In the event of death, the company continues to pay the salary to the employee’s surviving dependents for up to six months.

The members of the Management Board are provided with a company car as well as communication means, which they have the right to use for private purposes. Travel expenses are reimbursed in line with the Vonovia Travel Expense Policy.

Should the Management Board members be held liable for financial losses while executing their duties, this liability risk is, in principle, covered by the D&O insurance for Management Board members of the company. Vonovia follows the statutory requirements, which provide for a deductible of 10% of any claim up to an amount of one-and-a-half times the fixed annual remuneration for all claims in one fiscal year.

Bonus

The variable short-term remuneration is based on success criteria set in advance by the Supervisory Board as well as personal targets. The variable short-term remuneration is capped at € 700,000 for Rolf Buch as the Chairman of the Management Board, and at € 440,000 for Klaus Freiberg, Dr. A. Stefan Kirsten and Gerald Klinck. The success criteria state that 40% of the variable short-term remuneration depends on the achievement of the Group target, 15% on the achievement of the Group adjusted NAV/share target and a further 15% on the achievement of the Group EBITDA sales target. A further 30% of the variable short-term remuneration is related to the achievement of the personal targets agreed with the Supervisory Board.

The Management Board members receive the variable short-term remuneration one month after the adoption of the annual financial statements of Vonovia.

Long-term Incentive Plan

The variable long-term remuneration (long-term incentive plan, LTIP plan) is a plan which meets the requirements set out in the German Stock Corporation Act (AktG) and the German Corporate Governance Code and aims to ensure that the remuneration structure focuses on sustainable corporate development. The LTIP plan was introduced in 2015 and replaced the previous plan, which was launched at the time of the successful IPO.

The members of the Management Board are offered an annual remuneration component with a long-term incentive effect and a balanced risk-return profile in the form of notional shares (“performance shares”) in line with the provisions of the LTIP plan.

The Supervisory Board offers the Management Board members a prospective target amount (“grant value”) in EUR for each performance period, which corresponds to four years as a general rule. Rolf Buch is awarded performance shares with a grant value of € 1,900,000 a year respectively. Klaus Freiberg, Dr. A. Stefan Kirsten and Gerald Klinck are each awarded performance shares with a grant value of € 800,000 a year.

The actual payout amount is calculated based on this grant value, the target achievement level during the performance period and the performance of Vonovia’s shares, including dividends paid during the performance period. If the share price remains the same and the target achievement level comes to 100%, then the actual payout amount corresponds to the grant value (plus any dividends paid to the shareholders during the performance period).

The initial number of performance shares for the performance period in question corresponds to the grant value divided by the initial share price, rounded up to the next full share.

The overall target achievement level for a performance period is determined based on the following success targets:

  1. Relative Total Shareholder Return (RTSR)
  2. Development of NAV per share
  3. Development of per share
  4. Customer Satisfaction Index ()

Each of the four success targets is assigned a weighting of 25%.

At the start of each performance period, the Supervisory Board sets an objective for each of the four success targets. If all of these objectives are reached, the target achievement level comes to 100%. It also sets a minimum value for each of the four success targets as the lower target corridor threshold. If this value is reached, the target achievement level comes to 50% (“minimum value”). The Supervisory Board also sets a maximum value. If this value is reached or exceeded, the target achievement level comes to 200% (“maximum value”).

The Supervisory Board has the right and the obligation to appropriately adjust the calculation modalities if there are significant changes in the comparator group.

The reporting on the new LTIP plan is based on actuarial reports of an independent actuary.

At the end of each performance period, the initial number of performance shares is multiplied by the overall target achievement level and rounded up to the next full share. This multiplication produces the final number of performance shares.

The final number of performance shares is multiplied by the final share price, which, by definition, includes the total dividends paid per share during the performance period in relation to the final number of performance shares. This multiplication produces the cash payout amount.

The payout amount is limited to 250% of the grant value (“cap”).

In 2013, the Management Board members Rolf Buch, Klaus Freiberg and Dr. A. Stefan Kirsten were granted a total of 931,030 notional shares (SAR = stock appreciation rights) as part of the LTIP in force at that time. These shares were earned over five annual tranches of equal size. Over the five-year period, 400,000 notional shares are attributable to Rolf Buch, with Klaus Freiberg and Dr. A. Stefan Kirsten each being allocated 265,515. The notional shares will be converted into payout amounts for each annual tranche on the basis of a formula laid down in the LTIP agreement.

In connection with the conclusion of new employment contracts with the Management Board members Klaus Freiberg and Dr. A. Stefan Kirsten, an agreement was reached that no further shares could be vested after the 2017 fiscal year (vesting).

The 2015 remuneration report contains further details on the content of the above-mentioned LTIP agreement. Since the shareholding of the sole shareholder was reduced to below 30% in 2014, the fourth tranche was paid out in 2017 as agreed.

Upper Remuneration Thresholds

In addition to the provisions governing variable remuneration, upper thresholds have been contractually agreed for the remuneration paid to the Management Board as a whole in line with the recommendations set out in the German Corporate Governance Code (GCGC). As a result, the total remuneration for Rolf Buch is capped at a total of € 6,970,000 a year, excluding the claims under the LTIP dated June 14, 2013. The total remuneration for Klaus Freiberg and Dr. A. Stefan Kirsten, excluding the claims under the LTIP dated June 14, 2013, is capped at € 3,500,000.00 respectively. The total remuneration for Gerald Klinck is also capped at € 3,500,000.00 year.

Share Holding Provision

The Management Board members are obliged, for the duration of their appointment as members of Vonovia’s Management Board, to hold shares in the company (restricted shares) in the amount of the annual fixed remuneration and to furnish evidence showing that this obligation has been met at the end of each fiscal year by presenting suitable documents to the Chairman of the Supervisory Board. The value of the shares to be held is to be redefined in the event of changes to the annual fixed remuneration/a share split. In the first four fiscal years after an individual’s initial appointment as a Management Board member, the restricted shares can be accumulated on a pro rata basis.

Retirement Provision/Deferred Compensation Scheme

The pension entitlements of the Management Board members are based on the opportunity to pay an annual pension contribution into a deferred compensation scheme. Rolf Buch, Dr. A. Stefan Kirsten and Gerald Klinck make use of this opportunity, whereas Mr. Freiberg opts for a payout as cash remuneration.

For each calendar year, the contractually agreed pension contribution is converted in accordance with the in-house “Pension Instead of Cash Remuneration” model and is converted into an annuity based on actuarial principles depending on the age of the individual in question.

In 2017, the pension contribution was € 949,253 for Rolf Buch, € 367,388 for Dr. A. Stefan Kirsten and € 491,198 for Gerald Klinck.

Payments in the Event of Premature Termination of Management Board Duties

Payments to a Management Board member on premature termination of his or her contract, including fringe benefits, are contractually regulated to not exceed the value of two years’ remuneration and are paid for no more than the remaining term of the employment contract (severance pay cap).

Payments in the event of premature termination of a Management Board member’s contract due to a change of control are limited to 150% of the severance pay cap.

Following the termination of his employment contract, Rolf Buch is subject to a twelve-month non-competition regulation. The ex gratia payment corresponds to 75% of the contractual payments most recently received (incl. STI and LTIP for a period of 12 months). The other Management Board members are not subject to any non-competition regulation.

Loans/Advances

The Management Board members were not granted any loans or advances.

Remuneration of the Management Board Within the Meaning of the German Corporate Governance Code

 

 

Rolf Buch
CEO

 

Thomas Zinnöcker
CRO
until January 31, 2016

Grants allocated
in €

 

2016

 

2017

 

2017
(Min)

 

2017
(Max)

 

2016

 

2017

 

2017
(Min)

 

2017
(Max)

*

This is the total contractually agreed upper threshold.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

 

1,000,000

 

1,150,000

 

1,150,000

 

1,150,000

 

66,667

 

 

 

Deferred compensation

 

 

 

 

 

12,500

 

 

 

Fringe benefits

 

39,446

 

24,006

 

24,006

 

24,006

 

2,369

 

 

 

Total

 

1,039,446

 

1,174,006

 

1,174,006

 

1,174,006

 

81,536

 

 

 

Annual variable remuneration (bonus)

 

700,000

 

700,000

 

0

 

700,000

 

50,000

 

 

 

Multi-year variable remuneration (new LTIP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016–2018

 

 

 

 

 

 

 

 

2016–2019

 

1,429,217

 

 

 

 

101,481

 

 

 

2017–2020

 

 

2,040,633

 

0

 

4,750,000

 

 

 

 

Total

 

2,129,217

 

2,740,633

 

0

 

5,450,000

 

151,481

 

 

 

Pension expenses

 

600,398

 

949,253

 

949,253

 

949,253

 

 

 

 

Total remuneration

 

3,769,061

 

4,863,892

 

2,123,259

 

6,970,000*

 

233,017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Klaus Freiberg
COO

 

Dr. A. Stefan Kirsten
CFO

Grants allocated
in €

 

2016

 

2017

 

2017
(Min)

 

2017
(Max)

 

2016

 

2017

 

2017
(Min)

 

2017
(Max)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

 

600,000

 

600,000

 

600,000

 

600,000

 

600,000

 

600,000

 

600,000

 

600,000

Deferred compensation

 

160,000

 

160,000

 

160,000

 

160,000

 

 

 

 

Fringe benefits

 

27,627

 

27,603

 

27,603

 

27,603

 

31,571

 

32,723

 

32,723

 

32,723

Total

 

787,627

 

787,603

 

787,603

 

787,603

 

631,571

 

632,723

 

632,723

 

632,723

Annual variable remuneration (bonus)

 

440,000

 

440,000

 

0

 

440,000

 

440,000

 

440,000

 

0

 

440,000

Multi-year variable remuneration (new LTIP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016–2018

 

212,035

 

 

 

 

212,035

 

 

0

 

2016–2019

 

635,201

 

 

 

 

635,201

 

 

 

2017–2020

 

 

859,224

 

0

 

2,000,000

 

 

859,224

 

 

2,000,000

Total

 

1,287,236

 

1,299,224

 

0

 

2,440,000

 

1,287,236

 

1,299,224

 

0

 

2,440,000

Pension expenses

 

 

 

 

 

367,388

 

367,388

 

367,388

 

367,388

Total remuneration

 

2,074,863

 

2,086,827

 

787,603

 

3,500,000*

 

2,286,195

 

2,299,335

 

1,000,111

 

3,500,000*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gerald Klinck
CCO

 

 

 

 

 

 

 

 

Grants allocated
in €

 

2016

 

2017

 

2017
(Min)

 

2017
(Max)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

 

600,000

 

600,000

 

600,000

 

600,000

 

 

 

 

 

 

 

 

Deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

Fringe benefits

 

25,865

 

24,503

 

24,503

 

24,503

 

 

 

 

 

 

 

 

Total

 

625,865

 

624,503

 

624,503

 

624,503

 

 

 

 

 

 

 

 

Annual variable remuneration (bonus)

 

440,000

 

440,000

 

0

 

440,000

 

 

 

 

 

 

 

 

Multi-year variable remuneration (new LTIP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016–2018

 

212,035

 

 

 

 

 

 

 

 

 

 

 

2016–2019

 

635,201

 

 

 

 

 

 

 

 

 

 

 

2017–2020

 

 

859,224

 

0

 

2,000,000

 

 

 

 

 

 

 

 

Total

 

1,287,236

 

1,299,224

 

0

 

2,440,000

 

 

 

 

 

 

 

 

Pension expenses

 

491,198

 

491,198

 

491,198

 

491,198

 

 

 

 

 

 

 

 

Total remuneration

 

2,404,299

 

2,414,925

 

1,115,701

 

3,500,000*

 

 

 

 

 

 

 

 

 

 

Rolf Buch
CEO

 

Thomas Zinnöcker
CRO
until January 31, 2016

 

Klaus Freiberg
COO

Inflow in €

 

2016

 

2017

 

2016

 

2017

 

2016

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

 

1,000,000

 

1,150,000

 

66,667

 

 

600,000

 

600,000

Cash remuneration

 

 

 

12,500

 

 

160,000

 

160,000

Fringe benefits

 

39,446

 

24,006

 

2,369

 

 

27,627

 

27,603

Total

 

1,039,446

 

1,174,006

 

81,536

 

 

787,627

 

787,603

Annual variable remuneration (bonus)

 

694,750

 

694,750

 

50,000

 

 

437,360

 

433,400

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

 

 

 

 

Third tranche 2016

 

2,527,211

 

 

 

 

1,975,934

 

Fourth tranche 2017

 

 

2,855,444

 

 

 

 

2,150,265

Total

 

3,221,961

 

3,550,194

 

50,000

 

 

2,413,294

 

2,583,665

Pension expenses

 

600,398

 

949,253

 

 

 

 

Total remuneration

 

4,861,805

 

5,673,453

 

131,536

 

 

3,200,921

 

3,371,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. A. Stefan Kirsten
CFO

 

Gerald Klinck
CCO

 

 

 

 

Inflow in €

 

2016

 

2017

 

2016

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed remuneration

 

600,000

 

600,000

 

600,000

 

600,000

 

 

 

 

Cash remuneration

 

 

 

 

 

 

 

 

Fringe benefits

 

31,571

 

32,723

 

25,865

 

24,503

 

 

 

 

Total

 

631,571

 

632,723

 

625,865

 

624,503

 

 

 

 

Annual variable remuneration (bonus)

 

434,720

 

423,500

 

310,200

 

403,700

 

 

 

 

Multi-year variable remuneration (LTIP)

 

 

 

 

 

 

 

 

 

 

 

 

Third tranche 2016

 

1,975,934

 

 

 

 

 

 

 

Fourth tranche 2017

 

 

2,150,265

 

 

 

 

 

 

Total

 

2,410,654

 

2,573,765

 

310,200

 

403,700

 

 

 

 

Pension expenses

 

367,388

 

367,388

 

491,198

 

491,198

 

 

 

 

Total remuneration

 

3,409,613

 

3,573,876

 

1,427,263

 

1,519,401

 

 

 

 

FFO (Funds From Operations)
FFO reflects the recurring earnings from the operating business. In addition to adjusted EBITDA, FFO allow for recurring cash-effective net interest expenses from non-derivative financial instruments as well as income taxes. This key figure is not determined on the basis of any specific international reporting standard but is to be regarded as a supplement to other performance indicators determined in accordance with IFRS.
FFO 1
The profit or loss for the period to reflect the adjusted profit or loss from sales; period adjustments from assets held for sale; specific effects that do not relate to the period, are non-recurring or do not relate to the objective of the company; the net income from fair value adjustments of investment properties; depreciation and amortization; deferred and prior-year current taxes (tax expenses/income); transaction costs; prepayment penalties and commitment interest; valuation effects on financial instruments; the unwinding of discounting for provisions, particularly provisions for pensions, and other prior-year interest expenses and income that are not of a long-term nature.
CSI (Customer Satisfaction Index)
The CSI is determined at regular intervals by means of systematic customer surveys and reflects how our services are perceived and accepted by our customers. The CSI is determined on the basis of points given by the customers for our properties and their neighborhood, customer service and commercial and technical support as well as maintenance and modernization management.