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Compensation Report 2008
(Excerpt from the >> Annual Report 2008)
In our Compensation Report, we summarise the principles relevant for determining the compensation of our Executive Board and outline the structure and level of Executive Board and Supervisory Board compensation. Furthermore, this report contains information on benefits which the members of our Executive Board will receive if they resign from office or retire.
EXECUTIVE BOARD COMPENSATION
The structure of the compensation system of our Executive Board as well as the respective amount of the Executive Board compensation was deliberated upon and set by the co-determined General Committee of the Supervisory Board. Since November 2008, it has been the entire Supervisory Board’s responsibility to resolve upon and regularly review the Executive Board’s compensation system including all integral contractual elements as proposed by the General Committee.
Performance-oriented Executive Board compensation
The performance-oriented compensation of our Executive Board, which includes fixed and variable elements, consists of the following components:
- non-performance-related compensation component,
- performance-related compensation component,
- compensation component with long-term incentive effect.
The individual components are structured as follows:
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The non-performance-related compensation component (fixed salary) includes a fixed annual salary, which is paid in twelve monthly instalments, as well as benefits such as the private use of a company car, the payment of insurance premiums and, in exceptional cases, an adjustment amount paid to equalise tax treatment of personal income between the USA and Germany.
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The performance-related compensation component is paid as a variable Performance Bonus. Its amount is linked to the fixed annual salary and is determined by the individual performance of the respective Executive Board member as well as by the Group’s success in view of the financial results based on the development of profits considering the budget. The Performance Bonus is payable at the end of each financial year upon determination of target achievement.
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As a compensation component with a long-term incentive effect containing risk elements, our Executive Board members receive compensation from the Long-Term Incentive Plan 2006/2008 (LTIP Bonus). Payment of the LTIP Bonus will be effected following the approval of the consolidated financial statements for the period ending on December 31, 2008. Calculation of the payment amount is based on the cumulative increase in income before taxes (IBT) in the three-year period from 2006 to 2008, measured against the IBT result for the financial year 2005. If the cumulative increase achieved in the three-year period is below a defined target corridor, no LTIP Bonus payment is due. If the earnings increase is within the target corridor, the plan provides for payment of between 90% and a maximum of 150% of the basis amount defined individually for each Executive Board member. Hence, there is a cap on the maximum amount of the LTIP Bonus. Additionally, payments between 135% and 150% of the basis amount are dependent on the achievement of a defined percentage increase in IBT in the financial year 2008 compared to 2007. It is intended to introduce a new version of the Long-Term Incentive Plan in 2009, containing essentially comparable components.
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A share-based compensation component from a management share option plan does not exist since the members of our Executive Board exercised all option rights resulting from the Management Share Option Plan (MSOP) in the financial year 2007. A new share option plan was neither resolved upon by the Annual General Meeting in 2008 nor is such a resolution planned for the Annual General Meeting in May 2009.
Executive Board Total Compensation in 2008 (€ in thousands)
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| Herbert Hainer (CEO and Chairman) |
1,250 |
26 |
1,680 |
480 |
3,436 |
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| Glenn Bennett1) |
408 |
13 |
612 |
240 |
1,273 |
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| Robin J. Stalker |
500 |
11 |
680 |
240 |
1,431 |
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| Erich Stamminger |
700 |
1062) |
1,230 |
240 |
2,276 |
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| Total |
2,858 |
156 |
4,202 |
1,200 |
8,416 |
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1) In accordance with Glenn Bennett’s contract, the following compensation components were granted in US dollars: fixed annual salary $ 600,000, other benefits $ 19,000, Performance Bonus $ 900,000. An exchange rate of 1.4702 $/€ (annual average rate 2008) was used as the basis for calculation.
2) Also contains a tax adjustment due to different tax rates in Germany and the USA.
Executive Board Total Compensation in 2007 (€ in thousands)
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| Herbert Hainer (CEO and Chairman) |
1,120 |
23 |
1,680 |
1,360 |
4,1832) |
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| Glenn Bennett3) |
438 |
2384) |
657 |
680 |
2,013 |
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| Robin J. Stalker |
500 |
11 |
680 |
680 |
1,871 |
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| Erich Stamminger |
600 |
35 |
1,230 |
680 |
2,545 |
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| Total |
2,658 |
307 |
4,247 |
3,400 |
10,6122) |
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1) Payment of this bonus is made upon achievement of LTIP targets and after approval of the consolidated financial statements for the period ending December 31, 2008.
2) Due to the adoption of DRS17, the amounts do not include the amount of € 515,000, which equals the compensation resulting from the exercise of share options within the scope of the MSOP.
3) In accordance with Glenn Bennett's contract, the following compensation components were granted in US dollars: fixed annual salary $ 600,000, other benefits $ 326,595, Performance Bonus $ 900,000. An exchange rate of 1.3709 $/€ (annual average rate 2007) was used as the basis for calculation.
4) Also contains a tax adjustment due to different tax rates in Germany and the USA.
Appropriate Executive Board Compensation
The overall compensation paid to our Executive Board in the financial year 2008 amounted to € 8.416 million (2007: € 10.612 million). The Supervisory Board considers the variable compensation components to be structured in such a way that they form a considerable incentive to our Executive Board members and thus enduringly support value-oriented management. All compensation elements are appropriate both individually and in total. Criteria for the appropriateness of compensation are the tasks and contribution of the respective Executive Board member to the Group’s success, his individual performance as well as that of the entire Executive Board. In addition, the Group’s size and global orientation as well as its economic situation and prospects are taken into consideration.
Pension Commitments
There are individual contractual pension commitments for the members of our Executive Board. Upon reaching the age of 65, the individual pension commitments provide for a retirement pension and, in case of resignation from active office due to occupational incapacity or disability, they provide for a disability pension. Furthermore, a widow’s pension is paid upon the death of a former member of the Executive Board.
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Retirement pension: The pension allowance of an Executive Board member is calculated as a percentage of the pensionable income, which currently equals the annual fixed salary. Starting from a base amount totaling 10% of the pensionable income, the pension entitlement increases by 2% for each full year of tenure as an Executive Board member of adidas AG1) and can reach a maximum level of 40% of pensionable income. In the event of the retirement of an Executive Board member prior to reaching the statutory retirement age, the non-forfeiture of the pension entitlement will be in line with the legal provisions. The dynamisation of current pension payments is made in accordance with German law.
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Disability pension: The disability pension amounts to 100% of pension entitlements.
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Widow's pension: If an Executive Board member dies, his surviving spouse receives an annuity amounting to 50% of his pension entitlements.
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1)Herbert Hainer and Erich Stamminger were both first appointed on April 1, 1997. Robin J. Stalker was first appointed January 1, 2001. For Glenn Bennett, instead of his first appointment date (April 1, 1997), January 1, 2000, is used for the calculation of his pension entitlement. His base amount totals 20% of the pension entitlement.
Pension Fund and Pension Trust Fund Cover Pension Entitlements
In 2008, a total contribution of € 545,219 was made for all active Executive Board members into an external pension trust fund. For future pension entitlements of our Executive Board members, adidas AG has established pension reserves. In the Consolidated Balance Sheet drawn up in accordance with IFRS, plan assets which have arisen from the payments into the pension fund or pension trust fund are reported on a settled basis with assets offset against accruals.
Commitments to Executive Board Members Upon End of Tenure
In the event of adidas AG deciding not to renew the employment contract although the Executive Board member would be willing to continue his function as Executive Board member under the existing conditions, the respective Executive Board member receives an individually agreed severance payment in the amount of 100%1) of the fixed annual salary. Individual contracts providing for severance payments in case of premature termination of their employment agreements have not been concluded with the members of the Executive Board. If an Executive Board member dies during his term of office, his spouse will receive a one-time payment amounting to 25% of his fixed annual salary.
A post-contractual competition prohibition period of six months has been agreed upon with the Executive Board member Glenn Bennett according to which adidas AG is obliged to pay compensation of 100% of the fixed annual salary.
1) For Robin J. Stalker the severance payment amounts to 50% of the fixed annual salary.
No Loans Granted to Executive Board Members
As in the years before, the members of the Executive Board did not receive any loans or advance payments of future compensation components from adidas AG in 2008.
Miscellaneous
Our Executive Board members do not receive any additional compensation for mandates held within the adidas Group.
In the event of claims raised against members of the Executive Board for indemnification of losses incurred in connection with their managerial acts and omissions, the adidas Group’s directors’ and officers’ group liability insurance covers the personal liability of the Executive Board members but does not provide for a deductible.
Pensions Payments to Former Executive Board Members
In the financial year 2008, pension payments to former Executive Board members amounted to € 1.735 million (2007: € 1.727 million). Total pension provisions for pension entitlements of this group of persons amount to € 36.422 million (2007: € 37.576 million).
Payments to the Pension Trust Fund (€ in thousands)
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| Herbert Hainer (CEO and Chairman) |
240 |
240 |
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| Glenn Bennett |
82 |
82 |
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| Robin J. Stalker |
120 |
120 |
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| Erich Stamminger |
103 |
103 |
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| Total |
545 |
545 |
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Costs for Accrued Pension Entitlements of Executive Board Members1)
(€ in thousands)
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| Herbert Hainer (CEO and Chairman) |
173 |
215 |
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| Glenn Bennett |
52 |
68 |
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| Robin J. Stalker |
126 |
161 |
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| Erich Stamminger |
77 |
96 |
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| Total |
428 |
540 |
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1)This also includes service costs which have arisen with regard to the provisions for pension obligations in the Consolidated Income Statement according to IFRS.
SUPERVISORY BOARD COMPENSATION
Compensation Redefined as of 2008
Effective as of the financial year 2008, there has been a change in structure of the Supervisory Board compensation. The compensation is now linked to the size of the Group and to the more intense supervisory tasks. Furthermore, the members of the Supervisory Board now receive additional compensation for membership in particular committees and for the chairmanship of these committees. Due to these changes, the total compensation of the Supervisory Board rose to € 860,000 in 2008 (2007: € 294,000).
The compensation of the Supervisory Board members consists of a fixed annual payment amounting to € 40,000 for each member. Three times this amount is paid to the Chairman and twice this amount is paid to each Deputy Chairman. Furthermore, members of particular Supervisory Board committees (e.g. General Committee and Audit Committee) receive additional compensation. The chairman of a committee receives an additional annual allowance of € 40,000, while the Chairman of the Audit Committee receives an allowance of € 60,000. Every other committee member receives an allowance of € 20,000 (€ 40,000 for members of the Audit Committee). The members of the Steering Committee, the Mediation Committee, the Nomination Committee and committees which are established ad hoc do not receive additional compensation. If a Supervisory Board member is in more than one committee, the member receives only compensation for his/her task in the committee with the highest compensation. The Supervisory Board members are reimbursed for all expenses incurred in connection with their mandates as well as for the VAT payable on their compensation, insofar as they can charge for it separately and do so.
No Loans to Supervisory Board Members
As in the years before, the members of the Supervisory Board did not receive any loans or advance payments from adidas AG in 2008.
Miscellaneous
In the event of claims raised against members of the Supervisory Board for indemnification of losses incurred in connection with their acts and omissions, the adidas Group’s directors’ and officers’ group liability insurance covers the personal liability of the Supervisory Board members but does not provide for a deductible.
Supervisory Board Members' Compensation (in €)
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Dr. Hans Friderichs
(Chairman of the Supervisory Board,
Chairman of the General Committee,
Member of the Audit Committee) |
160,000 |
33,046 |
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Igor Landau
(Deputy Chairman of the Supervisory Board,
Member of the General Committee) |
100,000 |
22,546 |
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Fritz Kammerer
(Deputy Chairman of the Supervisory Board,
Member of the General Committee) |
100,000 |
31,500 |
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| Sabine Bauer |
40,000 |
21,000 |
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Dr. Manfred Gentz
(Chairman of the Audit Committee) |
100,000 |
21,000 |
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| Dr. Stefan Jentzsch |
40,000 |
3,0921) |
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| Roland Nosko |
40,000 |
21,000 |
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Hans Ruprecht
(Member of the Audit Committee) |
80,000 |
21,000 |
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| Willi Schwerdtle |
40,000 |
21,000 |
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| Heidi Thaler-Veh |
40,000 |
21,000 |
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| Christian Tourres |
40,000 |
21,000 |
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Klaus Weiß
(Member of the General Committee,
Member of the Audit Committee) |
80,000 |
21,000 |
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| Total |
860,000 |
294,0002) |
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1) Member of the adidas AG Supervisory Board since November 7, 2007.
2) Includes the compensation of Henri Filho who retired as member and Chairman of the Supervisory Board on November 7, 2007.
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