This remuneration report is part of the group management report and complies with the recommendations of the German Corporate Governance Code (GCGC) as well as the requirements of the German Commercial Code (HGB) and the German Accounting Standards (DRS 17). It explains the main points of the remuneration system for the Management Board and Supervisory Board and reports the amount of remuneration for each individual in accordance with its different components.
Remuneration of the management board
The Supervisory Board of SolarWorld AG determines the remuneration system of the Management Board and negotiates with each Management Board member to determine the individual Management Board remuneration amounts derived from this system. The structure of the remuneration system targets the sustainable development of the company and accounts for the company's distinctive characteristics as well as the relevant industry environment. The financial situation of the SolarWorld group is also taken into account.
The remuneration system of SolarWorld AG is composed of non-performace related and performance-related components. In accordance with §87 German Stock Corporation Act (AktG), the total remuneration for an individual Management Board member is reasonably proportionate to his tasks and the situation of the company.
Management contracts do not contain any severance provision for the case of premature termination of an employment relationship.
Non-performance related remuneration
Non-performace related components comprise fixed annual compensation and fringe benefits. The fixed annual compensation is to be paid in twelve monthly installments at the end of each month. Fringe benefits include use of a company car as well as payment of the costs for accident and D&O insurance. The agreed deductible for the D&O insurance corresponds, in accordance with §93 para. 2 sentence 3 AktG, to at least 10 percent of each damage up to at least one and a half times the fixed annual compensation. In addition to that, the Chief Financial Officer (CFO), Chief Sales Officer (CSO), Chief Information Technology, Brand and Personnel Officer (CIBPO), and the Chief Product Officer (CPO) receive grants towards their health insurance. Moreover, the CFO, CSO, and CPO are provided with direct insurance in the highest amount permissible according to tax law. Work-related disbursements, expenses, and allowances are reimbursed in accordance with §670 of the German Civil Code (BGB).
CEO Dr.-Ing. E. h. Frank Asbeck voluntarily waived the fixed remuneration for his work on the Management Board of SolarWorld AG from July 2012 until the end of 2013 in order to ease the company's financial burden during the crisis. With the completion of financial restructuring and the acquisition of the solar activities of Bosch Solar Energy AG, Solar World achieved again profit after taxes during the fiscal year 2014. As a result, the CEO received his contractually agreed Management Board remuneration during the year covered in the report.
The remuneration system of SolarWorld AG contains a variable component that is linked to the economic development of the company. A sustainability component with a multi-year valuation basis completes the system.
The basis for determining the variable remuneration was changed fundamentally in fiscal year 2014. The amount of remuneration is now dependent on the degree to which the individual target values set for each Management Board member are reached, exceeded, or fallen short of. The key performance indicators whose development is used to measure the variable Management Board remuneration are return on sales calculated from consolidated EBITDA and revenue, groupwide shipments, and the achievement of predefined cost goals. The amount of annual performance-related remuneration is limited to an individually agreed maximum amount for each Management Board member. This performance-related remuneration system will apply to the CFO starting in 2015. For 2014, the CFO’s compensation was still subject to the former provision, under which the performance-related remuneration was based on the amount of a dividend distributed to the shareholders and was therefore not paid in 2014.
The variable remuneration of the Management Board members contains, as required under section 4.2.3 GCGC and §87 para. 1 sentence 3 AktG, a sustainability component that is dependent on the company's development over a time period of three years. Initially, only 75 percent of the variable bonus – to the extent that it is dependent on consolidated return on sales – associated with this past fiscal year will be advanced. After three years have passed, the final variable remuneration will be determined according to the average value from the last three years. If this turns out to be lower than the advance that has already been paid out, then no additional payment will be made. The advance is not recallable. If the final variable remuneration calculated according to the average value turns out to be higher than the advance that has already been paid, a supplementary payment will be made.
In order to ensure that the system fulfills its role as an incentive, the variable Management Board remuneration will be supplemented by special bonuses granted under certain circumstances. One example would be a special assignment carried out by the Management Board in economically difficult years that should be rewarded in order to maintain the competitiveness of Management Board remuneration. It is for this reason that the Supervisory Board, as the organ responsible for Management Board remuneration, may deem it appropriate to award Management Board members with a special bonus in addition to their variable remuneration in order to offer incentive.
Due to the special challenges that the CFO faced during the fiscal year in connection with the restructuring and Bosch acquisition, the CFO was awarded bonus compensation of k€ 300.0 as an incentive and retention bonus.
There is no separate pension entitlement, which is why Management Board members are permitted to convert parts of their remuneration into company pension provisions.
In 2009, the Annual General Meeting decided to place an overall cap on Management Board remuneration per board member amounting to twenty times the average employee remuneration. On May 20, 2010, the Annual General Meeting also declared approval of the system for compensating members of the Management Board in accordance with § 120 para. 4 AktG. The Chairman of the Supervisory Board outlined the basic elements of the remuneration system and any changes thereto at the subsequent Annual General Meetings (section 4.2.3 GCGC).
The Management Board remuneration complies with all guidelines of acceptability and the stipulations of the GCGC and the law adopted on June 18, 2009, for Permissibility of Management Board Remuneration (VorstAG). Incidentally, Management Board remuneration at SolarWorld AG already adhered to these principles before the VorstAG came into force.
Remuneration of the Management Board 2014
Altogether, the total remuneration of the Management Board for fiscal year 2014 amounted to k€ 2,275.6 (2013: k€ 1,808.6). The disclosure of Management Board remuneration for the fiscal year 2014 was done in accordance with the recommendation of the GCGC in its version from June 24, 2014 (section 4.2.5). The uniform model tables make it possible to display separately the contributions and the actual allocation (meaning the payments made) for the year being reported. When considering the allocation, the remuneration values must also be provided, which can be achieved in minimum or maximum. Furthermore, additional remuneration for Management Board membership in subsidiaries of SolarWorld AG are listed separately.
Remuneration of the Supervisory Board
The Articles of Association specify that the Annual General Meeting shall determine the remuneration system for the Supervisory Board. Effective June 1, 2014, the Annual General Meeting of May 30, 2014, decided to change the system for Supervisory Board remuneration.
Remuneration System for the Supervisory Board Effective June 1, 2014
Every member of the Supervisory Board receives a yearly fixed remuneration of k€ 40.0 in addition to reimbursement for their expenditures in accordance with §670 German Civil Code (BGB).
In accordance with section 5.4.6 GCGC, the agreed remuneration system takes into account the chair and deputy chair of the Supervisory Board as well as the chair and members of the committees. The chair of the Supervisory Board receives three times the fixed compensation, therefore earning k€ 120.0, and the deputy chair receives double the fixed compensation, so k€ 80.0. Thus, membership or chairmanship in committees are also compensated. Ordinary members receive an additional k€ 5.0 in total for membership in one or more committees, in the case that the person is a committee chair in at least one committee they will instead receive double, which would be k€ 10.0. There is no entitlement to variable extra pay or separate attendance pay.
All amounts are given plus VAT, if such tax is applicable. If tenure as a member of the Supervisory Board is taken up or ended during the year, then remuneration will be awarded pro rata temporis.
Remuneration System for the Supervisory Board Effective Until May 31, 2014
Until May 31, 2014, the remuneration system of the Supervisory Board was based on the decision of the Annual General Meeting on May 24, 2011, concerning remuneration of the Supervisory Board. The system was composed of a fixed and a performance-related variable compensation plus fringe benefits and reimbursement of out-of-pocket expenses.
The fixed annual compensation for an ordinary member amounted to k€ 35.0, for the deputy chair it was k€ 52.5 and for the chair it was k€ 70.0. An attendance fee of k€ 0.5 for each meeting and Annual General Meeting participation functioned as the reimbursement of out-of-pocket expenses. The variable remuneration was tied to the distribution of dividends and was determined by multiplying a basis amount of €2,639.055 with every determined dividend cent. Here, too, the Supervisory Board remuneration is given plus VAT, if such tax is due. Variable remuneration was based on the previously completed fiscal year and was due only after the Annual General Meeting where the decision was made concerning the distribution of dividends.
As far as the meeting attendance fee is concerned, up to May 31, 2014, there was officially a total of four Supervisory Board meetings and one Annual General Meeting, which corresponded to a total of k€ 2.5 net. With respect to further details, we refer to the information in the table.
As in the previous year, the remuneration from Solarparc AG must be taken into account and disclosed for those members of the Supervisory Board of SolarWorld AG who were also members of the Supervisory Board of subsidiary Solarparc AG. Effective June 24, 2014, Solarparc AG was transformed into a limited liability company (GmbH) and as a result was no longer entitled to Supervisory Board remuneration starting on that date.
In addition to Supervisory Board remuneration, SolarWorld AG also takes responsibility for paying premiums for appropriate insurance protection in accordance with the legal liability inherent in duties on the Supervisory Board (D&O insurance). In accordance with section 3.8 GCGC, the Supervisory Board voluntarily agreed on July 1, 2010, to a deductible of at least 10 percent for each damage and up to at least one and a half times the fixed annual remuneration.
With regard to the disclosures recommended in the last paragraph of section 5.4.6 GCGC, it is also pointed out that Dr. Claus Recktenwald, who was Chairman of the Supervisory Board of SolarWorld AG until the Annual General Meeting from May 30, 2014, is a partner in the law firm of Schmitz Knoth Rechtsanwälte. This firm provided and provides legal advice and representation for the SolarWorld group through other partners and employees; it also takes care of the required international coordination.
With regard to own services provided from January 1, 2014, to May 27, 2014, the law firm Schmitz Knoth Rechtsanwälte billed SolarWorld AG k€ 249.1 excluding VAT and tax-free disbursement for consultancy services. In addition, fees for court proceedings totaling k€ 10.5 were charged in the period until the date mentioned above.
The consultancy fee for the subsidiaries of SolarWorld AG in this period amounted to a further k€ 90.7, comprising the respective net amounts of k€ 8.7 by Solarparc AG, k€ 60.6 by SolarWorld Industries Sachsen GmbH, k€ 1.1 by SolarWorld Industries Deutschland GmbH, k€ 1.0 by SolarWorld Solicium GmbH, k€ 12.3 by SolarWorld Industries Thüringen GmbH and k€ 7.1 by SolarWorld Innovations GmbH. This brings the company-related consultancy fee expenses to a total of k€ 339.8 (fiscal year 2013: k€ 847.8) In the area of legal representation of subsidiaries of SolarWorld AG, another k€ 64.1 net was disbursed, with k€ 1.5 for SolarWorld Industries Deutschland GmbH, further k€ 1.6 for SolarWorld Industries Schalke GmbH i.L., k€ 0.9 for Solar Factory GmbH and the remainder of k€ 60.1 for Deutsche Solar GmbH, chiefly for pursuing claims arising from long-term contracts. Therewith, overall legal fees amounting to k€ 74.5 (fiscal year 2013: k€ 577.0) were incurred for legal representation, which are counterbalanced by substantial claims for refunds that reduced the burden for the group.
All individual items within the group amount to a total of k€ 414.4 (fiscal year 2013: k€ 1,424.8) and of that, an amount of k€ 259.6 (fiscal year 2013: k€ 703.5) was subject to approval by the SolarWorld AG.
All individual items as well as the total sum accepted by the company were approved by the Supervisory Board of SolarWorld AG, both, during the year and at a Meeting on May 28, 2014. Commissioning was approved in each individual case, and the necessity for and appropriateness of the measures were confirmed after completion of the services. This was based on a new framework agreement, dated February 7, 2012, which also provides for the adoption of an approval resolution by the Supervisory Board prior to the relevant cost settlement and a decision in the individual case that the consulting and representation activities provided by the law firm of Schmitz Knoth Rechtsanwälte, evidenced by the cost invoices including time statements submitted, only relate to those Management Board tasks that are not part of the original area of tasks of the Supervisory Board. The Supervisory Board is confident of the relevant facts so as to simultaneously confirm the proper mandate by the Management Board. Moreover, the Management Board has induced an annual review of their own.