With the Remuneration Report, the Supervisory Board and the Management Board of SolarWorld AG also comply with the German Corporate Governance Code (GCGC). While section 3.10 GCGC makes provision for the Corporate Governance Report, which is contained separately in this annual report under an appropriate headline, and apart from that is also covered in the Report by the Supervisory Board, section 4.2.5 GCGC stipulates the explanation of the remuneration system for members of the Management Board, including the disclosure of individual remuneration. Section 5.4.6 GCGC – also as part of the notes or the Management Report – requires individualized reporting of Supervisory Board remuneration subdivided according to components, and including compensation paid or advantages extended for services provided individually, in particular, advisory or agency services. Insofar as Section 4.2.5 GCGC in its new version of May 13, 2013 envisages a third paragraph on minimum and maximum information, additional accrual sub-division and pension benefits, this applies only as of the 2014 fiscal year and will therefore not be explained in greater detail here yet, particularly as there was no variable remuneration or retirement pensions during the year covered by the report.
MANAGEMENT BOARD REMUNERATION
The annual Management Board remuneration fixed in terms of its structure by the Supervisory Board and agreed with all Management Board members of SolarWorld AG is composed of fixed and variable compensation components. It is guided by § 87 AktG, according to which the total remuneration for an individual Management Board member must be in appropriate relation to his/her tasks and the situation of the company. Where the Act on the Appropriateness of Management Board Remuneration (Gesetz zur Angemessenheit der Vorstandsvergütung, VorstAG), passed by the Bundestag on June 18, 2009, also provides for medium- and long-term remuneration components, these were taken into consideration in new management contracts and in the extension of expiring contracts. Even regardless of this, Management Board remuneration meets all appropriateness limits as well as the recommendations of the GCGC; account is taken of the special conditions of the company in the context of the group as well as the individual connection in the personal and professional field, taking into consideration the relevant environmental conditions. In doing so, the financial situation of the SolarWorld group is taken into account. The financial situation, in turn, determines the profit distribution possibilities which form the basis for the variable components of Management Board remuneration. The latter does not occur for 2013 covered by the report, during which the Chairman of the Board has also continued the waiver he declared in July 2012 of fixed remuneration with approval of the Supervisory Board. The Chairman of the Board also did not participate to this extent in the special remuneration with incentives for the remaining members of the Board, which the Supervisory Board had decided on at its meeting of April 29, 2013 and which was due following the extraordinary restructuring shareholders’ meeting of August 7, 2013.
Ultimately, the management remuneration also complies in all other respects with the requirements of the VorstAG. Both the individual performance of board members and the customariness in the industry are taken into account, as well as its orientation towards a sustainable corporate development. The deductible for members of the Management Board of at least ten percent of the losses in question and up to at least one and a half times the fixed annual compensation was already agreed upon with respect to D&O insurance as of January 1, 2010. Incidentally, Management Board remuneration at SolarWorld AG was already determined according to these principles before the VorstAG came into force.
As fringe benefits, all members of the Management Board receive the costs respecting their accident and D&O insurance, as well as a company car in the upper medium range for their own use. Furthermore, business-related payments, expenditure and expenses are reimbursed pursuant to § 670 German Civil Code (Bürgerliches Gesetzbuch, BGB). In addition, the board members in charge of finance (CFO), operations (COO), sales (CSO), and IT, brand and personnel (CIBPO) receive grants towards their health insurance. Since the full consolidation of Solarparc AG in 2012, the CEO’s remuneration as Chief Executive Officer of Solarparc AG must also be taken into account. The relevant amounts are shown in the following table.
Management contracts do not contain any severance provision for the case of premature termination of an employment relationship.
There is no separate pension entitlement, which is why Management Board members are permitted to convert parts of their remuneration into pension provisions.
The fixed annual compensation is to be paid to the Management Board members in twelve monthly installments at the end of each month. In addition, insofar as the requirements are met, every Management Board member receives variable, performance-related special compensation that amounts to an individually negotiated euro amount per eurocent and share of the dividend distributed to shareholders. The amount is paid within four weeks of the AGM during which the dividend payment to be used as a basis has been decided upon. In the following individualized statement of Management Board remuneration, only variable compensation for the 2011 fiscal year is shown, while no variable compensation is paid for the current fiscal year. Otherwise, variable compensation is capped in such a way that, per year, a member of the Management Board cannot receive more than a multiple of the fixed compensation that has been agreed with the Supervisory Board. The sustainability component, stipulated by section 4.2.3 GCGC and § 87 Sec. 1, sentence 3 AktG for variable compensation of the Management Board, is complied with as follows with regard to an assessment basis of several years: Initially, only 75 percent of the bonus for the last fiscal year is paid out. Then, based on a three-year assessment, an average value is determined. If this is below the initial payment of 75 percent, no additional amounts are paid. If this value is higher, a relevant back payment is made.
In accordance with a resolution of the AGM in 2009, the total management compensation per member of the Management Board is capped to 20 times the average employee remuneration. On May 20, 2010, the AGM also declared the approval of the system of remuneration for members of the Management Board pursuant to § 120 Sec. 4 AktG. The Chairman of the Supervisory Board outlined the salient points of the compensation system and any changes thereto at the subsequent Annual General Meetings (section 4.2.3 GCGC).
SUPERVISORY BOARD REMUNERATION
The AGM on May 24, 2011 modified the Supervisory Board remuneration, which was approved earlier at the AGM of May 25, 2005. It still consists of fixed remuneration, performance-related special remuneration, fringe benefits and reimbursement of out-of-pocket expenses. Current Supervisory Board remuneration has been applicable since January 1, 2011 and also applies to the following years, unless a new AGM passes different resolutions for the future. Fixed remuneration for a member amounts to € 35,000.00, for the Deputy Chairman to € 52,500.00 and for the Chairman to € 70,000.00. A lump sum of € 500.00 for every meeting attended is paid as reimbursement of expenses. In addition, the company pays variable remuneration in relation to a basic amount of € 2,639.055; this basic amount is to be multiplied by each dividend cent if a dividend has been adopted. Ultimately, the company assumes the premium payments for insurance cover concerning legal liability arising from Supervisory Board activities (D&O insurance). In accordance with the GCGC, the Supervisory Board has also agreed upon the deductible that is compulsory for the Management Board pursuant to the VorstAG, effective as per July 1, 2010.
The Supervisory Board remuneration is net so that turnover tax is added if a member of the Supervisory Board is liable to pay turnover tax. Fixed annual remuneration is paid retroactively for the closed fiscal year. Variable remuneration also refers to the fiscal year ended and becomes due upon the AGM that passes the resolution on a dividend to be distributed. As regards the meeting attendance fees, 14 flat-rate fees, each of € 7,000.00 net, were charged for one AGM and 13 Supervisory Board meetings. With respect to further details, we refer to the table.
In connection with the new version of section 5.4.6 GCGC, the Supervisory Board intends to propose to the AGM that only fixed remuneration for the Supervisory Board be approved and that an additional budget for training and professional development be provided.
With regard to the disclosures recommended in the last paragraph of section 5.4.6 GCGC, it is pointed out that the Chairman of the Supervisory Board of SolarWorld AG is a partner in the law firm of Schmitz Knoth Rechtsanwälte. Essentially, this firm provides legal advice and representation for the SolarWorld group through other partners and employees of the law firm as well as the required international coordination.
With regard to the provision of own services during the year of 2013 covered by the report, Sozietät Schmitz Knoth (Rechtsanwälte) charged SolarWorld AG € 672,203.04 for consultancy services without turnover tax and tax-free expenditure. Added to this are fees for court proceedings totaling € 31,279.90, which are mainly recoverable. The consultancy fee for the subsidiaries of SolarWorld AG stands a further € 175,571.49 and was accounted for with the relevant net amounts of € 1,800.07 by Solarparc AG, € 130,861.20 by Deutsche Solar GmbH, € 12,684.46 by Deutsche Cell GmbH, € 1,540.06 by Solar Factory GmbH, € 1,299.99 by SolarWorld Industries Deutschland GmbH, € 2,730.86 by SolarWorld Solicium GmbH and € 24,654.85 by SolarWorld Innovations GmbH. Therefore the Group expenditure on consultancy fees totaled € 847,774.53 (2012: € 825,996.80). In the field of court representation of subsidiaries of SolarWorld AG, a further € 545,742.20 net was incurred, which was divided as follows: € 715.00 for Deutsche Cell GmbH, a further € 3,481.40 for SolarWorld Industries Deutschland GmbH and the remainder of € 541,545.80 for Deutsche Solar GmbH, chiefly for pursuing claims for damages arising from long-term contracts. Therefore overall legal fees of € 577,022.10 (2012: € 424,592.55) were incurred for legal representation, which are counterbalanced by substantial claims for refunds, which is correspondingly less of a burden for the Group.
All individual items within the group amount to a total of € 1,424,797.17 (2012: 1,250,589.30, of which € 703,482.94 (2012: 501,333.15 €) were subject to approval by SolarWorld AG. All individual items and the total sum accepted by the group were discussed and approved by the Supervisory Board of SolarWorld AG, both during the year and at the meeting on January 20, 2014. At a meeting on February 26, 2014, they were discussed with the auditors and then together with this remuneration report approved. 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 has convinced itself of the relevant facts so as to simultaneously confirm the proper mandate by the Management Board. Moreover, the Management Board has induced an annual overhaul of their own.
As in the previous year, the remuneration from Solarparc AG must be taken into account of those members of the Supervisory Board of SolarWorld AG who are also members of the Supervisory Board of Solarparc AG. The relevant amounts are shown in the following table.