Remuneration of the Board of Management and Supervisory Board
Principles of Board of Management remuneration
The full Supervisory Board passes resolutions on the remuneration system and the total remuneration for individual members of the Board of Management of AUDI AG on the basis of the Presiding Committee’s recommendations. The remuneration system for the Audi Board of Management does not apply to Board of Management members who are simultaneously members of the Board of Management of Volkswagen AG. The remuneration system of Volkswagen AG applies to these.
The remuneration of the members of the Board of Management complies with the statutory requirements of the German Stock Corporation Act (AktG) and the recommendations of the German Corporate Governance Code. When elaborating the remuneration system, the Supervisory Board was assisted by renowned, independent, external remuneration and legal consultants. The Supervisory Board presents the remuneration system adopted by it to the Annual General Meeting for approval each time it is changed but at least every four years.
The level of remuneration should be fundamentally appropriate and attractive by national and international comparison. The relevant criteria include the tasks of a Board member, the economic situation, performance and future prospects of AUDI AG and also the standard nature of the remuneration, taking account of competitors on the market and the pay structure otherwise in place within the Volkswagen Group.
The amount of the remuneration, the individual objectives and target achievement are regularly checked by the Supervisory Board and adjusted if required.
Overview of the remuneration components
The following table provides an overview of the components that make up the remuneration system for members of the Board of Management of AUDI AG for the 2023 financial year. In addition, the table provides an overview of the structure of the individual remuneration components and explains their objectives, in particular in respect to how the remuneration promotes the long term development of the company. The ESG criteria were included in the remuneration system as of the 2023 financial year.
Fixed remuneration components
| Component | Form | Objective |
|---|---|---|
| Basic salary |
• 12 equal installments; paid at the end of each month |
Basic remuneration and fringe benefits should ensure a basic income that reflects the tasks and responsibilities of a member of the Board of Management and prevents the running of inappropriate risks |
| Fringe benefits | • Fringe benefits, such as for example a driving service, company cars or health services | Basic remuneration and fringe benefits should ensure a basic income that reflects the tasks and responsibilities of a member of the Board of Management and prevents the running of inappropriate risks |
|
Company pension scheme (bAV) |
• In principle, employer-based, contributions-based defined benefit plans by way of the direct pension commitment to retirement, reduction in earning capacity and surviving dependent benefits
• Until the employee reaches the age of 65
• Annual benefit expense of 40 percent of the contractually agreed annual basic salary |
bAV must assure members of the Board of Management an adequate level of benefits including in retirement· |
Variable remuneration components
| Component | Form | Objective |
|---|---|---|
| Annual bonus |
• Plan type: target bonus
• Assessment period: business year
• Benefit criteria:
○ Financial/non-financial partial goals:
Operating return on sales (ROS) in the Volkswagen Group and in the Audi Group as well as the return on investment (ROI) in the Volkswagen Group and the Audi Group (equally weighted) as well as a supplementary factor to take into account targets in the areas of Environmental, Social and Governance (ESG factor)
For every business year, the Supervisory Board stipulates the values for the financial and non-financial partial goals in the form of a threshold value, target value and upper reference value
• Annual bonus payment amount = individual target amount × financial total target achievement level * ESG factor
• Payment: cash payment/payment in the month after the approval of the consolidated financial statements for the relevant business year |
The annual bonus must incentivize members of the Board of Management to pursue ambitious targets; economic success targets promote the strategic goal of competitive profitability |
| Long-term bonus (LTI) |
• Plan type: virtual performance share plan
• Performance periods: three years forward-oriented
• Limitation: 200 percent of the target amount
• The virtual performance shares are pure calculation positions and grant no shares or voting rights in Volkswagen AG
• Allocation of performance shares: at the start of each business year, the individually agreed target amount is divided by the arithmetic average of the closing prices of the Volkswagen preferred share (security identification number: 766403) in the Xetra trading platform of the Deutsche Börse AG (German stock exchange) on the last 30 trading days prior to January 1 of the relevant performance period (initial reference price)
• The average EPS target achievement over the performance period is determined from the arithmetic average of the annual EPS target achievement during the three-year performance period |
The long-term bonus serves to align the remuneration of the members of the Board of Management to the long-term performance of the company; the trading price performance in combination with the distributed dividends, measured over three years, ensures the long-term impact of performance incentives and promotes the strategic goal of competitive profitability |
Other services
| Component | Form | Objective |
|---|---|---|
| Special payment |
• Only on the basis of a separate contractual agreement with the Board of Management member • Agreement in advance for the business year and stipulating the performance criteria for the special payment
• Currently there are no special payment agreements with Board of Management members |
Special payments should award outstanding and extraordinary services and may only be granted if they are in the company’s interests and are associated with future-related benefits for the company |
|
Benefits that are limited in time or are agreed for the entire duration of the service contract respect to Board of Management members |
• Only on the basis of a separate contractual agreement with the new, incoming Board of Management member in each case
|
(Compensatory) payments should make it possible |
Further remuneration regulations
| Component | Form | Objective |
|---|---|---|
|
Malus and clawback regulations |
• The Supervisory Board can reduce or reclaim the annual bonus and LTI up to 100 percent in the case of relevant misconduct during the assessment period
|
Malus and clawback regulations should counteract individual misconduct and organizational culpability |
| Maximum remuneration |
• The LTI is capped at 200 percent of the target amount; in the event of extraordinary developments, the Supervisory Board can at its own discretion set a limit on the variable remuneration components (cap) in accordance with the principle of appropriateness (Section 87 German Stock Corporation Act (AktG)) |
Benefits and defined benefits in the context of a premature termination
The remuneration system for the members of the Board of Management and the service contracts of the members of the Board of Management provide for redundancy payments for the event that the appointment as a member of the Board of Management is revoked.
The members of the Board of Management receive – except where there is an important reason entitling the company to terminate the employment contract extraordinarily, and where the revocation of the appointment is due to a gross breach of duty – a severance payment in the amount of the gross salary for the remainder of the employment contract, but no more than the amount of two gross annual incomes (severance cap). Any special payment is not taken into consideration in the calculation.
The severance is paid in a maximum of 24 monthly partial amounts from the time the appointment as member of the Board of Management of the company ends. Contractual remunerations paid by the company for the period from the time the appointment ends to the end of the employment contract are offset against the severance.
If the member of the Board of Management takes up another role after the appointment ends, the amount of the severance is reduced by the contractual remunerations that the company pays from the end of the appointment to the end of the employment relationship, and also by other income in this time frame.
The pension commitment for members of the Board of Management is contractually vested immediately. If a member of the Board of Management enters retirement immediately, they are entitled to a company car.
Principles of Supervisory Board remuneration
The remuneration of the members of the Supervisory Board is regulated in Section 16 of the Articles of Incorporation and Bylaws of AUDI AG, the current version of which was adopted by the Annual General Meeting of AUDI AG on November 30, 2021. The remuneration of the members of the Supervisory Board of AUDI AG comprises exclusively non-performance-related remuneration components.
The members of the Supervisory Board of AUDI AG receive a fixed remuneration per business year. The Chairperson of the Supervisory Board receives three times and their deputy receives twice the basic remuneration paid to an ordinary member of the Supervisory Board.
The members of the Supervisory Board additionally receive for their activity in the committees of the Supervisory Board an additional fixed remuneration per committee per business year, as long as the committee meets at least once per year to fulfill its tasks. Memberships in the Nomination and Negotiating Committee in accordance with Section 27 Para. 3 German Codetermination Act (MitbestG) are not taken into consideration. The chairpersons of the committees receive twice and their deputies receive one and a half times the amount of the above detailed committee remuneration. Supervisory Board members who are only on the Supervisory Board or one of its committees for part of the business year receive a proportionate remuneration. The company refunds the value added tax due on the remuneration.
The relevant member receives a fixed lump sum attendance fee per business year for participation in meetings of the Supervisory Board or a committee. The remuneration and lump-sum attendance fees are each payable 30 days after the end of the business year. The company also concludes a third-party liability insurance with deductible on behalf of the members of the Supervisory Board.
Former members of the Supervisory Board no longer receive remuneration from AUDI AG for their earlier activity on the Supervisory Board.
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