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Compensation system for the Board of Management

The Supervisory Board Personnel Committee reviews the compensation system for the Board of Management at regular intervals and formulates proposals for its further development where necessary. The Supervisory Board examines these recommendations carefully and passes its resolutions on that basis. Several criteria are used to assess the appropriateness of the Board of Management’s compensation. These include the tasks of the Board of Management as a whole and of its respective members, the members’ personal performance, the economic situation as well as the company’s long-term success and outlook. Furthermore, the Supervisory Board follows the development of the Board of Management’s compensation in comparison with other companies as well as with the top management team and the workforce at Dürr.

The current compensation system has been in place since 2010. Its structure was reviewed and deemed appropriate in 2015, when Mr. Dieter’s contract was extended. In accordance with the German Act on the Appropriateness of Management Board Compensation (VorstAG), the contracts of both members of the Board of Management include short-term and long-term incentives (variable compensation calculated over a period of one and several years, respectively), payment caps and a deductible that applies in connection with D&O (directors’ and officers’) liability insurance policies in case of liabilities.

The compensation for the Board of Management consists of non-performance-related and performance-related (variable) components. The non-performance-related component is made up of the basic compensation (fixed compensation) payable in equal monthly installments, plus fringe benefits. The latter include the use of a company car as well as term life and accident insurance contributions, both of which are subject to tax payable by Dürr.

Performance-related compensation is based on short-term and long-term incentives; special bonuses may also be paid. The short-term incentive (STI) scheme consists of an agreed proportion of the Group’s earnings before tax (EBT) in each financial year; there is a cap on the compensation payable under the STI scheme. In 2016 the STI cap was € 1.60 million for Mr. Dieter and € 1.44 million for Mr. Heuwing. Mr. Dieter and Mr. Heuwing are only entitled to an STI payment if EBT reaches € 100 million or more.

The compensation payable under the long-term incentive (LTI) scheme is based on the development of Dürr’s share price and the Group’s average EBIT margin over a threeyear period (LTI period). The LTI scheme operates on a rolling basis; seven LTI tranches have been issued since its introduction in 2010. Each year a specified number of virtual Dürr shares are issued, known as performance share units. In 2016 Ralf W. Dieter received 25,000 and Ralph Heuwing 22,500 performance share units (2015: 25,000 and 22,500). The amount payable at the end of the threeyear LTI period is calculated by multiplying the number of performance share units by a share price multiplier and an EBIT multiplier.

The Supervisory Board has raised the basic compensation for both members of the Board of Management in two stages since 2013: Mr. Dieter’s basic compensation was raised from € 600 thousand to € 800 thousand; Mr. Heuwing’s basic compensation was raised from € 500 thousand to € 650 thousand. Prior to this, the Supervisory Board had reduced the LTI payment cap in 2013. Since the 2013 to 2015 tranche, the LTI payment has been capped at € 1.20 million per tranche and person; previously it was capped at € 1.50 million.

Total compensation expense for the Board of Management in 2016 was € 7,886 thousand (previous year: € 7,454 thousand). Former members of the Board of Management received pension benefits in the amount of € 1,891 thousand (previous year: € 1,876 thousand).

Compensation expense for the Board of Management 2016



CEO
Ralf W. Dieter
CEO
Ralph Heuwing
CFO
201520162016 (min) 2016 (max) 2015 2016 2016 (min) 2016 (max)
Basic compensation
(fixed compensation)
800,000800,000800,000 800,000 650,000650,000 650,000 650,000
Fringe benefits (payments in kind, allowances related to insurance premiums etc.) 47,59449,17949,179 49,179 35,93833,125 33,125 33,125
Total 847,594849,179849,179
849,179
685,938683,125 683,125
683,125
One-year variable compensation
(STI)
1,445,1201,581,2600 1,600,000 1,300,6081,423,134 0 1,440,000
Total of multi-year variable compensation (LTI) 1,200,0001,200,0000 1,200,000 1,200,0001,200,000 0 1,200,000
Variable compensation
LTI 2013 – 2015
400,00000 0 400,0000 0 0
Variable compensation
LTI 2014 – 2016
400,000400,0000 400,000 400,000400,000 0 400,000
Variable compensation
LTI 2015 – 2017
400,000400,0000 400,000 400,000400,000 0 400,000
Variable compensation
LTI 2016 – 2018
0400,0000 400,000 0400,000 0 400,000
Other variable compensation 200,00000 350,000 200,000100,000 0 300,000
Total 3,692,7143,630,439
849,179
3,999,179
3,386,5463,406,259
683,125
3,623,125
Benefit obligation contribution 200,000640,000480,000 640,000 175,000209,000 100,000 209,000
Total compensation 3,892,7144,270,439
1,329,179 4,639,179
3,561,5463,615,259
783,125
3,832,125

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