Compensation of the Board Members

Executive Board Compensation

Executive Board remuneration first of all comprises a fixed annual salary and variable remuneration with two components. Further components of the remuneration system, described below in two separate sections, include non-cash benefits and retirement benefits.

Annual fixed salary

The annual fixed salary amounts to €600 thousand for full members of the Executive Board, €700 thousand for Dr. Klaus Patzak and €1,200 thousand for the Chairman of the Executive Board.

Variable remuneration

The variable remuneration shall consist of two components, a variable remuneration with a one-year assessment basis, the short-term incentive (STI), and a variable remuneration with a multi-year assessment basis, the long-term incentive (LTI). In addition, the granting of a special or recognition bonus is at the discretion of the Supervisory Board.

The STI is based on the achievement of economic success targets defined by the Supervisory Board. With an individual performance factor (IPF), which is also included, the Supervisory Board can take account of the individual performance of each member of the Executive Board as well as unforeseen events that have a material impact on the activities of the members of the Executive Board. The economic success targets and the criteria for the IPF of the respective member of the Executive Board are determined at the beginning of the relevant financial year by the Supervisory Board.

The annual initial value of the STI, corresponding to a 100 percent target achievement, amounts to €500 thousand for full members of the Executive Board, €650 thousand for Dr. Klaus Patzak and €1,000 thousand for the Chairman of the Executive Board. This figure changes depending on the achievement of targets defined each year by the Supervisory Board for the development of adjusted EBITA and free cash flow from operating activities of the Bilfinger Group. For the purposes of the STI, this free cash flow from operating activities is based on cash flow from operating activities less payments made for property, plant and equipment and intangible assets plus payments received from the disposal of property, plant and equipment and intangible assets. The achievement of these equally-weighted targets counts only within a corridor of 80 to 135 percent of the targets. The degree of target achievement is zero below the minimum value. If 80 percent of the goal is achieved, the degree of target achievement is 50 percent. It then rises on a linear basis up to a maximum target value of 135 percent to a maximum value of 200 percent of the STI value (‘cap’).

Disbursement of the STI is made following the conclusion of the relevant financial year and is calculated by multiplying the initial value with the arithmetic mean of the degree of achievement of the two economic success targets and the IPF defined for each member of the Executive Board under evaluation of his individual performance in the financial year (factor 0.8 to 1.2). In the case of the assumption or termination of an Executive Board mandate during the year, there is an entitlement to payment of the STI for this financial year pro rata temporis.

The LTI is designed to reward the sustainable long-term development of the company. It includes the annual issue of virtual shares of Bilfinger SE, so-called performance share units (PSU). Their number can change over the course of a three-year performance period depending on the degree of target achievement for the two success targets ROCE as well as the development of the relative total shareholder return figure (TSR figure) of the company shares pursuant to the regulations below. The resulting number of PSUs corresponds to the number of real shares of Bilfinger SE which the relevant Executive Board member may receive at the conclusion of the performance period.

At the beginning of each financial year, full Executive Board members receive PSUs with a current market value of €630 thousand and the Chairman of the Executive Board receives PSUs with a current market value of €1,400 thousand. For Dr. Klaus Patzak, the allotment value is €850 thousand. In the case of the assumption or termination of an Executive Board mandate during the year, the number of PSUs allocated for this financial year is decreased pro rata temporis.

The ROCE for the tranches 2015-2017 and 2016-2018 is calculated as adjusted ROCE before taxes, from the tranche 2017-2019, the ROCE will be defined as non-adjusted ROCE after taxes. The ROCE degree of target achievement for the performance period is determined on the basis of the average value of the achievement for the annual targets defined by the Supervisory Board. The achievement of the targets counts only within a corridor of 80 to 135 percent of the set target. The degree of target achievement is zero below the minimum value. If 80 percent of the goal is achieved, the degree of target achievement is 50 percent. It then rises on a linear basis up to a maximum target value of 135 percent to a maximum value of 150 percent of the ROCE target (‘cap’).

The second success factor for the LTI, the relative TSR value, is determined on the basis of a comparison of the TSR values of the shares of the other companies listed on the MDAX. With the achievement of a positioning of Bilfinger in comparison to the other MDAX companies through the performance period below the median, the target achievement amounts to zero percent and can, in the case of a positioning at the 75th percentile or above, amount to a maximum of 150 percent.

The final number of PSUs is calculated by multiplying the initial number of PSUs with the arithmetical average of the degree of target achievement for the two success targets. The final number is subject to a cap of maximum 150 percent of the initial number of PSUs. In addition, the Supervisory Board is authorized, in the case of extraordinary events or developments, especially in the case of extreme increases in the share price, to appropriately reduce the mathematical final number of PSUs. At the end of the performance period, members of the Executive Board receive a number of real Bilfinger shares corresponding to the final number of PSUs. The company is authorized, however, to make a full or partial cash payment in place of the delivery of Bilfinger shares, the amount of which is measured based on the current market price.

In addition to the STI and LTI, the Supervisory Board can, at its own discretion, grant a member of the Executive Board, on the basis of a previously concluded target-setting agreement, a special bonus or retroactively a recognition bonus for special achievement. There is no fundamental entitlement to such a bonus on the part of the member of the Executive Board except in the case of an expressed commitment from the Supervisory Board.

Own investment in Bilfinger shares

Members of the Executive Board are obliged to purchase Bilfinger shares, the purchase price for which equals one year’s gross annual fixed salary and to hold them for the period of their appointment to the Executive Board. The purchase is to be made within a time period of five years, whereby shares with a value of at least one-fifth of the total amount to be applied must be purchased in each financial year. Shares that are granted to a member of the Executive Board within the scope of the LTI are counted against this purchase obligation.

Non-cash benefits

The Executive Board remuneration system provides fringe benefits (benefits in kind), for the most part in the form of insurance cover and the use of company cars including driver, the value of which is accounted for in accordance with applicable tax law.

Retirement benefits

Retired members of the Executive Board receive pension payments from the age of 62. In case of the death of a member of the Executive Board with pension entitlement and assuming further conditions are met, dependents are entitled to pension benefits in the form of widow and orphan pensions. For new contracts since the third quarter of 2016, benefit entitlements for surviving dependents will exclusively take the form of capital payments. The entitlements described above have been transferred to an external institution in the form of a reinsured relief fund and are based on contributions made by the company to the relief fund and contractually agreed with the member of the Executive Board in the amount of 45 percent of the fixed remuneration (50 percent in the case of Dr. Patzak). All future pension entitlements are fully funded so that there is no financial burden on the company in the event of a claim. For all contracts there is a right to select between payment of the retirement benefit as a capital payment or as a life-long pension. The benefits of the external institutions also cover the risk of occupational disability.

Please refer to the Remuneration report (part of the combined management report) of the Annual Report regarding the total remuneration granted for the financial year 2017.

Supervisory Board remuneration

The members of the Supervisory Board receive, as specified by Section 16 of the Articles of Incorporation of Bilfinger SE, in addition to the reimbursement of their expenses, annual fixed remuneration of €70 thousand. The Chairman of the Supervisory Board receives two and a half times that amount; the Deputy Chairman of the Supervisory Board and the Chairmen of the committees with the exception of the Nomination Committee receive double that amount. The members of the committees with the exception of the Nomination Committee receive one and a half times that amount. If a member of the Supervisory Board exercises several of the aforementioned functions, he or she is only entitled to the highest of the respective amounts. Members of the Supervisory Board receive a meeting fee of €500 for each meeting of the Supervisory Board and its committees that they attend. Members who reside in Germany are also reimbursed for any value added tax applicable to their remuneration.

Please refer to the Remuneration report (part of the combined management report) of the Annual Report regarding the total remuneration granted for the financial year 2017.

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