The remuneration report provides information on the principles of the remuneration system for the general partner (KSB Management SE) including its Managing Directors and Administrative Board. It is prepared in accordance with the recommendations of the German Corporate Governance Code (item 4.2.5).
In accordance with the Articles of Association of KSB SE & Co. KGaA (the “company”), the general partner receives annual remuneration not based on profit and loss in the amount of 4 % of the share capital for the management and assumption of personal liability. Accordingly, € 20 thousand was spent on this by KSE SE & Co. KGaA in the 2018 financial year.
According to the Articles of Association, the company additionally reimburses the general partner for any expenses incurred in connection with the management of business operations; this relates but is not limited to the remuneration of the members of the governing bodies of the general partner.
The general partner is responsible for the management of the company. The Administrative Board of KSB Management SE appoints its Managing Directors and is responsible for the contracts of service of the Managing Directors. This responsibility includes the structure of the remuneration arrangements, the amount of remuneration and their regular review.
The remuneration arrangements for the Managing Directors are structured as transparently as possible. The total amount of remuneration for the individual Managing Directors is determined based on various parameters. Criteria for assessing the appropriateness of the remuneration include the responsibilities of the individual Managing Directors, their personal performance, the economic situation, the company’s success and customary remuneration amounts when taking peer companies and the remuneration structure used elsewhere within the company into consideration.
The remuneration of the Managing Directors consists of fixed and variable components. Fixed components are granted regardless of performance and consist of a fixed sum plus benefits, as well as pension commitments (retirement, disability, widow’s or orphan’s pension). The fixed sum makes up 60 % of the normal annual salary and is paid out as a monthly basic remuneration. All Managing Directors are equally entitled to the accompanying fringe benefits which include the private use of a company car, payment of insurance premiums and any payments associated with a post-contractual non-competition clause. No loans or advance payments were granted to Managing Directors in the past financial year.
To ensure the sustainability of the nature of the remuneration, the variable remuneration component includes a long-term component, which accounts for around two thirds of the variable remuneration. It is calculated on the basis of the net profit of the KSB Group plus depreciation / amortisation. Its calculation in the form of a rolling, weighted three-year average essentially includes the effect of the future financial years over the contract term. The short-term variable portion of remuneration is linked to three reference values in equal part. In addition to the Group’s key indicators of EBIT margin and sales revenue, the calculation is based on the personal goals of the Managing Directors. These goals are set in such a way that their fulfilment has a positive impact on the relevant performance area beyond the year under review.
The total amount of the variable remuneration components is limited in order to take extraordinary, unforeseen developments into account.
The weighting factors above do not reflect the additional possibility of a bonus, to be paid out in individual cases at the discretion of the Administrative Board, of no more than three monthly salary payments per financial year in recognition of any special performance of individual Managing Directors. Such decisions are only made on an irregular basis, meaning that they do not necessarily have to be made annually.
Furthermore, when contracts of service are concluded, care is taken to ensure, in accordance with item 4.2.3 of the German Corporate Governance Code, that payments made to a Managing Director in the event of his or her tenure being terminated prematurely without good reason shall not exceed the value of two years’ remuneration including fringe benefits (settlement cap) and shall not exceed the remuneration due for the remaining term of the contract of service. No other payments have been promised to any Managing Director in the event of termination of service; similarly no compensation will be paid in the event of a takeover offer. If the contract of service of a Managing Director is terminated for cause, the company shall not make any severance payments. On 6 May 2015 – using a legally permissible option – the Annual General Meeting resolved not to disclose the details of the compensation for a period of five years.
The shareholder of KSB Management SE, Klein, Schanzlin & Becker GmbH, decides on the remuneration of the Administrative Board. The remuneration essentially consists of a fixed sum which covers the time spent attending up to 15 meetings of the Administrative Board. A daily or hourly rate in line with usual market rates is agreed for any extra time spent. Fringe benefits for the Administrative Board have not been agreed and will not be granted. Its members are, however, covered by directors’ and officers’ (D&O) liability insurance [Vermögensschaden-Haftpflichtversicherung] taken out by the company under usual market conditions in favour of the Administrative Board.
Frankenthal, 13 March 2019
KSB Management SE
The Managing Directors