Report on Management Board remuneration

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The Remuneration Committee is responsible for structuring the remuneration package awarded to the Management Board. In addition to basic remuneration (fixed salary including remuneration in kind), a variable performance-based component was agreed with the members of the Management Board. This performance-based component is contingent upon the achievement of defined targets and is limited to 150% of the base remuneration. The targets for the reporting year consist of 75% financial figures (return on assets in excess of the costs of capital (weighting 25%), operating free cash flow (weighting 25%) and customer value (weighting 25%)), as well as strategic objectives. The Remuneration Committee decides about the degree of target achievement and the amount of the variable salary component on the basis of the Consolidated Financial Statements and the implementation of strategy. Performance-based remuneration becomes payable after the result for the financial year in question has been resolved, while for Hannes Ametsreiter and Günther Ottendorfer an advance in the amount of 60% of the fixed salary is paid in 14 instalments in the current financial year.

The multi-year share-based long-term incentive programme (LTI) introduced in 2010 continued in the 2014 reporting year with the issue of the 2014 tranche. The second tranche of the LTI programme (LTI 2011) was paid out in the amount of 28% in 2014, following the end of the three-year performance period and the determination by the Remuneration Committee of the degree of achievement. Detailed information about this can be found in the Notes to the Consolidated Financial Statements and the section on the remuneration of the individual members of the Management Board.

The total expense for basic remuneration, including remuneration in kind, of members of the Management Board in 2014 amounted to EUR 1.484 mn (2013: EUR 1.118 mn), while variable remuneration amounted to EUR 1.374 mn (2013: EUR 1.349 mn). EUR 0.087 mn was spent on LTI 2011 in the 2014 reporting year (2013 for LTI 2010: EUR 0.111 mn). On account of the expansion of the Management Board in September 2013, year-on-year comparisons make limited sense. Termination benefits in connection with the dissolution of the contract with Hans Tschuden and severance pay amounted to EUR 0.737 mn and EUR 0.850 mn respectively; a further EUR 0.213 mn was paid into the pension fund.

On 100% attainment of their goals in the context of the new 2014 LTI tranche launched in July 2014, the members of the Management Board were provisionally allocated the following number of Telekom Austria shares: 51,348 shares for Hannes Ametsreiter, 37,650 shares for Siegfried Mayrhofer, 18,622 shares for Hans Tschuden and 43,722 shares for Günther Ottendorfer. Any actual allocation of these shares or cash settlement will occur after the end of the three-year performance period, i. e. not before 1 July 2017, commensurate with the level of achievement of objectives as determined by the Remuneration Committee.

In terms of old-age provisions, the members of the Management Board receive a contribution to their voluntary pension plan, which is paid into a corporate pension fund by the company and amounts to 20% of their respective fixed salary. Members will only receive an eventual pay-out from the corporate pension fund when they are over 55 years of age and no longer in a contractual relationship with the company.

The amount of the severance payment to be paid in the event of the termination of a Board member’s appointment is based on the length of their employment and is capped at one year’s total remuneration for Hannes Ametsreiter, Siegfried Mayrhofer and Hans Tschuden. The Mitarbeiter- und Selbstständigenvorsorgegesetz (BMSVG—Austrian Corporate Employee and Entrepreneur Pension Law) applies to Günther Ottendorfer.

Furthermore, the members of the Management Board are entitled to a company car, and casualty insurance provides cover in the event of death or invalidity. There is also supplementary health insurance for Management Board members. The members of the Management Board are included in the D&O insurance policy concluded and paid for by Telekom Austria AG. Moreover, there is criminal defence insurance for administrative offences or violations of criminal law.

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Remuneration of the individual members of the Management Board

Management Board remuneration
in EUR ‘000

Basic remuneration
(fixed salary incl. remuneration in kind)

Variable
remuneration

Multi-year share-based remuneration (LTI)

Total remuneration+,++

 

2014

2013

2014

2013

2014

2013

2014

2013

*

Until 31 May 2014

**

Appointed from 1 June 2014

***

Appointed from 1 September 2013

****

Upon commencing his role on 1 September 2013, Management Board member Günther Ottendorfer received a one-time payment of EUR 290,330 (EUR 114,334 in the form of 20,872 shares in the company) as compensation for the loss of benefits acquired under his former employment contract and for relocating from Australia to Austria). This payment is included in variable remuneration for 2013.

+

The agreement with Hans Tschuden, which was to run until 31 March 2015, was terminated early on 31 May 2014. The figures for 2014 shown in the table do not include termination benefits in connection with the dissolution of the agreement with Hans Tschuden and severance pay amounting to EUR 0.737 mn and EUR 0.850 mn respectively; a further EUR 0.213 mn was paid into the pension fund.

++

Deviations in totals due to rounding; year-on-year comparisons make limited sense on account of the expansion of the Management Board from two to three members in September 2013.

Hannes Ametsreiter

549

493

631

495

43

55

1,224

1,043

Hans Tschuden*,+

205

472

412

474

43

55

660

1,001

Siegfried Mayrhofer**

268

268

Günther Ottendorfer***

462

154

330

380****

793

534

Total+,++

1,484

1,118

1,374

1,349

87

111

2,944

2,578

Long-term incentive programme

The Telekom Austria Group’s multi-year share-based long-term incentive programme (LTI) introduced in the 2010 financial year continued in 2014. This incentive scheme, designed for Management Board members, executives and selected employees, has a term of three years for each tranche. The LTI is based on the performance-based allocation of shares. During the programme, participants must hold shares in Telekom Austria, the number of which is determined by the defined number of potential shares for each entitled beneficiary. Any payments are made in cash. The amount of the payment depends on the achievement of targets in the form of key figures defined by the Supervisory Board within a three-year performance period, ranging from 0% to more than 175% of the participant’s investment.

The Telekom Austria Group’s long-term incentive programme is consistent with the requirements of the Austrian Corporate Governance Code (C Rule 28). The relevant target performance indicators are based on the long-term development of the company. The targets and key performance indicators are determined by the Supervisory Board at the beginning of each tranche. Each performance period is three years long. Free cash flow (weighting 45%), total shareholder return (weighting 35%) and EBITDA (weighting 20%) were defined as the targets/key performance indicators for the 2010, 2011 and 2012 tranches. The targets for the 2013 and 2014 tranches were defined as net income (weighting 30%), EBITDA (weighting 35%) and relative total shareholder return (weighting 35%), which will be assessed versus a defined peer group of nine European telecommunication companies.

Benefits under the LTI programme in the 2014 reporting year

The second LTI tranche (LTI 2011) which had been granted on 1 June 2011 was distributed to the entitled employees of the Group in June 2014 after the end of the three-year performance period. The tranche was paid out in the amount of 28% in line with the level of performance determined by the Remuneration Committee of the Supervisory Board, at a value of 124,260 bonus shares in total (measured using the average price for the fourth quarter of 2013 of EUR 6.04 and therefore EUR 0.751 mn (2013: EUR 0.936 mn)). Hannes Ametsreiter and Hans Tschuden each received 7,189 shares or an equivalent amount of EUR 0.043 mn (2013: EUR 0.055 mn each).

A detailed description of the long-term incentive programme can be found in the Notes to the Consolidated Financial Statements.

As at 31 December 2014, the members of the Management Board hold the following shares, some of which serve to satisfy LTI programme participation requirements:

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Number of Telekom Austria shares held as at 31 Dec 2014

 

 

of which for LTI participation

Hannes Ametsreiter

25,674

25,674

Siegfried Mayrhofer

24,750

18,825

Günther Ottendorfer

21,872

21,861

In compliance with the relevant statutory provisions, transactions involving Telekom Austria shares conducted by executives, members of the Supervisory Board and related parties are reported to the Austrian Financial Market Authority (see www.fma.gv.at under ‘Directors’ Dealings’).

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