Lufthansa Group Corporate Governance Supervisory Board Topics

Transcription

1 Lufthansa Group Corporate Governance Supervisory Board Topics Last revised: 16 November 2018 lufthansagroup.com

2 Agenda Lufthansa Becoming #1 Page 2

3 Our goal remains: #1 for all stakeholder groups Set-up of Lufthansa Group Customers Employees #1 Shareholders Strategic focus topics Network Airlines: #1 in Europe Point-to-Point Airlines: #1 in home markets Aviation Services: #1 world-wide Aspirations Consolidation Shape and lead the industry Flexibilization and others Grow the business Invest steadily Digitalization Cost Reduction Stay competitive Page 3

4 Lufthansa s Supervisory Board 20 Board Members Age 1 Nationality Shareholder Representatives Employee Representatives Member of the Supervisory Board for Years Years Professional experience Years 80% 20% 70% 90% 10% <65 Outside Germany German 1 other company 2 other companies > 2 other Companies 1. Only Shareholder Representatives Page 4

5 Lufthansa Supervisory Board Shareholder Representatives Dr. Karl-Ludwig Kley Chairman of the Supervisory Board Born 1951, German Member since 2013 Expertise in financial analysis and capital markets and extensive leadership and supervisory board experience Herbert Hainer Born 1954, German Member since 2010 Extensive leadership experience and expert in marketing, sales and strategy Michael Nilles Born 1973, German Member since 2018 Expert in Digital Transformation Ambassador Miriam E. Sapiro Born 1960, US American Member since 2017 Leadership experience and international experience in government and business Dr Carsten h.c. Robert Knobel Kimmitt Born 1947, 1969, US German American Member since Comprehensive legal and compliance expertise and Particular expert in expertise politics in financial analysis and capital markets Martin Koehler Born 1957, German Member since 2010 Airline expert with extensive expertise in aviation and strategy Martina Merz Born 1963, German Member since 2016 Technical / Industrial expert and expertise in marketing and sales, extensive board experience Monika Ribar Born 1959, Swiss Member since 2014 Logistics expert, extensive leadership and finance experience Stephan Sturm Born 1963, German Member since 2015 Particular expertise in financial analysis and capital markets Matthias Wissmann Born 1949, German Member since 2008 Comprehensive legal and compliance expertise and expert in transport policy Page 5

6 Lufthansa Supervisory Board Employee Representatives Christine Behle Deputy Chairman of the Supervisory Board Born 1968, German Member since 2013 Extensive supervisory board experience Alexander Behrens Born 1974, German Member since 2018 Flight attendant Dr. Holger Benjamin Koch Born 1976, German Member since 2018 Senior Director of Sustainability Management Process Olivia Stelz Born 1971, German Member since 2018 Purser Dr Jörg h.c. Cebulla Robert Kimmitt Born 1947, 1966, US German American Member since Comprehensive legal and compliance expertise and Flight expert Captain politics Birgit Rohleder Born 1960, German Member since 2018 Business administration graduate Christina Weber Born 1958, German Member since 2013 Commercial employee Christian Hirsch Born 1959, German Member since 2018 Information management consultant Ilja Schulz Born 1967, German Member since 2018 Flight Captain Klaus Winkler Born 1973, German Member since 2018 Engine mechanic Page 6

7 Nomination Process of New Candidates Step 1 - Define requirement profile Step 2 Step 2 Step Step 3 3 Step Step 4 4 Skills Industry knowledge Functional expertise Diversity International work experience Representation of Women Age diversity Experience Work experience Different functions Leadership roles Skill matrix Diversity concept Self imposed composition targets Other Independence Max. age Max. # of terms Sufficient time etc. Nomination committee consults on potential candidates based on requirement profile. Supervisory board presents appointment proposal at annual shareholders meeting where decision is up for vote. Selection results are being presented to all supervisory board members. Page 7

8 Supervisory Board Diversity Page 8

9 Terms of Shareholder Representatives (staggered board) HV 2019 HV HV HV Dr. Karl-Ludwig Kley Herbert Hainer Carsten Knobel Martin Koehler Michael Nilles Martina Merz Monika Ribar Miriam Sapiro Stephan Sturm Matthias Wissmann Page 9

10 Cooperation in Board Committees Steering Committee Prepares the supervisory board s personnel decisions Sets total remuneration for individual Executive Board members Members Dr. Karl-Ludwig Kley, Chairman Christine Behle, Deputy Chairwoman Herbert Hainer Ilja Schulz Arbitration Committee pursuant to Section 27 (3) of the Co-Determination Act Makes a proposal in case no two-third majority is reached for the appointment or the cancellation of an appointment of Executive Board members. Audit Committee Nomination Committee Monitors the accounting process and internal control systems Examines effectiveness of internal control-, compliance- and risk management systems Members Stephan Sturm, Chairman Alexander Behrens Jörg Cebulla Carsten Knobel Monika Ribar Christina Weber Recommends to the Supervisory Board candidates for election to the Supervisory Board by the Annual Shareholders Meeting Members Dr. Karl-Ludwig Kley, Chairman Christine Behle, Deputy Chairwoman Herbert Hainer Ilja Schulz Members Dr. Karl-Ludwig Kley, Chairman Herbert Hainer Martin Koehler Page 10 Shareholder Representatives Employee Representatives

11 Participation in Meetings Supervisory Board Attendance of Supervisory Board and committee meetings Annual Meetings 1 Steering Committee Audit Committee 5 Annual Meetings 1 5 Annual Meetings 1 Nomination Committee 4 Annual Meetings 1 Executive Board: 26 Meetings in Meetings refer to actual frequency of meetings in 2017 Page 11

12 Efficiency Review The Supervisory Board conducts yearly efficiency reviews of its work in line with the German Corporate Governance Code. All Supervisory Members provide their feedback based on a detailed efficiency review questionnaire that is evaluated anonymously (improved efficiency review questionnaire since 2017). The Chairman conducts bilateral meetings with the Supervisory Board Members. The results are discussed by the Supervisory Board. Page 12

13 Comprehensive revision of Efficiency Review Questionnaire in 2017 Former Version Improved efficiency review Questionnaire Page 13

14 Lufthansa Board Structure Shareholders Deutsche Lufthansa AG Supervisory Board Carsten Spohr Chairman and CEO Harry Hohmeister Hub Management Ulrik Svensson Chief Financial Officer Dr. Bettina Volkens Corporate Human Resources and Legal Affairs Thorsten Dirks Eurowings and Aviation Services Frankfurt Munich Zurich Vienna Functional reporting line Functional reporting line Functional reporting line Further companies, if applicable Further companies Page 14

15 Lufthansa Executive Board Succession Plan and Diversity Concept Basic criteria Leadership skills Personality and Previous achievements Diversity Integrity Complementary Professional Knowledge of the Long-term succession profiles qualifications company plan Main objectives and diversity criteria Management experience Aviation industry knowledge Proportion of women of 30% until 2021 International experience Appropriate age spectrum Age limit: current retirement age Page 15

16 Involvement in the Strategy Process A special strategy meeting of the Supervisory Board is held regularly in September. In addition, strategic issues are also discussed at the other meetings of the Supervisory Board as required. Q1/2018 Q2/2018 Q3/2018 Q4/2018 * * Supervisory Board Meetings Strategy Meeting Mid-term planning / Capital Allocation Audit Committee Meetings Mid-term planning / Capital Allocation Chairman of the Supervisory Board Continuous exchange between the CEO and the Chairman of the Supervisory Board * Additional strategy coverage if required. Page 16

17 CSR aspects derivation of materiality Dimensions of corporate (social) responsibility Transfer to materiality matrix Derived form the dimension defined for Corporate (Social) Responsibilty Prioritized through stakeholder survey Confirmed by management via Corporate Social Responsibility Council Identification of aspects reported according to CSR RiLUG (German Law for Implementation of the CSR directive) Review and validation of central action areas regarding business relevance and impact of aspects with repective process owners in workshops Assignment of material areas of action to aspects to be reported (minimum) Confirmation of materiality and assignment Final review and confirmation through CSR Review Board Dedicated reporting of material CSR aspects within annual report 2017 Page 17

18 Implementation of mandatory reporting CSR aspects Environmental Responsibility Employee Matters Anti-Corruption and Bribery Human Rights Society Climate Protection CO2 Emissions (Scope 1 Flight Operations) Employer Attractiveness LH Engagement Index (EI) (derived from annual employee survey) (Integral) Part of the Lufthansa Group Compliance Managementsystem Essential part of the corporate culture - stated in the Code of Conduct Social Engagement help alliance Noise Protection Job Safety & health protection Share of aircraft fulfilling 10dB criterion of ICAO chapter 4 Health Index (derived from annual employee survey Sustainability of Supply Chain: Cross-sectional topic with own chapters incorporated in non-financial declaration (report) Page 18

19 Remuneration System Remuneration system approved by AGM 2016 (89,95% approval). Latest modifications of Executive Board remuneration system in 2017: STI: increase in the factor to be paid for each 0.1% of the EBIT margin by 50% (CEO: 60%), increase of STI deferral ratio from 25% to 50% and increase of STI cap from 150% to 175% of base salary Abolition of discretionary bonus level of base salary remained constant Compensation Elements All financial elements of remuneration are capped for Board members. Only private flights in line with IATA regulations and with restricted booking status as full-fare passengers are not capped for members of the Executive Board. Since the booking status is restricted, the related ancillary benefit is small. Criteria: EBIT margin, individual performance Payout: 50% in cash, 50% deferred over 2 additional years Cap: 175% of base salary Yearly contribution in the amount of 25% of the annual compensation (incl. variable compensation) Page 19 Base Salary Bonus (STI) Long-Term Incentive (LTI) Pension Share Ownership Guidelines (SOG) Criteria: absolute and relative TSR vs. industry specific peer group Payout: Cash Cap: 1,8 Mio. CEO 1,2 Mio. other Board members Personal investment as condition for a participation in the LTI Lock-up period of investment over 4 years

20 Rationale The Short-Term Bonus (STI) The STI combines the group s financial target (EBIT margin) with individual targets. STI Basic Functionality STI Target Value Company Performance EBIT margin Target Achievement x = x Individual Performance Multiplier from STI Actual Value 50% Cash Payout * 50% Deferral 50% Deferral x Target Achievement (2 years) 70% EACC 30% sustainability parameters = Factor between 0-2 Cash Payout* The new performance targets EBIT margin and EACC (earnings after cost of capital) are aligned with the concept of value-based management of Lufthansa Group. They reflect key performance indicators (KPIs) and complement each other in a balanced way as capital costs are considered and international comparability is possible. The multiplier ensures the flexibility to adjust payouts according to individual performance. Page 20

21 Rationale The Long-Term Incentive (LTI) The performance cash plan is based on the absolute TSR as well as the relative TSR. Performance Cash Plan Basic Functionality LTI target value x Target Achievement over 4 Years = Absolute TSR performance Increase of absolute TSR of at least 23% and max. 35% Relative TSR performance TSR of Dt. Lufthansa AG compared to the companies of an industry specific peer group Final payout in cash (Cap: 1,8 Mio. CEO; 1.2 Mio. other Board members) Personal investment (shares of Dt. Lufthansa AG) Locked-up over 4 years Shares become freely available The LTI is aligned with the capital market perspective by focusing on TSR development and therefore strengthens a shareholder-oriented culture. Relative TSR is a well-established and accepted performance measure from an investor s point of view, focusing on absolute capital market performance and comparison with peers. Page 21

22 Supervisory Board remuneration The Chairman of the Supervisory Board receives fixed compensation of 240,000. The Deputy Chairman receives 120,000. Other members of the Supervisory Board receive 80,000. The Chairman of the Audit Committee receives additional 60,000, members get half of it. Other Committee Chairman receive an additional 40,000, Committee members get half of it. Page 22

23 Appendix lufthansagroup.com

24 The Short-Term Incentive (STI) Back-up The Short-Term Incentive is structured as follows: = = = Base Salary Bonus (STI) Target Cash Comp. Long-Term Incentive (LTI) Target Direct Comp. Pension Total target comp. Performance targets Discretionary multiplier Short-Term Incentive (STI) EBIT margin Individual performance factor, which varies from 0.8 to 1.2 Cap Cap of total STI: 175% of the base salary Payout* 50% payout in cash 50% deferred over 2 additional years * Since 2017, 50% of the annual bonus are deferred before 2017, the deferred proportion was 25%. Page 24

25 Cash Deferral (LTI) Back-up The Cash Deferral is structured as follows: = = = Base Salary Bonus (STI) Target Cash Comp. Long-Term Incentive (LTI) Target Direct Comp. Pension Total target comp. Plan type Long-Term Incentive Level 50% of the annual bonus* Target achievement Performance targets Performance period factor between 0 and 2 Cash Deferral 70%: EACC achieved over the three-year period 30%: sustainability parameters (e.g. environmental protection, customer satisfaction and staff commitment) 1 year STI 2 years deferral Payout Payout in cash * Since 2017, 50% of the annual bonus are deferred before 2017, the deferred proportion was 25%. Page 25

26 The Long-Term Incentive (LTI) Back-up The Long-Term Incentive is designed as a performance cash plan: = = = Base Salary Bonus (STI) Target Cash Comp. Long-Term Incentive (LTI) Target Direct Comp. Pension Total target comp. Page 26 Plan type Performance targets Target achievement Performance period Payout Share Ownership Guidelines * Target corridor of the performance option of Long-Term Incentive (LTI) Performance Cash Plan performance & outperformance option Absolute TSR Relative TSR compared with a fictitious index (Air-France-KLM, International Airlines Group, easyjet, Ryanair, Wizz Air Hungary, Norwegian) Threshold absolute TSR: Increase of 23%* Cap absolute TSR: Increase of 35%* If threshold is reached ; further per 1.2 percentage points of TSR increase Threshold relative TSR: 1% outperformance Cap relative TSR: 20% outperformance per percentage point of outperformance 4 years Payout in cash, maximum of per tranche Personal investment in equity of per tranche as condition for participation in the LTI (45 tranches for CEO, 30 for other board members) 50% discount on personal investment is offered ( 2.000) Investment is locked-up over 4 years (duration of performance period)

27 Pension Back-up The pension scheme is designed as a defined contribution scheme: = = = Base Salary Bonus (STI) Target Cash Comp. Long-Term Incentive (LTI) Target Direct Comp. Pension Total target comp. Pension scheme Plan type Defined contribution plan Contribution 25% of the annual compensation incl. variable compensation; guaranteed contribution Retirement age 65 years (or early retirement between 62 and 65) Invalidity or death pension Payout Death pension A supplementary risk capital sum will be added to the pension credit up to the amount of the theoretical capital to which the claimant would be entitled at the age of 60 from the time a disability pension entitlement arises Basically in ten installments, on application a payment as a lump sum or in fewer than ten installments or as annual pension 60% of the deceased s pension entitlement If the Board member dies within active employment, dependents will be paid full salary until the end of the financial year for a period of at least six months Page 27

28 Other contractual terms Back-up Settlement cap According to German Corporate Governance Code (GCGC): Maximum of two years total compensation or the total compensation for the remainder of the service agreement Settlement for change-of-control Settlement equal to the compensation entitlements pursuant to the remainder of the service agreement, maximum of 150% of the settlement cap Non-compete clause n/a Other fringe benefits Non-cash benefit of using company cars Discount granted in connection with LTI Concessionary travel in accordance with the relevant IATA regulations Page 28