Upon the proposal of the Chairman’s Committee, the Supervisory Board determines the remuneration of the ­individual Executive Board members. It regularly adopts and reviews the remuneration system for the Executive Board. The criteria governing the appropriateness of remuneration are the tasks of each individual Board member, their personal performance, the economic position, the performance and sustainable development of the Company, the benchmark remuneration customary in the peer environment, and the remuneration structure otherwise applied in German companies. Moreover, remuneration is set at a level that is competitive in the market for highly qualified managerial staff.

In financial year 2013 / 14, the Superviory Board commissioned a renowned consultancy company with preparing an expert report for Executive Board members based in Germany. The focus of the assessment included ­general and specific appropriateness, new requirements in the framework of the German Corporate Governance Code (DCGK) and recommendations for action derived from the Code. The overall finding was that the level of remuneration for Executive Board members based in Germany was appropriate in the peer market and hence, in particular, in conformity with section 87 (1) of the German Stock Corporation Act as well as DCGK 4.2.2 and DCGK 4.2.3.

For Executive Board members based in Germany, a new remuneration system was drawn up in financial year 2009 / 10. Its purpose is to promote sustained corporate development, and it applies to new or amended service contracts. This remuneration system was approved by TUI AG’s Annual General Meeting on 17 February 2010.

In financial year 2013 / 14, the remuneration of Mr Long, based in the UK, was exclusively paid by TUI Travel PLC and fixed by its own Remuneration Committee.

Remuneration of the Executive Board in financial year 2013/14

1. General
The remuneration granted to TUI AG’s Executive Board members for financial year 2013 / 14 comprises fixed components, fringe benefits and variable components. Fringe benefits comprise a company car with driver ­services as well as travel and insurance benefits. The variable components consist of an annual management bonus and a multi-annual bonus covering a period of four years under a long-term incentive programme.

2. Variable compensation

a) Annual management bonus
The management bonus is linked to target achievement and the individual performance of the Board member concerned. Since 1 October 2010, the performance target has been reported earnings before interest, tax and ­amortisation of goodwill (reported Group EBITA). If less than 50 % of the annual target is achieved, the management bonus for the year is not paid. If more than 50 % of the target is achieved, the target amount fixed in the service contract of the Executive Board member concerned is multiplied by the degree of target achievement; however a cap of 150 % applies.

The amount determined in this way is adjusted by the Supervisory Board by means of a factor ranging between 0.8 and 1.2 in order to take account of the Board member’s personal performance. The annual management ­bonus for Mr Joussen is paid out in full upon the adoption of the relevant annual financial statements of the Company. 50 % of the annual management bonus for Mr Baier is paid upon adoption of the relevant annual ­financial statements of the Company. The remaining 50 % of the management bonus is carried forward in equal tranches to the two subsequent years and adjusted in accordance with the degree of target achievement in those two years. The maximum amount payable for the annual performance bonus has been capped at € 1,400.0 thousand for Mr Joussen and € 1,147.5 thousand for Mr Baier.

b) Long-term incentive programme
The long-term incentive programme (LTIP) is based on phantom stocks and covers a period of four years. For ­Executive Board members, an individual target amount has been fixed in their service contracts. This amount is translated annually into a preliminary number of phantom stocks based on the average price of TUI AG shares over a period of twenty days prior to the beginning of any financial year. Entitlements for the beneficiary under the LTIP always arise upon completion of the four-year performance period (plan term in accordance with the model tables related to section 4.2.5 of the German Corporate Governance Code).

At the end of the four-year period, the degree of target achievement is determined by comparing the change in total shareholder return (TSR) at TUI AG with the change in the Dow Jones Stoxx 600 Travel & Leisure index. The degree of target achievement is determined as a function of the TSR rank at TUI AG compared with the TSR value of the companies in the Dow Jones STOXX 600 Travel & Leisure over the performance period. If the ­degree of target achievement is less than 25 % of the reference value, no remuneration is paid under the long-term incentive programme. If the degree of target achievement exceeds 25 % based on defined TSR ranks of TUI AG, the resulting degree of target achievement is multiplied by the preliminary number of phantom stocks ­determined for the first financial year of the four-year service period; however, a cap of 175 % applies.

At the end of the four-year performance period, the final number of phantom stocks determined in this way is multiplied by the average price of TUI AG shares (20 trading days prior to the end of the service period), and the resulting amount is paid out in cash. The maximum amount payable in cash under the long-term incentive programme has been capped at € 2,100.0 thousand for Mr Joussen and € 1,530.0 thousand for Mr Baier per performance period.

The table shows the fair value of the phantom stocks granted this year as per 30 September 2014 as benefits granted (in accordance with the model tables related to section 4.2.5 DCGK) for the completed financial year on the basis of an assumed target achievement of 100 %. An entitlement to a cash payment (“allocation” in accordance with model tables related to section 4.2.5 DCGK) generally only arises upon the termination of the four-year performance period from 1 October 2013 to 30 Septeber 2017 “LTIP 2013 / 14 – 2016 / 17” in the month ­following the adoption of the annual financial statements of TUI AG as per 30 September 2017 and depends solely on future target achievement for the period “LTIP 2013 / 14 – 2016 / 17”. The allocation for the completed financial year thus shows the cash payment for the performance period “LTIP 2013 / 14 – 2016 / 17” for Mr Baier. By way of derogation, a contractual advance payment of € 1,280.0 thousand has been agreed with Mr Joussen for the performance period “LTIP 2013 / 14 – 2016 / 17”, payable upon the adoption of the annual financial statements for financial year 2013 / 14. It is shown as an allocation and will be offset against the actual entitlement that will have arisen at the end of the performance period (LTIP 2013 / 14 – 2016 / 17”. Mr Joussen will receive additional advance payments of € 100.0 thousand each for the performance periods “LTIP 2012 / 13 – 2015 / 16” and “LTIP 2013 / 14 – 2016 / 17”, along with the advance payment for the performance period “LTIP 2014 / 15 – 2017 / 18”.

The long-term incentive programme for Mr Long entails the granting of shares in TUI Travel PLC (“TUI Travel”) based on personal assessment factors established by TUI Travel’s Remuneration Committee. On 1 October 2013, Mr Long held vesting rights to 7.54 million shares in TUI Travel. In financial year 2013 / 14, 2.37 million shares worth 378 pence / share were allocated to Mr Long on account of having achieved the performance targets defined by TUI Travel’s Remuneration Committee. New awards for 1.25 million shares were granted to Mr Long for ­financial year 2013 / 14. As per 30 September 2014, awards for shares in TUI Travel totalled 6.42 million.

As per 30 September 2014, Mr Long also held 3.02 million shares in TUI Travel awarded to him (previous year 3.02 million).

Provisions totalling € 2,660.8 thousand (previous year € 6,617.0 thousand) and liabilities worth € 1,839.2 thousand (previous year € 2,047.6 thousand) were formed to cover entitlements under TUI AG’s long-term incentive programme. The total expense for share-based payments and the amount attributable to each individual Executive Board member are shown in the table “Remuneration of individual Executive Board members“.


Development of aggregate phantom stocks of Executive Board members of TUI AG

  Units
Balance as at 30 Sep 2013 621,292
Phantom stocks granted for the financial year 2013 / 14 207,464
Decrease of phantom stocks - 149,655
Balance as at 30 Sep 2014 679,101

On 30 September 2014, former Executive Board members did not hold any phantom stocks in TUI AG (previous year 450,025 shares).

Remuneration of individual Executive Board members granted by TUI AG

Remuneration of individual Executive Board members in financial year 2013/14

€ ‘000 Fixed
remuneration
Annual
management bonus
Long-term
incentive
programme
Supervisory
Board memberships in the
Group*
Total 2013/14 Total 2012/13
Friedrich Joussen 1,056.5 1,108.0 1,731.4 3,895.9 3,874.3
Horst Baier 690.8 614.2 639.9 - 245.4 1,699.5 1,957.7
Total 1,747.3 1,722.2 2,371.3 - 245.4 5,595.4 5,832.0
Previous year 1,682.0 1,549.1 2,600.9 5,832.0  

* The remuneration received by Mr Baier since 1 January 2010 for his Supervisory Board mandate in Hapag-Lloyd AG, a Group shareholding, is ­deducted as remuneration from an intra-Group mandate.


The remuneration of Peter Long determined by the Remuneration Committee of TUI Travel for financial year 2013 / 14 amounted to € 1,042.0 thousand for fixed remuneration (previous year € 1,011.4 thousand), € 8,333.3 thousand for the annual management bonus (previous year € 4,938.1 thousand), € 3,427.7 thousand for the long-term incentive programme (previous year € 1,450.7 thousand) and totalled to € 12,803.0 thousand (previous year € 7,400.2 thousand).

As in the prior year, the members of the Executive Board did not receive any loans or advances in financial year 2013 / 14.

The two tables below show the benefits already granted by TUI AG and payments received by the individual members of the Executive Board.

Benefits granted to Executive Board members in financial year 2013/14

  Friedrich Joussen
CEO
since 15 Oct 2012
Horst Baier
CFO and
Chief Human Resources Officer
since 8 Nov 2007
€ '000 2012/13 2013/14 (Min. p. a.) (Max. p. a.) 2012/13 2013/14 (Min. p. a.) (Max. p. a.)
                 
Fixed remuneration 963.8 1,000.0 1,000.0 1,000.0 680.0 680.0 680.0 680.0
Perquisites 25.4 56.5 56.5 56.5 12.8 10.8 10.8 10.8
Total 989.2 1,056.5 1,056.5 1,056.5 692.8 690.8 690.8 690.8
Annual perfomance-based remuneration 920.0 920.0 1,400.0 255.0 255.0 459.0
Multi-year variable remuneration 1,899.1 1,731.4 2,100.0 956.8 849.9 2,218.5
   Cash Deferral (FY 2012 / 13) 255.0 688.5
   Cash Deferral (FY 2013 / 14) 255.0
   LTIP (2012 / 13 – 2015 / 16) 1,899.1 701.8
   LTIP (2013 / 14 – 2016 / 17 1,731.4 2,100.0 639.9 1,530.0
Total 3,808.3 3,707.9 1,056.5 4,556.5 1,904.6 1,840.7 690.8 3,368.3
Pension 189.4 196.5 196.5 196.5 594.7 346.9 346.9 346.9
Total remuneration 3,997.7 3,904.4 1,253.0 4,753.0 2,499.3 2,187.6 1,037.7 3,715.2

Allocation to Executive Board members in financial year 2013/14

€ '000

Friedrich Joussen
CEO
since 15 Oct 2012

Horst Baier
CFO
and Chief Human Resources Officer
since 8 Nov 2007
 
2013/14
2012/13
2013/14
2012/13
Fixed remuneration 1,000.0 963.8 680.0 680.0
Perquisites 56.5 25.4 10.8 12.8
Total 1,056.5 989.2 690.8 692.8
Annual perfomance-based remuneration 1,108.0 986.0 307.1 273.3
Multi-year variable remuneration (total) 1,280.0 1,280.0 866.3 1,057.2
   Cash Deferral (FY 2010 / 11) 138.6
   Cash Deferral (FY 2011 / 12) 169.9 151.2
   Cash Deferral (FY 2012 / 13) 137.1
   LTIP (2009 / 10 – 2012 / 13) 767.4
   LTIP (2010 / 11 – 2013 / 14) 559.2
   LTIP (2012 / 13 – 2015 / 16) 1,280.0
   LTIP (2013 / 14 – 2016 / 17) 1,280.0
Other - 245.4
Total 3,444.5 3,255.2 1,618.8 2,023.3
Pension 196.5 189.4 346.9 594.7
Total remuneration 3,641.0 3,444.6 1,965.7 2,618.0

The remuneration received by Mr Baier since 1 January 2010 for his Supervisory Board mandate in Hapag-Lloyd AG, a Group shareholding, is ­deducted as remuneration from an intra-Group mandate (“Other”).

Benefits in the event of a termination of position

1. Pension entitlements
Pensions are paid to former Executive Board members if they reach the predefined age limit or are permanently incapacitated. The Executive Board members are not entitled to receive transition payments upon leaving the Board.

Mr Joussen receives an annual amount of € 196.5 thousand, paid into an existing pension plan for Mr Joussen. Interest on these plan contributions is paid by the provider of the pension plan and is therefore not shown by TUI AG. The Company has not assumed any additional obligations in the framework of the company pension plan for the first service period.

Mr Baier receives an annual contribution to the company pension plan agreed in his service contract. The pension contribution amounts to 22.5 % of the target cash remuneration per contribution year (fixed remuneration and ­annual management bonus at 100 % target achievement excluding any cash deferrals). The contributions to the company pension plan carry an interest rate established in the pension obligation; the interest rate currently stands at 5 % p. a. Board members become eligible for payment of the pension upon reaching the age of 60. The beneficiary may choose between a one-off payment, payment by instalments or pension payments.

Contributions to the company pension scheme in financial year 2013/14

€ '000 Pension contribution
Friedrich Joussen 196.5
Horst Baier 267.7

Mr Long does not have a pension entitlement vis-à-vis TUI AG. Instead of granting a pension entitlement, Mr Long receives an amount of 50 % of his fixed remuneration from TUI Travel PLC to be paid into a pension fund (translated into euros at € 518.7 thousand, previous year € 503.5 thousand).

Under certain circumstances, widows of Executive Board members will receive a widow’s pension worth 60 % of the above-mentioned pension for their lifetime or until remarriage. Children of Executive Board members receive an orphan’s pension, paid as a maximum until they reach the age of 27. Orphans who have lost one parent receive 20 % of the pension, and orphans who have lost both parents receive 25 %.

2. Change of control agreement
In the event of a loss of Board membership through a change of control or by executing the right granted to Board members, specifically accorded for this case, to resign their position and terminate their contract of employment as a Board member, every Board member is entitled to receive compensation for the financial entitlements that he or she would have derived from the remainder of the agreed contract term, a maximum of two or three years, respectively.

The performance-related remuneration and the phantom stocks granted for the remainder of the contract term are based on the average remuneration received in the last two financial years for Mr Joussen and the average remuneration received in the last three financial years for Mr Baier.

3. Payments to past Executive Board members
Past Executive Board members received payments of € 2,451.0 thousand for financial year 2013 / 14.

4. Termination and severance arrangements
The service contracts of Mr Joussen and Mr Baier limit potential severance payments upon early termination of their service contracts by the Company without good cause to an amount corresponding to two annual remuneration payments.

The service contract of Mr Long can be terminated without a severance payment with twelve months’ notice.

5. Pension obligations
At 30 September 2014, pension obligations for active members of the Executive Board totalled € 6,626.2 thousand (previous year balance sheet date: € 20,253.6 thousand) according to IAS 19 and € 6,137.9 thousand (previous year balance sheet date € 17,830.2 thousand) according to commercial law. In the period under review, the provision according to IAS 19 was reduced by an amount of € 13,627.4 thousand (previous year € 7,878.9 thousand), with a reduction of € 11,692.3 thousand (previous year € 6,137.0 thousand) according to commercial law provisions.

€ '000 Addition to/reversal
from pension provisions
Net present value
  2013/14 2012/13 30 Sep 2014 30 Sep 2013
Friedrich Joussen
Horst Baier 707.0 321.0 6,626.2 5,919.2
Gesamt 707.0 321.0 6,626.2 5,919.2

Where the above table shows a corresponding amount, the pension obligations for German beneficiaries are funded via the conclusion of pledged reinsurance policies. As the reinsurance policy fully covers the pension ­obligations for former and active Executive Board members, the insurance was deducted as an asset from the pension obligation.

Pension provisions for former members of the Executive Board and their dependents amounted to € 69,626.6 thousand (previous year: € 49,587.7 thousand) as measured according to IAS 19 at the balance sheet date, and € 63,193.0 thousand (previous year € 51,633.7 thousand) as measured according to commercial law provisions’. In financial year 2013 / 14, obligations for this group of persons increased by € 20,038.9 thousand (in financial year 2012 / 13 by € 6,468.6 thousand) according to IAS 19 and € 11,559.3 thousand (in the prior year by € 6,935.3 thousand) according to commercial law provisions.

In financial year 2013 / 14, the remuneration paid to former Executive Board members and their surviving dependents totalled € 4,455.8 thousand (previous year € 4,002.4 thousand).