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Remuneration of Management and Supervisory Board

Remuneration of the Management Board

The total annual compensation of the individual members of the Management Board, which is fixed by the Supervisory Board and agreed with every individual Management Board member, is composed of fixed and variable components. It is guided by section 87 of the German Stock Corporation Act (AktG) and the Code. In line with those requirements, compensation is awarded based on an assessment of performance that is oriented towards the sustainable growth of Evotec. The criteria for determining the amount of compensation awarded include the tasks of the individual members of the Management Board, their personal performance, the economic situation, the performance and outlook of Evotec as well as the comparative level of compensation at peer companies and the compensation structure in place in other areas of the Company. Moreover, the Supervisory Board considers the relationship between the compensation of the Management Board and that of senior management as well as the staff overall, particularly in terms of its development over time. The Supervisory Board determines how senior managers and the relevant staff are differentiated.

Following section 4.2.3 of the Code, the amount of compensation is capped, both overall and for individual compensation components. It should be noted, however, that the variable long-term incentive compensation is based on issuance of share-based awards under the Share Performance Plans 2012 and 2015 as approved by the AGMs in 2012 and 2015. There is a cap for the number of awards upon allocation, but no cap for the value of the allocated shares after the expiration of the vesting period.

The German Law on the Appropriateness of Management Board Compensation (VorstAG) of 31 July 2009 allows the AGM to approve the system of remunerating members of the Management Board (section 120 paragraph 4 AktG). The Management Board and the Supervisory Board of Evotec AG proposed such an approval at the AGM in 2012. The shareholders and shareholder representatives voted in favour of this item of the agenda with a majority of 92.22% of the votes. Following section 4.2.3 of the Code, this item was put to none of the subsequent AGMs as the remuneration system for the Management Board has not changed.

Under the aforementioned system, new Management Board contracts were concluded with all four Management Boards members in the year under review.

In 2016, the fixed and one-year variable remuneration of the active members of the Management Board totalled T€ 2,346, of which the variable part amounted to T€ 796.

Fixed remuneration includes base salaries paid in 12 monthly instalments at the end of each month and fringe benefits such as contributions to retirement insurance policies, premiums for accident and accidental death insurance policies as well as the benefit derived from the private use of an upper mid-range company car. In addition, to the aforementioned remuneration, business-related payments, expenditure and expenses are reimbursed.

One-year variable remuneration is determined by a bonus scheme. The respective objectives are specified every year by the Remuneration and Nomination Committee of the Supervisory Board and subsequently approved by the Supervisory Board.

The variable portion of the remuneration paid out in March 2016 was based on the achievement of certain strategic targets for the financial year 2015. The variable portion of the remuneration for the achievement of strategic targets for the financial year 2016 will be paid out in March 2017. In 2016, the bonus paid to Dr Werner Lanthaler, Colin Bond, Dr Cord Dohrmann and Dr Mario Polywka was based on the achievement of corporate milestones and objectives. As per 31 December 2016, the Company had accrued a total of T€ 992 for the variable portion of the remuneration paid to the members of the Management Board, thereof T€ 407 for Dr Werner Lanthaler, T€ 211 for Dr Cord Dohrmann, T€ 214 for Dr Mario Polywka, T€ 78 for Enno Spillner after joining Evotec on 18 July 2016, and T€ 82 for Colin Bond for a period of 6 months (January to June 2016).

The 2015 and 2016 corporate objectives related to general targets considered important for the positive development of the Company, such as the achievement of revenue and profitability targets, the execution of significant integrated collaboration agreements for both business segments and the preparation of the Company for sustainable future growth. Beyond that, specific targets included the closing and integration of the acquisition of Evotec (France) SAS in Toulouse in 2015 and the ramp-up of an iPSC initiative in 2016.

In addition to their fixed and variable remuneration, the members of the Management Board received 396,291 SPAs in 2016 (2015: 338,382) under the Company’s share performance plan. These SPAs vest after four years according to the achievement of defined key performance indicators over a three-year performance measurement period. SPAs can only be exercised, if and when key performance indicators are achieved. Key performance indicators for each individual tranche of the SPAs are determined by the Supervisory Board. The key performance indicators for the grant in both 2016 and 2015 are “Group Revenues”, “Operating Income before Impairment” and “Share Price”. The fair values of all Share Performance Awards granted as of the grant date amounted to a total of T€ 1,534 in 2016 (2015: T€ 910).

The following tables present for each Management Board member:

  • The benefits granted for the year under review including fringe benefits (such as car allowance, contributions made towards health insurance, a pension, accident/life insurance and accommodation costs) and including the maximum and minimum achievable compensation for variable compensation components
  • The allocation of fixed compensation, short-term variable compensation and long-term variable compensation for the year under review, broken down into the relevant reference years

Remuneration of the Management Board 2016

Benefits_2016

Benefits_Notes_2016

Allocation_2016

Allocation_2016_Notes

The members of the Management Board of Evotec AG have only customary rights in the case of a change of control. Their contracts contain a change-of-control clause which would allow them to terminate their current contracts in the event of a change of control. Should members of the Management Board make use of their right to terminate their contracts in the event of a change of control, they are entitled to severance payments determined as follows: for Dr Werner Lanthaler, the severance payment shall be equal to 24 months of his base salary; for Dr Mario Polywka, the payment shall be equal to 18 months of his base salary; and for both Dr Cord Dohrmann and Enno Spillner, the payment shall be equal to 18 months of their base salary plus bonuses. In no case shall the respective severance payment be higher than the total compensation due for the remaining term of the respective Management Board member’s contract.

In accordance with section 4.2.3 of the Code, in case of an early termination of their respective service agreement in the absence of a change-of-control situation, payments to the members of the Management Board shall not exceed the amount of two annual remunerations and shall not exceed the amount of remuneration that would be due until the expiration date of the service agreement.

The Company has made a provision for a pension for one former Management Board member amounting to T€ 204 (2015: T€ 182). No such further provisions are due for other former Management Board members or their surviving dependants.

 

Remuneration of the Supervisory Board

The remuneration of the members of the Supervisory Board is stipulated in the Company’s Articles of Association.

According to section 113 AktG, Supervisory Board remuneration is to be appropriate to the task of the Supervisory Board members and the situation of the Company. The members of Evotec’s Supervisory Board are entitled to fixed payments as well as out-of-pocket expenses. In accordance with the recommendations of the Code, the Chairman and the Vice Chairman positions on the Supervisory Board as well as the Chair positions and membership on committees are considered when determining the remuneration of individual members. Consequently, as last amended following the approval of the AGM 2014, the fixed compensation is T€ 30 per Supervisory Board member. The Chairman of the Supervisory Board shall be paid T€ 75 and the Vice Chairman shall be paid T€ 45. Supervisory Board members serving on its committees shall be paid T€ 5 per committee membership; the chairman of a committee shall be paid T€ 20.

For their contributions in 2016, the individual members of the Evotec Supervisory Board receive the following compensation:

Remuneration of the Supervisory Board 2016

Total_Remunaration_2016

There are currently no consultancy agreements in place between Evotec and current or former members of the Supervisory Board.

 

Directors’ and Officers’ Liability Insurance (D&O Insurance)

Evotec procured directors’ and officers’ liability insurance cover for its Management and Supervisory Board members, its senior management and the directors of its subsidiaries at a cost to the Company of T€ 75 in 2016 (2015: T€ 91). For the members of Supervisory Board, an appropriately sized deductible, and for the members of the Management Board, a deductible in line with the stipulations of the legal provisions of the VorstAG, were agreed upon.