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Compensation of the Management Board

The entire Supervisory Board of Fresenius Management SE is responsible for determining the compensation of the Management Board. The Supervisory Board is assisted in this task by a personnel committee. In the fiscal year 2012, the acting personnel committee was composed of Dr. Gerd Krick, Dr. Dieter Schenk and Dr. Karl Schneider.

The Management Board compensation system was reviewed by an independent external compensation expert in the fiscal year 2010, and later submitted to the Annual General Meeting of Fresenius SE (since January 28, 2011: Fresenius SE & Co. KGaA) for approval. On May 12, 2010, the Annual General Meeting approved of the Management Board compensation system with a majority of 99.51% of the votes cast. In 2011, it was complemented by a share-based compensation with cash settlement (performance shares) in order to strengthen the component with long-term incentive effects. The amended Management Board compensation system was reviewed by an independent external compensation expert and was approved by the Annual General Meeting on May 11, 2012, with a majority of 97.0% of the votes cast.

The objective of the compensation system is to enable the members of the Management Board to participate reasonably in the sustainable development of the Company’s business and to reward them based on their duties and performance as well as their successes in managing the Company’s economic and financial position giving due regard to the peer environment.

The compensation of the Management Board is, as a whole, performance-based and was composed of three elements in the fiscal year 2012:

  • non-performance-based compensation (base salary)
  • performance-based compensation (variable bonus)
  • components with long-term incentive effects (stock options, postponed bonus payments, and share-based compensation with cash settlement (performance shares))

In addition, there are pension commitments for the seven members of the Management Board based on their respective service agreements.

The design of the individual components is based on the following criteria:

The non-performance-based compensation was paid in monthly installments as base salary in the fiscal year 2012. Moreover, the members of the Management Board received additional benefits consisting mainly of insurance premiums, the private use of a company car, special payments such as rent supplements and reimbursement of certain other charges as well as contributions to pension and health insurance.

The performance-based compensation will also be granted for the fiscal year 2012 as a short-term cash component (annual bonus) and as a longer-term compensation component (stock options, postponed bonus payments, share-based compensation with cash settlement (performance shares)). The amount of the bonus in each case is dependent on certain target parameters oriented on the net income attributable to Fresenius SE & Co. KGaA and / or to the relevant business segments being achieved. In the case of the members of the Management Board with functional responsibility for the entire Group – such members being Dr. Schneider, Mr. Sturm and Dr. Götz – the amount of the variable bonus is based in its entirety on the respective net income attributable to Fresenius SE & Co. KGaA (after deduction of noncontrolling interest). For Mr. Baule and Dr. De Meo, half of the amount of the variable bonus in each case depends on the development of the net income attributable to Fresenius SE & Co. KGaA as well as the development of the net income of the business segment (in each case after deduction of noncontrolling interest) for which the respective member of the Management Board is responsible. Half of the amount of the variable bonus of Dr. Wastler in each case is oriented on the net income attributable to Fresenius SE & Co. KGaA (after deduction of noncontrolling interest) as well as on the net income before tax and extraordinary income/expenditures of the VAMED group. Dr. Lipps receives his compensation exclusively from Fresenius Medical Care. Furthermore, the Supervisory Board may grant a discretionary bonus for extraordinary performance.

For the fiscal years 2012 and 2011, the amount of cash payment of the Management Board of the general partner of Fresenius SE & Co. KGaA consisted of the following:


    Non-performance-related compensation   Performance-related compensation Cash compensation (without long-term incentive components)
  Salary Other2 Bonus    
1 Dr. Ben Lipps receives his compensation only from Fresenius Medical Care, of which Fresenius SE & Co. KGaA held 31% of the total subscribed capital.
As Dr. Ben Lipps is a member of the Management Board of Fresenius Management SE, his compensation has to be included in the compensation report of the Fresenius Group..
2 Includes insurance premiums, private use of a company car, contributions to pension and health insurance as well as other benefits.
€ in thousands 2012 2011 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 990 900 51 61 1,150 1,150 2,191 2,111
Rainer Baule 550 500 26 120 801 764 1,377 1,384
Dr. Francesco De Meo 550 500 19 19 700 671 1,269 1,190
Dr. Jürgen Götz 415 375 34 33 600 584 1,049 992
Dr. Ben Lipps1 973 862 302 182 1,438 1,078 2,713 2,122
Stephan Sturm 550 500 89 86 751 721 1,390 1,307
Dr. Ernst Wastler 470 425 34 33 587 571 1,091 1,029
Total 4,498 4,062 555 534 6,027 5,539 11,080 10,135

    Non-performance-related compensation   Performance-related compensation Cash compensation (without long-term incentive components)
  Salary Other2 Bonus    
1 Dr. Ben Lipps receives his compensation only from Fresenius Medical Care, of which Fresenius SE & Co. KGaA held 31% of the total subscribed capital.
As Dr. Ben Lipps is a member of the Management Board of Fresenius Management SE, his compensation has to be included in the compensation report of the Fresenius Group..
2 Includes insurance premiums, private use of a company car, contributions to pension and health insurance as well as other benefits.
€ in thousands 2012 2011 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 990 900 51 61 1,150 1,150 2,191 2,111
Rainer Baule 550 500 26 120 801 764 1,377 1,384
Dr. Francesco De Meo 550 500 19 19 700 671 1,269 1,190
Dr. Jürgen Götz 415 375 34 33 600 584 1,049 992
Dr. Ben Lipps1 973 862 302 182 1,438 1,078 2,713 2,122
Stephan Sturm 550 500 89 86 751 721 1,390 1,307
Dr. Ernst Wastler 470 425 34 33 587 571 1,091 1,029
Total 4,498 4,062 555 534 6,027 5,539 11,080 10,135

In the fiscal year 2012, the directly paid bonus, excluding the payment to Dr. Ben Lipps, amounts to €4,589 thousand. This equals 97% of the total bonus of €4,737 thousand. The remaining part in an amount of €148 thousand was converted into a component based on a multi-year assessment and the payment was postponed by two years.

To ensure that the overall system of compensation of the members of the Management Board is oriented towards long-term and sustained corporate development, the compensation system provides that the share of long-term variable compensation components is at least equal in its amount to half of the total variable compensation components granted to the respective member of the Management Board. As a means of ensuring this minimum ratio in favor of the compensation components oriented towards the long term, it is expressly provided that the Supervisory Board may determine that the variable bonus to be paid as a rule annually is converted (pro rata) into a variable compensation component based on a multi-year assessment in order to also take account of any negative developments within the assessment period. This is done in such a way that the maturity of the yearly bonus earned on a variable basis is postponed at the discretion of the Supervisory Board, either on a pro rata basis or in its entirety, by two years. At the same time, it is ensured that any payment is made to the member of the Management Board after expiration of such multi-year period only if (i) no subsequent adjustment of the decisive (i. e. adjusted by extraordinary effects) net income attributable to Fresenius SE & Co. KGaA (after deduction of noncontrolling interest) beyond an amount equal to a tolerance range of 10% is made, and (ii) the amount of net income attributable to Fresenius SE & Co. KGaA (adjusted for extraordinary effects) in the two relevant subsequent years is not substantially less than the net income attributable to Fresenius SE & Co. KGaA (adjusted by extraordinary effects, after deduction of noncontrolling interest) of the respective preceding fiscal years. In the event of the aforementioned conditions for payment being missed only to a minor and / or partial extent, the Supervisory Board may resolve on a corresponding pro rata payment of the converted portion of the variable bonus. No interest is payable on the converted bonus claim from the time when it first arises until the time of its effective payment. In this way, the variable bonus can be converted pro rata or in its entirety into a genuine variable compensation component on a multi-year assessment basis, which also participates in any negative developments during the relevant assessment period.

In the fiscal year 2012, stock options based on the Stock Option Plan 2008 of Fresenius SE & Co. KGaA and the Fresenius Medical Care AG & Co. KGaA Stock Option Plan 2011 were granted as further components with long-term incentive effects. The number of stock options to be granted is defined in each case by the Supervisory Board at its discretion, with all members of the Management Board, except for the Chairman of the Management Board who receives double the number of stock options, receiving the same number of stock options.

The principles of both plans are described in more detail in note 35 of the notes of the Fresenius Group, Stock options.

Furthermore, the members of the Management Board were granted an entitlement to a share-based compensation with cash settlement (performance shares) in the fiscal year 2012, as a long-term incentive component.

The entitlement is subject to a four-year vesting period, although a shorter period may apply in special cases (e. g. professional incapacity, retirement, non-renewal of expired service agreements by the Company). The amount of cash payment corresponds to the share price of Fresenius SE & Co. KGaA’s ordinary shares upon exercise at the end of the four-year vesting period.

The payment is subject to the achievement of the performance target of an 8% increase of the consolidated net income attributable to Fresenius SE & Co. KGaA on a constant currency basis (adjusted for extraordinary effects) year over year during the four-year vesting period. For each year in which the success target has not been met, one-fourth of the entitlement shall forfeit. Apart from that, the total entitlement for payment is earned if an average increase of the consolidated net income attributable to Fresenius SE & Co. KGaA of 8% on a constant currency basis is achieved over the four-year vesting period.

For the fiscal years 2012 and 2011, the number and value of stock options issued, the value of the postponed performance-based compensation as well as the value of the share-based compensation with cash settlement (performance shares) is shown in the following table.

The stated values of the stock options granted to members of the Management Board in the fiscal year 2012 correspond to their fair value at the time of grant, namely a value of €21.19 (2011: €19.10) per stock option of Fresenius SE & Co. KGaA and €12.68 (2011: €13.44) per stock option of FMC-AG & Co. KGaA. The exercise price of the granted stock options of Fresenius SE & Co. KGaA was €78.33 (2011: €71.28).

As the financial targets of the year 2012 were achieved, Dr. Ben Lipps is entitled to a share-based compensation in an amount of €768 thousand (2011: €684 thousand) in accordance with the bonus agreement of Fresenius Medical Care. The entitlement is based on the development of the ordinary share of Fresenius Medical Care and has a three-year vesting period.

LONG-TERM INCENTIVE COMPONENTS


    Stock options1   Postponed performance-related compensation Share-based compensation with cash settlement (performance shares) Total
  Number Value, € in thousands Value, € in thousands Value, € in thousands Value, € in thousands
1 Stock options that were granted in 2012 and 2011 under the Fresenius SE & Co. KGaA stock option plan.
Dr. Ben Lipps received stock options under the Fresenius Medical Care stock option plan.
  2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 56,760 56,760 1,203 1,084 0 0 100 100 1,303 1,184
Rainer Baule 28,380 28,380 601 542 99 122 100 100 800 764
Dr. Francesco De Meo 28,380 28,380 601 542 0 29 100 100 701 671
Dr. Jürgen Götz 28,380 28,380 601 542 0 0 100 100 701 642
Dr. Ben Lipps 74,700 74,700 947 1,004 0 0 768 684 1,715 1,688
Stephan Sturm 28,380 28,380 601 542 49 79 100 100 750 721
Dr. Ernst Wastler 28,380 28,380 601 542 0 0 100 100 701 642
Total 273,360 273,360 5,155 4,798 148 230 1,368 1,284 6,671 6,312

    Stock options1   Postponed performance-related compensation Share-based compensation with cash settlement (performance shares) Total
  Number Value, € in thousands Value, € in thousands Value, € in thousands Value, € in thousands
1 Stock options that were granted in 2012 and 2011 under the Fresenius SE & Co. KGaA stock option plan.
Dr. Ben Lipps received stock options under the Fresenius Medical Care stock option plan.
  2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 56,760 56,760 1,203 1,084 0 0 100 100 1,303 1,184
Rainer Baule 28,380 28,380 601 542 99 122 100 100 800 764
Dr. Francesco De Meo 28,380 28,380 601 542 0 29 100 100 701 671
Dr. Jürgen Götz 28,380 28,380 601 542 0 0 100 100 701 642
Dr. Ben Lipps 74,700 74,700 947 1,004 0 0 768 684 1,715 1,688
Stephan Sturm 28,380 28,380 601 542 49 79 100 100 750 721
Dr. Ernst Wastler 28,380 28,380 601 542 0 0 100 100 701 642
Total 273,360 273,360 5,155 4,798 148 230 1,368 1,284 6,671 6,312

At the end of the fiscal year 2012, the members of the Management Board held a total of 1,151,740 (2011: 1,050,050) stock options and convertible bonds (together referred to as stock options) of Fresenius SE & Co. KGaA and 348,600 (2011: 572,700) stock options and convertible bonds of FMC-AG & Co. KGaA.

The development and the status of the stock options of the Management Board in the fiscal year 2012 are shown in the following table:


  Dr. Ulf M. Schneider Rainer Baule Dr. Francesco De Meo Dr. Jürgen Götz Dr. Ben Lipps1 Stephan Sturm Dr. Ernst Wastler Total2
1 Dr. Ben Lipps holds stock options under the Fresenius Medical Care stock option plan. 2 Only stock options of Fresenius SE & Co. KGaA, excluding stock options of Dr. Ben Lipps
Options outstanding on January 1, 2012                
number 333,680 130,290 138,360 115,680 572,700 196,080 135,960 1,050,050
average exercise price in € 50.37 54.37 52.72 53.98 37.20 47.26 51.83 51.18
Options granted during fiscal year                
number 56,760 28,380 28,380 28,380 74,700 28,380 28,380 198,660
average exercise price in € 78.33 78.33 78.33 78.33 57.30 78.33 78.33 78.33
Options exercised during fiscal year                
number 75,040 21,930 0 0 298,800 0 0 96,970
average exercise price in € 41.11 57.43     33.30     44.80
average stock price in € 88.49 86.08     53.62     87.94
Options outstanding on December 31, 2011                
number 315,400 136,740 166,740 144,060 348,600 224,460 164,340 1,151,740
average exercise price in € 57.61 58.85 57.08 58.78 44.85 51.19 56.41 56.40
average remaining life in years 4.6 4.6 4.5 4.6 5.4 4.1 4.4 4.5
range of exercise prices in € 33.81 to 78.33 33.81 to 78.33 33.81 to 78.33 33.81 to 78.33 30.49 to 57.30 29.50 to 78.33 29.50 to 78.33 29.50 to 78.33
Exercisable options on December 31, 2011                
number 145,120 51,600 81,600 58,920 99,600 139,320 79,200 555,760
average exercise price in € 45.77 44.25 45.99 45.89 31.97 41.10 44.28 44.29

  Dr. Ulf M. Schneider Rainer Baule Dr. Francesco De Meo Dr. Jürgen Götz Dr. Ben Lipps1 Stephan Sturm Dr. Ernst Wastler Total2
1 Dr. Ben Lipps holds stock options under the Fresenius Medical Care stock option plan. 2 Only stock options of Fresenius SE & Co. KGaA, excluding stock options of Dr. Ben Lipps
Options outstanding on January 1, 2012                
number 333,680 130,290 138,360 115,680 572,700 196,080 135,960 1,050,050
average exercise price in € 50.37 54.37 52.72 53.98 37.20 47.26 51.83 51.18
Options granted during fiscal year                
number 56,760 28,380 28,380 28,380 74,700 28,380 28,380 198,660
average exercise price in € 78.33 78.33 78.33 78.33 57.30 78.33 78.33 78.33
Options exercised during fiscal year                
number 75,040 21,930 0 0 298,800 0 0 96,970
average exercise price in € 41.11 57.43     33.30     44.80
average stock price in € 88.49 86.08     53.62     87.94
Options outstanding on December 31, 2011                
number 315,400 136,740 166,740 144,060 348,600 224,460 164,340 1,151,740
average exercise price in € 57.61 58.85 57.08 58.78 44.85 51.19 56.41 56.40
average remaining life in years 4.6 4.6 4.5 4.6 5.4 4.1 4.4 4.5
range of exercise prices in € 33.81 to 78.33 33.81 to 78.33 33.81 to 78.33 33.81 to 78.33 30.49 to 57.30 29.50 to 78.33 29.50 to 78.33 29.50 to 78.33
Exercisable options on December 31, 2011                
number 145,120 51,600 81,600 58,920 99,600 139,320 79,200 555,760
average exercise price in € 45.77 44.25 45.99 45.89 31.97 41.10 44.28 44.29

The following table shows the total compensation of the Management Board of the general partner of Fresenius SE & Co. KGaA for the years 2012 and 2011:

  Cash compensation (without long-term incentive components) Long-term incentive components Total compensation (including long-term incentive components)
€ in thousands 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 2,191 2,111 1,303 1,184 3,494 3,295
Rainer Baule 1,377 1,384 800 764 2,177 2,148
Dr. Francesco De Meo 1,269 1,190 701 671 1,970 1,861
Dr. Jürgen Götz 1,049 992 701 642 1,750 1,634
Dr. Ben Lipps 2,713 2,122 1,715 1,688 4,428 3,810
Stephan Sturm 1,390 1,307 750 721 2,140 2,028
Dr. Ernst Wastler 1,091 1,029 701 642 1,792 1,671
Total 11,080 10,135 6,671 6,312 17,751 16,447

  Cash compensation (without long-term incentive components) Long-term incentive components Total compensation (including long-term incentive components)
€ in thousands 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 2,191 2,111 1,303 1,184 3,494 3,295
Rainer Baule 1,377 1,384 800 764 2,177 2,148
Dr. Francesco De Meo 1,269 1,190 701 671 1,970 1,861
Dr. Jürgen Götz 1,049 992 701 642 1,750 1,634
Dr. Ben Lipps 2,713 2,122 1,715 1,688 4,428 3,810
Stephan Sturm 1,390 1,307 750 721 2,140 2,028
Dr. Ernst Wastler 1,091 1,029 701 642 1,792 1,671
Total 11,080 10,135 6,671 6,312 17,751 16,447

The stock options and the entitlement to a share-based compensation (performance shares) can be exercised only after the expiry of the specified vesting period. Their value is recognized over the vesting period as expense in the respective fiscal year. The expenses attributable to the fiscal years 2012 and 2011 are stated in the following table.

EXPENSES FOR LONG-TERM INCENTIVE COMPONENTS


  Stock options Share-based compensation with cash settlement (performance shares) Total expenses for share-based compensation
€ in thousands 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 877 736 42 2 919 738
Rainer Baule 439 368 42 2 481 370
Dr. Francesco De Meo 439 351 42 2 481 353
Dr. Jürgen Götz 439 368 42 2 481 370
Dr. Ben Lipps 2,136 1,098 1,681 780 3,817 1,878
Stephan Sturm 439 368 42 2 481 370
Dr. Ernst Wastler 439 351 42 2 481 353
Total 5,208 3,640 1,933 792 7,141 4,432

  Stock options Share-based compensation with cash settlement (performance shares) Total expenses for share-based compensation
€ in thousands 2012 2011 2012 2011 2012 2011
Dr. Ulf M. Schneider 877 736 42 2 919 738
Rainer Baule 439 368 42 2 481 370
Dr. Francesco De Meo 439 351 42 2 481 353
Dr. Jürgen Götz 439 368 42 2 481 370
Dr. Ben Lipps 2,136 1,098 1,681 780 3,817 1,878
Stephan Sturm 439 368 42 2 481 370
Dr. Ernst Wastler 439 351 42 2 481 353
Total 5,208 3,640 1,933 792 7,141 4,432

The system of compensation for the Management Board provides for a contractually stipulated cap or for the possibility of capping the amount of the annual compensation to be claimed by the member of the Management Board overall, i. e. including all variable compensation components. This makes it possible to adequately take account in particular of those extraordinary developments that are not in any relevant proportion to the performance of the Management Board.

Under the compensation system, the amount of the basic and the total compensation of the members of the Management Board was and will be assessed giving particular regard to the relevant comparison values of other DAX companies and similar companies of comparable size and performance from the relevant industrial sector.

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