Remuneration Report

Report as of 29 March 2017

The remuneration report, which discloses the basic elements, structure and amounts of the remuneration paid to the Management Board and the Supervisory Board, is part of the Group management report and the Corporate Governance Report. The Company’s remuneration systems comply with legal regulations and largely comply with the recommendations of the German Corporate Governance Code.

Compensation of the Management Board

The remuneration paid to the members of the Management Board serves to reward each member’s personal performance and create an incentive for successful corporate management, taking the Company’s economic position into account. It is aligned with standards customary to both the industry and the country.

Determination of the Management Board’s compensation

The proposal for the Management Board’s remuneration is drawn up by the Human Resources Committee, which subsequently presents it to the full Supervisory Board for approval. The remuneration is reviewed annually by the Supervisory Board.

The Supervisory Board is also authorized to reduce the overall remuneration of the Management Board by an appropriate amount, if the Company’s situation deteriorates so that continued payment of this remuneration would be unsustainable.

Amount and structure

The annual remuneration of the Management Board members comprises three components:

  • Non-performance related fixed remuneration (fixed remuneration)
  • A performance-related bonus with four components
  • Stock options

The amount of fixed remuneration was adjusted most recently in September 2016 with the appointment of Jason Loveridge, Ph.D. as new Chief Executive Officer.

The existing remuneration system was approved by the Annual General Meeting on 9 May 2014.

Non-performance related-remuneration

The amount of the fixed remuneration is contingent on the given individual’s position and responsibility as well as on parameters customary to both the industry and the market that are geared in particular towards listed small and mid-sized companies from the biotechnology sector and related industries (e.g. MedTech). Fixed remuneration is paid on a monthly basis.

Performance-related remuneration

The performance-related remuneration comprises an annual bonus (bonus I) as well as a long-term bonus measured on the basis of the officer’s performance over three years (bonus II). In the first quarter of 2013, the Supervisory Board resolved two additional bonus options linked to the achievement of special strategic corporate goals.

The Supervisory Board fixes the performance-related bonus I following an appropriate annual performance review, exercising due discretion. Bonus I is based on the performance of 4SC and the degree to which predefined individual and general corporate goals have been achieved. These goals concern different strategic topics from clinical development, business development, strategy, investor relations and general management, which are weighted on the basis of their priorities for further business development.

The Supervisory Board determines whether the goals have been achieved in its first meeting of the subsequent calendar year. Bonus I is payable immediately after the resolution of the Supervisory Board concerning attainment of the goals. There is a cap on the amount. In addition to his basic salary and the short-term bonus I, each Management Board member additionally receives a long-term salary component as a second bonus that is measured over three years and serves to promote sustainable business development. Bonus II is based on personal and company-specific goals that are proposed by the Management Board and determined by the Supervisory Board at the start of each financial year. Whether a Management Board member is entitled to payment of bonus II depends on whether these goals have been achieved during a pre-defined three-year period. There is a cap on the amount.

The Supervisory Board determines whether the goals have been achieved in its first meeting after the end of the respective target achievement period. Bonus II is payable immediately after the resolution of the Supervisory Board concerning attainment of the goals for the three-year target achievement period.

Another variable remuneration component the Management Board receives is bonus III, which is awarded in the event the Company sells its business operations or is merged. The bonus payments in this case are percentages linked to the sales proceeds, capped at a maximum of €25 million. In the case of an unforeseeable change in circumstances, the Supervisory Board can limit bonus III within reason.

The Management Board will receive a bonus IV if a licence agreement is reached for one of 4SC’s products. The cash flows accruing to the Company until a possible registration of these products constitute the basis of calculation for the payments. However, bonus IV is capped at a maximum of €25 million.

The Supervisory Board reviews bonus III and IV and decides whether to essentially continue or amend these programs every three years.

Stock options

Another remuneration component with a long-term incentive effect are the ESOPs (Employee Stock Option Programs), in which the Management Board and all employees participate. Under these programs, stock options which entitle their holders to acquire 4SC shares were last issued to the Management Board in 2016. For more detailed information on the current options holdings, please see section 10.1 of the 2016 IFRS consolidated notes.

For the Management Board member Jason Loveridge, Ph.D., an agreement was included in his directors’ contracts in the context of his appointment, stipulating that in the event of a takeover by a third party and if the Management Board is to be dissolved as a result, his salary (fixed salary plus bonus I and II) would be fully paid out for the remaining term of his contract, but at least for a minimum mathematical remaining period of six months. Furthermore, in the event that a controlling interest is acquired in the Company, the regulations on the expiry of stock options for the Management Board member are rescinded, i.e. all stock options issued to the member of the Management Board up to the contingent termination date would remain with the Management Board member regardless of the termination of his employment. Apart from this, there are no post-employment or termination benefits owed to the Management Board member.

Regarding compliance with the Code recommendations on management remuneration, please see the disclosures in the Declaration of Compliance in accordance with section 161 of the German Stock Corporation Act (AktG).

Management Board compensation for 2016

The total remuneration paid to the members of the Management Board of 4SC AG in the reporting period amounted to €501 thousand. A detailed breakdown of the Management Board members’ individual salaries can be found in section 10.1 of the 2016 IFRS consolidated notes in the 4SC annual report.

 Benefits granted
in € 000’s
Jason Loveridge, Ph.D.
from 21 Sep. 2016
 2015 2016 2016
(Min)
2016
(Max)
Fixed remuneration 94 94 94
Incidental benefits  0 0 0
 Total    94 94 94
One-year variable remuneration 11 0 11
Multi-year variable remuneration
2009 Stock option plan (term: 3 years)
2009 Stock option plan (term: 3 years) 0 0 0
Long-term bonuses, term: 3 years
  2013 – 2015
  2014 – 2016
  2015 – 2017
  2016 – 2018 0 0 0
Total   105 94 105
Cost of benefits 0 0 0
Total remuneration
  105 94 105

 Benefits granted
in € 000’s
Enno Spillner
until 30 Jun. 2016
Daniel Vitt, Ph.D.
until 31 Dec. 2016
 2015 2016 2016
(Min)
2016
(Max)
 2015 2016 2016
(Min)
2016
(Max)
Fixed remuneration 259 159 159 159 196 259  259 259
Incidental benefits 0 0 0 0 0 15 15 15
 Total 259 159 159 159 196 274 274 274
One-year variable remuneration 22 23 0 25 22 11 0 25
Multi-year variable remuneration
2009 Stock option plan
(term: 3 years)
0 0 0 0 0 0 0 0
2009 Stock option plan
(term: 3 years)
0
Long-term bonuses,
term: 3 years
  2013 – 2015 9 6 0 37 9 6  0 37
  2014 – 2016 0 0 0 37 0 0 0 37
  2015 -2017 0 8 0 37 0 11 0 37
  2016 – 2018 10 0 60 14 0  60
Total 290 205 159 355 227 316 274 470
Cost of benefits 42 21 21 21 5 5 5  5
Total remuneration
332 226 180 376 232 321 279 475

 

Allocation for the financial year
in € 000’s
Jason Loveridge, Ph.D.
from 21 Sep. 2016
Enno Spillner
until 30 Jun. 2016
Daniel Vitt, Ph.D.
until 31 Dec. 2016
2015 2016 2015 2016 2015 2016
Fixed remuneration 94 259 159 196 259
Incidental benefits 0 0 0 0 15
Total 94 259 159 196 274
One-year variable remuneration 0 5 23 5 29
Multi-year variable remuneration
2009 Stock option plan
(term: 3 years)
0 0 0 0
2016 Stock option plan
(term: 3 years)
0
Long-term bonuses,
term: 3 years
2013 – 2015 5 6 5 6
2014 – 2016 0 0 0 0
2015 – 2017 0 8 0 11
2016 – 2018 0 10 14
Total 94 269 205 206 334
Cost of benefits 0 42 21 5 5
Total remuneration
94 311 226 211 339

D&O liability insurance

Since 1 July 2010, the Company’s current D&O insurance policy for the members of its Management Board has contained the deductible required by law. Regarding compliance with the Code recommendations on D&O insurance for Supervisory Board members, please see the disclosures in the Declaration of Compliance in accordance with section 161 of the German Stock Corporation Act (AktG).

Shareholdings of the Management Board members

As of 31 December 2016 the members of 4SC AG’s Management Board held a total of 322,320 stock options, entitling them to 322,320 shares. Furthermore, they held 83,361 shares, which represent 0.4% of the Company’s total shares.


Compensation of the Supervisory Board

The Supervisory Board is paid fixed remuneration because the Company believes that this way the Supervisory Board is motivated to carry out its tasks with a focus on the Company’s sustainable and successful long-term development.

Determination of the Supervisory Board’s compensation

The compensation paid to the members of the Supervisory Board is based on a resolution of the Company’s Annual General Meeting on 17 June 2016.

Amount and structure

The basic annual remuneration paid to each Supervisory Board member is €18 thousand, with the Chairperson of the Supervisory Board receiving twice this amount and his deputy receiving 1.5 times this amount. The Company pays €5 thousand to Supervisory Board members for each membership in a Supervisory Board committee, with the Chairperson of the respective committee receiving 1.5 times this amount.

Supervisory Board compensation for 2016

In financial year 2016, remuneration paid to the members of the Supervisory Board totaled €160 thousand. A breakdown of the remuneration of individual Supervisory Board members is provided in section 10.2 of the 2016 consolidated IFRS notes in the 4SC annual report.

Shareholdings of the Supervisory Board members

As at 31 December 2016, the members of 4SC’s Supervisory Board held a total of 7,219 shares equivalent to an interest of 0.0% in the Company.

 

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