A. Content and method of determining compensation and shareholding programmes (point 5.1 Annex DCG)
The principles and elements of compensation and of shareholding programmes (architecture and determining mechanisms, as well as details of the shareholding programme and how it works) must be explained to investors in terms that are as comprehensible as possible. Examples are provided in point 5.1 of the Commentary on the DCG. The key points of the process used to determine compensation and participation in the shareholding programme must be described. Whether the bodies involved have only an advisory function, or hold actual decision-making powers, must be stated. Any involvement of external consultants must also be disclosed clearly.
In addition to the process itself, the elements (objectives and components) that are factored in to compensation, as well as their weightings, must be stated for market participants in comprehensible terms. Other rules applying to the content and/or determination process for individual members of the board of directors or executive committee must be disclosed separately.
If compensation or the pay systems of other companies are used for comparison, the composition of this peer group, or the companies concerned, must be described in such a way that permits the investor to gain a clear picture of the other firms with which the issuer is comparing itself. Naming the companies that are used for comparison is only one of several means of ensuring sufficient disclosure. Where a benchmark exists, its component elements must be described.
If all or part of the compensation paid to the members of the board of directors and/or the executive committee is at the discretion of the board of directors, this must also be stated explicitly.