Remuneration Report

Executive Board Remuneration

Following preparatory work by its Personnel Committee, the Supervisory Board is responsible for setting remuneration for individual Executive Board members. The full Supervisory Board is also responsible for regularly examining and making decisions about adjustments to the remuneration system for the Executive Board, although the preparatory work is actually done by the Personnel Committee. When conducting their reviews, the Personnel Committee and the Supervisory Board take into account the recommendations of the German Corporate Governance Code, the responsibilities and performance of each member of the Executive Board, and in particular HHLA’s size and activities, its financial and economic position, the amount and structure of executive board remuneration at comparable companies, and the relationship between the remuneration of the Executive Board and the remuneration of the upper levels of management and the staff in general.

The remuneration system for members of the Executive Board was approved by the company’s Annual General Meeting on 14 June 2012. Under this system, remuneration for members of the Executive Board consists of a non-performance-related fixed component, a performance-related bonus, pension commitments and fringe benefits. Following a review in the 2015 financial year, the individual components of Executive Board remuneration were amended slightly and implemented in the contracts recently extended or drawn up. The amendments relate to a moderate increase in the fixed remuneration while capping the variable remuneration, as well as other adjustments in line with the recommendations of the German Corporate Governance Code. The modified provisions apply to all members since 1 January 2017.

Fixed remuneration amounts to € 350,000 p.a. for ordinary members of the Executive Board (prior to amendment: € 325,000) and is paid out in twelve monthly instalments. The chairperson of the Executive Board receives a higher basic salary. In addition, there are fringe benefits (non-monetary compensation) in the form of a right to use an appropriate company car (including for private purposes) and the payment of insurance premiums by the company. The members of the Executive Board pay tax on these benefits as components of their remuneration.

The performance-related bonus is set on the basis of a three-year assessment period and paid out once the Annual Financial Statements have been approved. The calculation is based on the average earnings before interest and taxes (EBIT) for the last three years (before additions to pension provisions and reduced by any extraordinary income from the disposal of real estate and companies), the average return on capital employed (ROCE) and the achievement of targets relating to environmental issues (reduction of the carbon footprint of each container handled and transported) and social issues (broken down into training and continuing professional development, health and employment) in the same period. Target ranges were set for each of the sustainability components. Achieving these targets triggers the payment of the relevant bonus. When making these calculations, roughly equal weight is given to EBIT on the one hand and the above-mentioned sustainability components on the other. As part of the amendments to Executive Board remuneration, variable remuneration was capped at 100 % of basic salary (previously: 150 %). The new cap was implemented in all Executive Board contracts as of 31 December 2016, with the exception of one old contract.

Level of Remuneration for Executive Board Members in 2016 Based on Different Scenarios

As of: 31 December 2016

¹ In an old contract with a maturity term until 31 December 2016, the cap still amounted to 150 %.
² Per container handled and transported

The company usually pays for an appropriate direct insurance policy on behalf of the Executive Board member on their appointment. Members of the Executive Board who are re-appointed on expiry of their initial appointment period are granted pension entitlements. Pensions are paid to entitled Executive Board members after a minimum of five or eight years’ service on the Executive Board if they leave the Board for reasons unrelated to their person or for which they are not responsible, or as a result of incapacity or reaching retirement age. Pensions are calculated as a percentage of the entitlement salary, which in turn is based on the annual basic salary. This percentage is between 35 and 50 %. The actual amount depends on the Executive Board member’s length of service, whereby adjustments are made not on a linear basis over the contract term, but rather in the case of contract extensions. Several different forms of income are taken into account on an individual basis, such as earnings from self-employment or employment and, in some cases, income from statutory pensions and related benefits from public funds. Surviving spouses of Executive Board members receive a widow(er)’s pension of 55 to 60 % of the pension entitlement and children receive an orphan’s allowance of 12 to 20 % of the pension. Should the pension entitlement have been suspended or no longer apply, transitional or interim pay applies for a limited period on the basis of the fixed remuneration.

The service contracts of the members of the Executive Board contain a compensation provision that provides for the payment of compensation to the respective Executive Board member in the event of them losing their Executive Board seat due to a change of control or similar circumstances. The company was originally obliged to pay the respective Executive Board member any outstanding remuneration for the remaining term of the service contract in a lump sum, discounted by 2 % per annum, less certain other income earned by the Executive Board member until the end of the service contract. In the Executive Board contracts drawn up or extended in 2015 and 2016, the above entitlements were successively amended so that not more than two annual salaries (including fringe benefits) and not more than the total remuneration for the remaining term is payable in the event of premature termination of an Executive Board contract (including termination due to change of control). In addition, other amendments were made to the contracts to bring them in line with the recommendations of the German Corporate Governance Code. Should the service contracts be terminated prematurely for another reason without good cause, the payment of compensation shall be limited to the remaining term of the contract. The last contracts with the old provision expired on 31 December 2016. As of 1 January 2017, all service contracts now fully comply with the recommendations of the German Corporate Governance Code.

The members of the Executive Board were not granted any loans or similar payments. Total remuneration disbursed to the members of the Executive Board for their services in the 2016 financial year amounted to approximately € 3.14 million (previous year: € 2.93 million). Former members of the Executive Board and their surviving dependants received total payments of € 692,224 (previous year: € 684,938). Total provisions of € 12,385,982 were recognised for pension obligations to former members of the Executive Board and their surviving dependants (previous year: € 11,398,460).

The service cost for the financial years 2015 and 2016 was impacted by additional one-off expenses. In the reporting period, these primarily relate to Dr. Behn’s decision to step down from the Executive Board as of 31 March 2017, which increased the service cost to € 688,121. The service cost for the 2015 financial year includes a past service cost of € 547,172 in connection with the increase in Dr. Lappin’s pension entitlements due to his length of service.

Individual Remuneration of the Executive Board

The following figures comply with the recommendations in Section 4.2.5 of the German Corporate Governance Code (GCGC).

Supervisory Board Remuneration

In accordance with Article 16 of HHLA’s articles of association, Supervisory Board members are remunerated as resolved by the Annual General Meeting. This remuneration is based on the scope of the Supervisory Board members’ activities as well as on the company’s financial position and results. The current remuneration was adopted at the Annual General Meeting held on 13 June 2013. The members of the Supervisory Board receive fixed remuneration of € 13,500 per financial year. The Chairman receives three times this amount and the Vice Chairman is paid one-and-a-half times the basic figure. Supervisory Board members who belong to a committee receive an additional € 2,500 per committee per financial year, while the Chairman of the respective committee receives € 5,000, but altogether no more than € 10,000. Supervisory Board members who have belonged to the Supervisory Board or a committee for less than one full financial year receive a corresponding pro rata payment. Furthermore, Supervisory Board members receive a meeting attendance fee of € 250 for each meeting of the Supervisory Board or one of its committees. There is no variable remuneration component.

No loans or similar payments were granted to members of the Supervisory Board. Other than the usual market remuneration payable to the employee representatives under their contracts of employment, the members of the Supervisory Board did not receive any other payment for additional services rendered. The total remuneration paid to members of the Supervisory Board amounted to € 327,292 (previous year: € 299,625).