Compensation Report

This section is part of the audited Combined Management Report.

The Compensation Report describes the main features of the compensation system for the Executive Board and Supervisory Board of ProSiebenSat.1 Media SE. It explains the structure and level of compensation of the individual members of the Executive Board and Supervisory Board. The Compensation Report is part of the audited combined Management Report and complies with the applicable statutory requirements. It also takes into account the recommendations of the German Corporate Governance Code in the version from May 5, 2015.

Compensation Paid to the Executive Board

In addition to their functions as directors and officers of the Company, the members of the Executive Board of ProSiebenSat.1 Media SE have contractual relationships with the Company. The ProSiebenSat.1 Media SE Supervisory Board is responsible for making the employment agreements with the members of the Executive Board. The employment contracts of Executive Board members have a maximum term of five years and also regulate compensation. After a proposal by the Compensation Committee, the structure and amount of the Executive Board’s compensation are defined by the Supervisory Board as a whole and regularly reviewed. The criteria for appropriate compensation are, firstly, the personal performance and areas of work and responsibility of the individual members of the Executive Board and, secondly, the amount and structure of executive board compensation in comparable companies, the Company’s business situation and the compensation structure of ProSiebenSat.1 Media SE.

Compensation System for the Executive Board

The compensation system for the Executive Board of ProSiebenSat.1 Media SE aims to create an incentive for sustainable company performance. It is composed of fixed and performance-based components. In the financial year 2016, the Executive Board’s compensation comprised the following components:

• All Executive Board members each received a fixed base salary, paid monthly, that was determined with reference to the individual Executive Board member’s areas of work and responsibility.
• In addition to this fixed base salary, Executive Board members also received performance-based variable annual compensation, also known as a performance bonus. The structure of the performance bonus is regulated uniformly in the employment contracts of the Executive Board members. The amount depends on the achievement of annual targets defined at the beginning of each year for target parameters determined for the relevant financial year. Both underlying target parameters and the amount of performance targets are determined at the Supervisory Board’s discretion. This means that the performance bonus can be adjusted to the prevailing situation of the Company and tailored to the responsibilities of each Executive Board member. The Supervisory Board sets at least two performance targets for each Executive Board member and their respective weighting. A target bonus per financial year is defined for all of these performance targets. If the target is exceeded, the performance bonus may also exceed the target bonus; however, it may not exceed 200 % of the target bonus. If targets are not met, the performance bonus may also be lower than the target bonus or may not be paid at all. Performance targets for 2016 were defined in the target agreements of the Executive Board members. These are achieved on the basis of the Group’s EBITDA and net financial debt in addition to individual targets based on the responsibilities allocated to Executive Board members. Personal target agreements for Executive Board members who bear segment responsibility in relation to agreed segment targets are essentially based on revenue and EBITDA targets of the respective segments.
• In addition, Executive Board members receive a long-term share-based compensation component. The Group Share Plan that was created in 2012 is organized as a share bonus program. Performance share units (PSUs) are issued to participants. After the end of a four-year holding period starting at the beginning of the year of issue, participants are entitled, at the Company’s discretion, to receive shares of the Company or to a corresponding payment in cash in the amount of the market value of these shares. In March 2016, the Company and the Supervisory Board decided to exercise this right to settle these in cash until further notice and thus to pay for these PSUs in cash after the holding period has expired (see Notes to the Consolidated Financial Statements, Note 31 “Share-based payments”). The conversion factor by which the PSUs are converted into ProSiebenSat.1 shares or an equivalent amount in cash after the end of the holding period depends on the achievement of predefined annual targets during the holding period. These relate to the development of the Group’s EBITDA performance targets and consolidated net income. The conversion factor can vary between 0 % and 150 % (performance-based cap). In addition, the number of PSUs for anti-dilution protection is adjusted if a superdividend is distributed. In the event of exceptional developments, the Supervisory Board can also raise or lower the conversion factor by up to 25 percentage points while taking into account the individual performance of the Executive Board members. The adjustment of the number of PSUs for anti-dilution protection for a superdividend and the individual adjustment of the conversion factor take place when the conversion factor for performance share units into shares or the corresponding amount in cash is determined. If the share price, when the conversion factor is defined, exceeds the share price when the PSUs were issued by more than 200 %, the conversion factor is further reduced so that a price increase above the threshold of 200 % does not result in a further increased value of the PSUs (price-related cap). After the end of each year of the four-year holding period, a quarter of the PSUs awarded become vested; a requirement for this is that consolidated net income is positive in the according year and ProSiebenSat.1 Group’s EBITDA does not fall below a defined minimum. The Group Share Plan has replaced the previous stock option plan (Long Term Incentive Plan/LTIP) under which Executive Board members in office in the according year were issued stock options most recently in 2009 (for work previously performed at the Company before their appointment to the Executive Board); all of these shares have now been exercised or redeemed. Further information on the Group Share Plan and the LTIP can be found in the Notes to the Consolidated Financial Statements.
  Under the new Mid Term Incentive Plan, which was introduced in 2015, Executive Board members receive another multi-year variable compensation component. This involves a mid-term remuneration instrument to be paid out in cash for members of the Executive Board and other selected executives of ProSiebenSat.1 Group. The Mid Term Incentive Plan has a three-year plan term starting in the financial year 2016. The payment amount depends on recurring EBITDA achieved by ProSiebenSat.1 Group by the end of the plan term in addition to the achievement of certain minimum thresholds for revenues and recurring EBITDA during the plan term. The payment amount is limited to 250 % of the respective target bonus. Executive Board members and other participants in the Mid Term Incentive Plan each receive a one-off allocated amount for the entire plan term. If participants leave the Company prematurely before the end of the plan term, their payment shall be reduced on a pro rata basis. This one-off amount under the Mid Term Incentive Plan to the Company’s Executive Board members in office in the financial year 2015 was allocated in February and April 2015. New Executive Board Members appointed in the financial year 2016 received this one-off amount in March and June 2016. The Mid Term Incentive Plan for 2015 is not reported in the table of benefits in accordance with the German Corporate Governance Code (GCGC) as the plan term as defined by the GCGC does not begin until 2016. The target value, i.e. the value that is granted to the Executive Board if 100 % of the target has been achieved, is EUR 1.5 million for Thomas Ebeling and EUR 1.0 million for Dr. Gunnar Wiedenfels, Conrad Albert, Dr. Christian Wegner, Dr. Ralf Schremper, Jan David Frouman and Christof Wahl respectively. Dr. Christian Wegner stepped down from the Executive Board as of December 31, 2016. His employment contract, which would have had been effective until December 31, 2017, also ended effective December 31, 2016. Under the Mid Term Incentive Plan, Dr. Christian Wegner was allocated an amount worth EUR 1.0 million with a plan term from 2016 to 2018. Based on the agreement in his termination agreement, this amount was paid out on the termination date on a pro rata basis for 2016 and 2017, i.e. for the period until the end of the term of his employment contract, amounting to EUR 666,666.67. The remaining amount of EUR 333,333.33 expired without compensation. Dr. Gunnar Wiedenfels will leave the Executive Board at his own request on March 31, 2017; his employment contract ends effective March 31, 2017. Due to the premature termination of his employment contract prior to the expiration of the plan term, all of the entitlements of Dr. Gunnar Wiedenfels under the Mid Term Incentive Plan expired without compensation. For information on termination agreements, please refer to the section below the table entitled “Compensation of Executive Board members for the financial year 2016 in accordance with GAS 17”.
• Pension agreements were signed for all members of the Executive Board: For the period of the employment relationship, the Company pays a monthly contribution into the personal pension account managed by the Company. The contribution made by the Company is equivalent to 20 % of the respective fixed monthly gross salary. Each member of the Executive Board has the right to pay any additional amount into the pension account in the context of deferred compensation. There are no further payments after the end of the employment relationship. The Company guarantees the paid-in capital and an annual interest of 2 %. The amounts paid-in are invested on the money and capital markets. A retirement pension is paid if the Executive Board member reaches the age of 60, or 62 in the case of Dr. Ralf Schremper, Dr. Gunnar Wiedenfels, Jan David Frouman and Christof Wahl, and has been a member of the Executive Board for at least three full years. This entitlement also arises in the case of permanent disability. The monthly retirement pension is derived from the actuarially calculated life-long pension as of the time of the entitlement to benefits. Instead of a life-long pension, Executive Board members can demand the payment of the guaranteed capital when the entitlement occurs.
• In addition, Executive Board members receive other non-performance based fringe benefits (particularly, the provision of company cars, group accident insurance and occasionally chauffeur services and flights home).
• If the employment contracts of Executive Board members are terminated prematurely by the Company without good cause, these contracts provide for a severance payment amounting to two years’ worth of total compensation as defined by section 4.2.3 of the GCGC; however, this may not exceed the amount of compensation that would have been paid until the end of the contract period.
• The contracts of Executive Board members contain change-of-control clauses in the event of a change of control at the Company. A change of control as defined in the agreements of the Executive Board members takes place (i) if control is acquired within the meaning of takeover law, i.e. at least 30 % of the voting rights in the Company are acquired by the acquirer, (ii) if the merger of the Company is implemented with the Company as the transferring legal entity, or (iii) if a control agreement comes into force with the Company as the dependent entity. In the event of a change of control, Executive Board members have the right to terminate their employment contract with three months’ notice at the end of the month and resign from the Executive Board if the change of control significantly affects the position of these Executive Board members. If this right of termination is exercised, the Executive Board members shall receive a payment in cash that is to be added in full to any waiting allowances. Compensation in cash corresponds to three years’ remuneration, but shall not exceed remuneration for the remainder of the employment contract discounted to the termination date. When determining this cash settlement, fixed remuneration for the last financial year that Executive Board members are contractually entitled to, the performance bonus, multi-annual compensation components and pension contributions are to be regarded as annual compensation.

Compensation of Executive Board Members for the Financial Year 2016 in Accordance with GAS 17

The following total compensation for Executive Board members in office in the financial year 2016 was determined in accordance with GAS 17:

Dr. Christian Wegner stepped down from the Executive Board as of December 31, 2016. His employment contract, which would have been effective until December 31, 2017, also ended effective December 31, 2016. In accordance with his termination agreement, Dr. Christian Wegner received a severance payment that was payable on the termination date. This payment was made up of the following elements: fixed remuneration (EUR 700,000) and variable compensation based on the target bonus, i.e. assuming that 100 % of the targets for the performance bonus were achieved (EUR 700,000), for the remainder of the employment contract (from January to December 2017) and EUR 200,000 as compensation for the non-participation in the Group Share Plan for 2017. Under the Mid Term Incentive Plan, Dr. Christian Wegner was allocated an amount of EUR 1.0 million with a plan term from 2016 to 2018. Based on the agreement in his termination agreement, this amount was paid out on the termination date on a pro rata basis for 2016 and 2017, i.e. for the period until the end of the term of his employment contract, amounting to EUR 666,666.67. Dr. Christian Wegner also received pension contributions of EUR 140,000 for 2017. Concerning the Group Share Plan, the termination agreement stipulates that Dr. Christian Wegner is still participating in the Group Share Plan in accordance with the terms and conditions of this plan with the performance share units issued until the termination date; on the condition that with regard of the vesting of these the original termination of the employment contract is assumed (December 31, 2017). A provision of EUR 581,977.25 was recognized for this purpose. It has also been agreed that the post-contractual non-competition clause and the associated provisions regarding the waiting allowance are canceled without compensation.

Dr. Gunnar Wiedenfels will leave the Executive Board at his own request on March 31, 2017; his employment contract ends effective March 31, 2017. In accordance with his termination agreement, Dr. Gunnar Wiedenfels shall not receive a severance payment. The performance bonus for 2016 will be calculated and paid out based on the actual targets achieved in accordance with the provisions contained in his employment contract. Dr. Gunnar Wiedenfels receives a non-performance-based pro rata amount worth 3/12 of the target bonus for the performance bonus (EUR 81,250) as a performance bonus for 2017. The target bonus is based on the assumption that 100 % of the target for the performance bonus has been achieved. The PSUs issued to Dr. Wiedenfels under the Group Share Plan (GSP) in 2015 and 2016 as part of his work as an Executive Board member are vested at 50 % (GSP 2015) and 25 % (GSP 2016) when he leaves the Company, and are settled in cash in the allocated amount (or any lower market value in accordance with the terms and conditions of the plan). The PSUs issued to him in 2013 and 2014 for work performed before his appointment to the Executive Board are vested at 100 % (GSP 2013) or 75 % (GSP 2014) when he leaves the Company and will be settled as planned after the end of the respective holding period. All PSUs that are not vested upon departure expire without compensation. Due to the premature termination of his employment contract before the end of the plan term, all of the entitlements of Dr. Gunnar Wiedenfels under the Mid Term Incentive Plan expire without compensation. Since the three-year waiting period for the contractual vesting has not been reached, the pension agreement provides only for entitlements that Dr. Gunnar Wiedenfels obtained from deferred compensation. In addition, the termination agreement stipulates that the post-contractual non-competition clause and the associated provisions regarding the waiting allowance are canceled without replacement.

Additional Disclosures on Share-based Payment Instruments (Group Share Plan)

The performance share units granted to active members of the Executive Board for their work as members of the Executive Board developed as follows in the financial year 2016:

In the financial year 2016, 125,909 performance share units from the Group Share Plan were exercised and 15,879 performance share units expired. For more information on the performance share units granted for the financial year 2016, please refer to Note 31 in the Notes to the Consolidated Financial Statements.

Other Compensation Components

The Company has granted neither loans nor provided guaranties or warranties to the members of the Executive Board.

Compensation of Executive Board Members for the Financial Year 2016 in Accordance with the German Corporate Governance Code (GCGC)

The GCGC recommends the individual disclosure of specific compensation components for each Executive Board member according to certain criteria. It further recommends the use of the template tables included in the GCGC for their presentation — in some cases deviating from GAS 17.

Benefits Granted in Accordance with GCGC

The table below shows the benefits that have been granted for the financial year 2016, including fringe benefits and the minimum and maximum compensation achievable in the financial year 2016 that were granted to active members of the Executive Board for their work as Executive Board members. In deviation from the presentation of total compensation according to GAS 17, to comply with the GCGC the annual variable compensation must be disclosed as the target value, i.e. the value granted to the Executive Board member in the event of 100 % target achievement. Furthermore, the pension cost, i.e. the service cost in accordance with IAS 19, must be included in total compensation in accordance with GCGC.

For information on the termination agreements of Dr. Christian Wegner and Dr. Gunnar Wiedenfels, please refer to the section below the table entitled “Compensation of Executive Board members for the financial year 2016 in accordance with GAS 17.”

Receipt in Accordance with GCGC

As the compensation granted to members of the Executive Board for the financial year is not always accompanied by a payment in the respective financial year, a separate table — in accordance with the relevant recommendation of the GCGC — shows the amount received by members of the Executive Board for work performed in the financial year.

In line with GCGC recommendations, the fixed compensation and annual variable compensation must be recognized as receipts for the respective financial year. According to the GCGC, share-based compensation is considered received at the date and value relevant to German tax law.

Following the recommendations of the GCGC, when disclosing receipts the pension cost in the sense of service cost according to IAS 19 equates to the contributions made, even though strictly speaking it is not an actual receipt.

Post-contractual Non-competition Clause

A post-contractual non-competition clause was agreed for all Executive Board members covering one year following the termination of the employment contract. As part of the termination agreement with Dr. Christian Wegner and Dr. Gunnar Wiedenfels, their respective post-contractual non-competition clauses and associated entitlement to a waiting allowance in relation to their premature termination were canceled.

If the post-contractual non-competition clause applies, Executive Board members receive a monthly waiting allowance for the duration of the post-contractual non-competition agreement, which in each case amounts to 1/12 of 75 % of the annual remuneration amount most recently received. In order to determine the waiting allowance, the sum of fixed remuneration, the performance bonus and, if applicable, additional multi-annual compensation components that have been granted are to be regarded as annual compensation. This calculation assumes a target achievement of 100 % for the performance bonus and the allocated amount of multi-year compensation components or, if no annual allocation has been made, the pro rata allocated value attributable to one year of the plan term. Any income generated from work performed while the non-competition clause is in force is to be offset against in the waiting allowance — based on a one-year period — if it exceeds 50 % of the annual compensation most recently obtained. The Company may waive the non-competition clause before the end of the agreement. In this case, the Executive Board member is entitled to a waiting allowance only for the period between the end of the agreement and the end of a six-month period after the waiver has been received. Sections 74 ff. of the German Commercial Code also apply accordingly.

The following table shows the net present value of compensation to be paid in connection with the post-contractual non-competition clause. This consists of the present value of the amounts that would be paid assuming that Executive Board members were to leave the Company at the end of the term of their respective current contracts and that the contractual benefits received immediately before the termination of their contracts equal their most recent annual compensation. It can be assumed that actual compensation resulting from the post-contractual non-competition clause will differ from the amounts presented in this table. This depends on the exact date on which the employment contract is terminated and the level of compensation received on this date.

Total Compensation of Former Executive Board Members

Total compensation of EUR 6.0 million was paid to former members of the Executive Board in the financial year 2016 (previous year: EUR 3.2 million). This includes the payment of 58,112 performance share units from the Group Share Plan 2012 amounting to EUR 3.3 million (previous year: EUR 0), the severance payment for Dr. Christian Wegner of EUR 2.3 million payable on the termination date (December 31, 2016), and pension payments of EUR 0.4 million (previous year: EUR 0.3 million). In accordance with the termination agreement, a provision of EUR 0.6 million was recognized for Dr. Christian Wegner’s participation in the Group Share Plan. Dr. Christian Wegner also received pension contributions of EUR 0.1 million for 2017. As of December 31, 2016, pension provisions for former members of the Executive Board — including provisions for Dr. Christian Wegner — in accordance with IFRS amounted to EUR 14.4 million (previous year: EUR 11.4 million).

Pension Provisions

In the financial year 2016, there were additions to pension provisions for active and former Executive Board members in accordance with IFRS. These amounted to EUR 2.8 million in total (previous year: EUR 3.1 million). EUR 0.6 million of this amount is attributable to service costs (previous year: EUR 0.6 million), while EUR 0.6 million is attributable to interest expenses (previous year: EUR 0.5 million). EUR 1.3 million of this amount is attributable to actuarial losses (previous year: minus EUR 0.1 million) while minus EUR 0.4 million is attributable to pension payments (previous year: minus EUR 0.3 million). Furthermore, deferred compensation in the amount of EUR 0.6 million (previous year: EUR 2.4 million) has been made in the past financial year. As of December 31, 2016, pension provisions for active and former Executive Board members totaled EUR 25.7 million (previous year: EUR 22.9 million).

D&O Insurance

Executive Board members are covered by group liability insurance (D&O insurance). This D&O insurance covers the personal liability risk should Executive Board members be made liable for financial losses when exercising their professional functions for the Company. The insurance includes a deductible according to which an Executive Board member against whom a claim is made pays a total of 10 % of the claim in each insured event, but not more than 150 % of the respective fixed annual compensation for all insurance events in one insurance year. The relevant figure for calculating the deductible is the fixed remuneration in the calendar year in which the breach of duty occurred.

Compensation Paid to the Supervisory Board

Compensation System for the Supervisory Board

The Supervisory Board’s compensation is determined in the articles of incorporation of the Company.

This Compensation System Comprises the Following:

Members of the Supervisory Board receive fixed annual compensation for each full financial year of their membership of the Supervisory Board. The fixed compensation amounts to EUR 250,000 for the Chairman of the Supervisory Board, EUR 150,000 for the Vice Chairman and EUR 100,000 for all other members of the Supervisory Board. The Chairman of a Supervisory Board committee receives additional fixed annual compensation of EUR 30,000; the additional fixed annual compensation for the Chairman of the Audit and Finance Committee amounts to EUR 50,000. Members of the Supervisory Board also receive fixed annual compensation of EUR 7,500 for membership in a Supervisory Board committee. In addition, members of the Supervisory Board receive a meeting honorarium of EUR 2,000 for each meeting attended in person. For the Chairman of the Supervisory Board, the meeting honorarium amounts to EUR 3,000 for each meeting attended in person. If multiple meetings are held on one day, the meeting honorarium is paid only once. No performance-based variable compensation is granted.

The current members of the Supervisory Board have declared to the Supervisory Board that they voluntarily undertake to each use 20 % of their fixed remuneration granted on a yearly basis in accordance with article 14 (1) and (2) of the articles of incorporation (before deduction of taxes) in order to purchase shares in ProSiebenSat.1 Media SE every year, and to hold these for a period of four years which, however, shall not exceed the duration of their membership on the Supervisory Board of ProSiebenSat.1 Media SE; if they are re-elected, the obligation to hold these shares shall apply to their individual terms of office. With this self-commitment to invest in and hold ProSiebenSat.1 shares, the members of the Supervisory Board want to underline their interest in the long-term, sustainable success of the Company.

Compensation of Supervisory Board Members for the Financial Year 2016

Supervisory Board members received the following compensation for the financial year 2016:

In addition to this fixed annual compensation and meeting honoraria, the members of the Supervisory Board were reimbursed for all out-of-pocket expenses and value-added tax levied on their compensation and out-of-pocket expenses.

D&O insurance covers the personal liability risk should Board members be made liable for financial losses when exercising their functions. No deductible has been agreed for members of the Supervisory Board.

Members of the Supervisory Board received no remuneration or other consideration for personal services, especially consulting and mediation services, during the 2016 financial year. Members of the Supervisory Board do not receive loans from the Company.