METRO GROUP
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Corporate Governance Report 2009Pursuant to the recommendation of subsection 3.10 of the German Corporate Governance Code, the Management Board and Supervisory Board of METRO AG deliver the following report on corporate governance at METRO Group.1
The Management Board and Supervisory Board of METRO AG are firmly committed to the principles of transparent, responsible corporate governance and supervision. They attach great importance to good corporate governance standards.
Overview - Corporate Governance Bericht
Declaration of compliance with the German Corporate Governance Code
Suggestions of the German Corporate Governance Code
Corporate management practices
Division of duties and areas of responsibility between the Management Board
and the Supervisory Board
Transparent corporate management
Directors' dealings, share ownership by members of the Management and
Supervisory Boards
Accounts audit
Remuneration report 2009
Remuneration report 2009 pursuant to chapter VIII. of the
Group management report
Compensation of members of the Management Board
Compensation of members of the Supervisory Board
The Management and Supervisory Boards of METRO AG discuss METRO Group’s corporate governance practices at least once a year – most recently during the Supervisory Board meeting in December 2009. The discussions focus on implementing the recommendations of the German Corporate Governance Code. The conclusion for the financial year 2009 was that METRO AG implements all recommendations of the code without exception. As a result, the Management Board and Supervisory Board of METRO AG made the following declaration of compliance in December 2009 pursuant to § 161 of the German Stock Corporation Act. This can be accessed permanently by shareholders on the website:
"The Management Board and the Supervisory Board hereby declare
that METRO AG fully complies with the recommendations of the Commission of the German Corporate Governance Code in its version of 18 June 2009 published by the Federal Ministry of Justice in the official part of the electronic Federal Bulletin.
Furthermore, the Management Board and the Supervisory Board declare that METRO AG has complied with the applicable recommendations of the Commission since the last declaration of compliance in December 2008."
During the financial year 2009, the Management and Supervisory Boards of METRO AG reinforced their voluntary commitment to the German Corporate Governance Code through a new determination in the boards’ by-laws. It states:
"The Management Board and Supervisory Board of METRO AG base their actions on the relevant valid recommendations of the German Corporate Governance Code and only deviate from the code’s recommendations in well-founded exceptional cases. If the Management Board or Supervisory Board intend to deviate from a recommendation, the organs inform each other of the planned move prior to its implementation."
The declaration of compliance issued by METRO AG’s Management Board and Supervisory Board, in accordance with the law, is directed only at the recommendations of the German Corporate Governance Code.
In addition to the recommendations, the code contains suggestions that a company can, but does not have to address.
METRO AG follows the vast majority of suggestions laid down in the German Corporate Governance Code. In the financial year 2009, there were only two points that were not fully implemented:
The German Corporate Governance Code emphasises the Management and Supervisory Boards’ obligation to ensure the Company’s continued existence and sustainable value creation in accordance with the principles of the social market economy. In the exercise of this responsibility, the Management Board of METRO AG has gone beyond legal requirements and developed and established guidelines and standards within the Company. The issues of compliance, risk management and sustainability are of particular importance to METRO Group’s sustained value creation as an international retail group.
In 2009, the Management Board of METRO AG launched the efficiency and value-enhancing programme Shape 2012. Under this programme, METRO Group is centralising business areas that are key to the Group’s financial management and supervision. Compliance is one of these. This structural adjustment is also being implemented with a view to METRO Group’s international character and complexity and takes account of increasing regulatory requirements affecting METRO AG as the listed holding company of METRO Group. Accordingly, the Management Board in March 2009 agreed on a substantially enhanced compliance concept that is now being rolled out across the Group’s businesses.
METRO Group’s business principles, which go back to 2007, represent the core component of the Group-wide compliance programme, but the future compliance system also comprises additional elements. Aside from an organisational reinforcement and additional staffing, the programme aims for the sustained prevention of regulatory infringements within the Company. In organisational terms, this results in a clear delineation vis-à-vis the Internal Audit department. Risk prevention is carried out through the systematic identification of all behavioural risks, the creation of organisational structures and rigorous risk monitoring by the responsible divisions of METRO Group. In terms of content, too, compliance will thus be even more broadly based within METRO Group.
The necessary toolbox for rigorous monitoring of behavioural risks includes, above all, the assignment of clear responsibilities, the adaptation or introduction of clear behavioural guidelines and the development and provision of sensible risk management and control processes. Added to this must be special training courses for managers and employees as well as sustainable communications regarding the need for an effective compliance management system. Employees within the compliance organisation have started the long-term Group-wide roll-out of these elements. The responsible management teams, all employees at the management companies of METRO Group’s sales divisions and all national subsidiaries will in future be able to draw on the support and advice of Compliance Officers.
Compliance within METRO Group thus aims to prevent or at least hinder regulatory infringements. The Chief Compliance Officer reports directly to the Chairman of the Management Board of METRO AG, Dr Eckhard Cordes.
Additional information on the subject of compliance can be found on the website www.metrogroup.de in the section Company – 
.
METRO Group’s risk management forms another integral component of value-oriented corporate management. It helps management to exploit opportunities and limit risks, and is based on systematic and Group-wide risk reporting. As a result, unfavourable developments are recognised at an early stage, allowing for the timely introduction of appropriate countermeasures. In addition, existing opportunities are identified, evaluated and realised in a systematic manner.
In the financial year 2009, METRO Group launched a project for the restructuring of its risk management system. The goal of this project is to continue to improve risk detection and risk assessments at an operational level, that is, at the level of METRO Group’s globally active subsidiaries. METRO AG sets standards in the effective and harmonised Group-wide creation of structures and processes, and sets centralised risk management requirements.
In order to continue its profitable growth and optimise its capital allocation, METRO Group has to ensure that it manages its core business in a sustainable manner. This means that social and environmental requirements must be considered at an early stage in all activities along the supply chain.
The aim of METRO Group’s sustainability management is to protect the foundations of its future business in a responsible manner. To this end, the relevant social and environmental challenges faced by the trade and retail industry must be continually identified. The resulting concrete actions and objectives help the Company to exploit potential opportunities and minimise its risks. The key focus is on the areas of action of employees, the supply chain, products, the environment, corporate social responsibility and stakeholder dialogue.
Integrated management systems and an organisational structure with clearly defined responsibilities are key preconditions of a sustainability approach that contributes to the long-term increase in company value. For this reason, the Management Board of METRO AG has created a Sustainability Board, which is chaired by METRO AG’s CEO, Dr Eckhard Cordes. By recommending binding sustainability targets, guidelines and actions to METRO AG’s Management Board, the Sustainability Board contributes to the continued development of the Company’s sustainability strategy. In addition, the Board determines key topics and key performance indicators to measure the Company’s sustainability performance.
The Sustainability Board is assisted by four working groups that develop concepts and prepare the Board’s decisions. The working groups focus on the subject areas of quality, health and the environment, energy and resource management, employees and social affairs as well as social policies and stakeholder dialogue.
METRO Group’s sales divisions ensure that the measures adopted by the Management Board are practically and rigorously applied in the day-to-day business environment. They comment on the suggestions of the working groups and contribute their own proposals. In addition, they report on the progress of projects and provide the data necessary for performance measurement.
Additional information on the subject of sustainability and responsibility is available in the section
In the financial year 2009, about 290,000 employees from more than 150 nations were the architects of METRO Group’s success. METRO Group pursues an innovative, forward-looking personnel policy with the aim of attracting and retaining sufficient numbers of skilled and dedicated employees in a competitive global environment. METRO Group manages to get people excited about the Company and the retail sector by offering multi-faceted career prospects and opportunities for personal growth, rigorous training and qualification programmes as well as by promoting cultural diversity.
A constructive, fair and open social dialogue is a key factor in reaching corporate goals. METRO Group advocates fair and equitable working conditions around the world. Within its own stores and companies, it is unreservedly committed to the four core labour standards of the International Labour Organisation (ILO).
Extensive information on the subject of employees is available in the section ..
METRO Group’s suppliers also have to meet high standards along the entire supply chain – from the manufacturing site to the store shelf. These include demanding quality specifications as well as the consideration of human rights, animal welfare and environmental aspects. Prohibitions of forced labour, child labour or any other form of exploitation form an integral part of METRO Group’s supplier agreements.
With respect to imports of certain products from outside the European Union, METRO Group has pledged to screen and monitor its suppliers and to help them to introduce better working conditions. METRO Group is a founding member of the Business Social Compliance Initiative, or BSCI, whose objective is to ensure basic human rights in the production and supply chain. In order to guarantee minimum social standards in the product manufacturing stage, METRO Group makes compliance with the BSCI code of conduct mandatory for its suppliers.
The BSCI code of conduct and background information on the BSCI management system are available in the section Sustainability and Responsibility – 
www.bsci-eu.org
METRO Group focuses on sparing and efficient use of energy and resources at its various sites in order to continually reduce the cost and environmental impact of its operations. Employee training and the use of state-of-the-art technology help to markedly reduce consumption of electricity and heat in the stores. In addition, METRO Group enhances its energy efficiency through work process optimisation and technological modernisation. Renewable energy is purchased as green electricity and generated in the Company’s own plants.
The year 2009 saw the opening of the shopping centre "Meydan Merter" in Istanbul, Turkey, which was developed by METRO Group’s real estate subsidiary METRO Group Asset Management. The 1,200 square metre collector field of the centre’s solar chilling plant captures the sun’s radiation energy, producing warm water that can then be used in the building’s air-conditioning system. During summer, the energy is used to power an absorption refrigeration system that covers the shopping centre’s air-conditioning needs.
Additional information on this subject can be found in the section Sustainability and Responsibility –
The key element of corporate governance for German stock corporations is the clear division between corporate management on the one hand and corporate supervision on the other. Duties and areas of responsibility are clearly divided between the Management Board and the Supervisory Board. The standards actively practised within METRO Group augment this fundamental structure specified by German Stock Corporation Law.
The Management Board of METRO AG has six members: Dr Eckhard Cordes (Chairman), Thomas Unger (Vice-Chairman), Olaf Koch, Zygmunt Mierdorf, Frans W. H. Muller and Joël Saveuse.2
Information on each member of the Management Board including their respective responsibilities and terms of office is available in the section Company – The Boards –
The Management Board is responsible for running METRO AG and the Group, with METRO AG acting as a strategic management holding company. METRO Group’s sales divisions have undivided responsibility for the operational business. The management duties of the Management Board include, in particular, the development and implementation of the Group’s strategic positioning in coordination with the Supervisory Board. In addition, the Management Board of METRO AG ensures the availability of investment funds and decides on their allocation within the Group. METRO AG also handles the Group-wide task of attracting and supporting highly qualified managers. METRO AG’s other holding company tasks include the provision of the organisational structures and control and monitoring systems needed to ensure effective business management. All METRO Group sales divisions are represented on the Management Board to ensure that key Group functions are effectively orientated towards necessary operational requirements. The Chief Executive Officer of Metro Cash & Carry was appointed to the Management Board of METRO AG in 2006; the Chief Executive Officer of Real joined the Management Board in 2008. The Vice-Chairman is in charge of advising and supervising the management of the Galeria Kaufhof and Media Markt and Saturn sales divisions.
Fundamental regulations governing the working relationship within the Management Board are specified in the by-laws the Management Board has adopted with the consent of the Supervisory Board. The members of the Management Board assume joint responsibility for the Group’s overall management. They work as a team and regularly inform each other of important measures and developments in their respective areas of responsibility. Irrespective of the Management Board’s collective responsibility, the individual members of the Management Board manage their respective business segments on their own responsibility. Matters requiring a Board resolution are specified in the by-laws of the Management Board. The Chairman of the Management Board is responsible for the coordination of all business segments and the Board’s representation towards shareholders and the public. In addition, he is the first point of contact for the Supervisory Board Chairman.
In accordance with the by-laws of the Management Board, resolutions of the Management Board are made in meetings that are required to take place at least every two weeks and in practice are generally held on a weekly basis. The by-laws of the Management Board include specifications outlining the convention and agenda of these meetings as well as the required majorities for Management Board resolutions.
Pursuant to the German Co-determination Act, METRO AG’s Supervisory Board is composed of ten shareholder representatives and ten employee representatives.
Shareholder representatives
Franz M. Haniel, Chairman
Dr. Wulf H. Bernotat
Jürgen Fitschen
Prof. Dr. Dr. h. c. mult. Erich Greipl
Peter Küpfer
Marie-Christine Lombard
Prof. Dr. Klaus Mangold
Dr.-Ing. e.h. Bernd Pischetsrieder
M.P.M. (Theo) de Raad
Dr. jur. Hans-Jürgen Schinzler
Employee representatives
Klaus Bruns, Vice Chairman
Ulrich Dalibor
Hubert Frieling
Andreas Herwarth
Uwe Hoepfel
Werner Klockhaus
Rainer Kuschewski
Xaver Schiller
Peter Stieger
Angelika Will
Status: 1 March 2010
Information on the personnel composition of the Supervisory Board as well as additional information on each member of the Supervisory Board is also available in the section Company – The Boards – Supervisory Board
The Supervisory Board of METRO AG advises the Management Board and monitors its corporate management including its attainment long-term corporate and Group objectives. The Supervisory Board is brought into the planning of the development of METRO Group by the Management Board to the same degree that it is included in decisions about important measures. Aside from its legally prescribed approval obligations, the Supervisory Board has determined its own approval requirements for certain actions and business dealings of the Management Board.
The Supervisory Board of METRO AG regularly convenes for five regular meetings in each financial year. Guidelines on the scheduling of meetings and resolutions are laid down in the by-laws of the Supervisory Board. Details on the meetings and the collaboration between the Management and Supervisory Boards of METRO AG in the financial year 2009 can be found in the report of the Supervisory Board.
The Management Board informs the Supervisory Board in accordance with legal stipulations, the regulations of the German Corporate Governance Code, possible regulations in the by-laws of the Management Board, the Supervisory Board or Supervisory Board Committees and in cases where the Supervisory Board has special information needs.
Five committees support the Supervisory Board in its work, contributing greatly to the Board’s overall efficiency. The committees’ concrete assignments were newly defined by a resolution of the Supervisory Board at the end of 2009 and include the following:
The Supervisory Board Presidential Committee addresses the following issues:
The by-laws of the Supervisory Board of METRO AG call for the Chairman of the Supervisory Board to head the Presidential Committee. The Supervisory Board Presidential Committee includes Messrs Franz M. Haniel (Chairman), Klaus Bruns (Vice-Chairman), Dr Wulf H. Bernotat and Werner Klockhaus.
The Personnel Committee helps the Supervisory Board prepare the following issues and may present recommendations for resolutions:
Instead of the Supervisory Board, the Personnel Committee decides on the following issues, in particular:
METRO AG’s by-laws also call for the Chairman of the Supervisory Board to chair the Personnel Committee. Members of the Personnel Committee include Messrs Franz M. Haniel (Chairman), Klaus Bruns (Vice-Chairman), Dr Wulf H. Bernotat and Werner Klockhaus.
The Accounting and Audit Committee supports the Supervisory Board particularly in matters pertaining to accounting and financial reporting, dependency controlling, auditing, compliance and risk management. In lieu of the Supervisory Board, the Committee handles the following key duties:
In addition, the Accounting and Audit Committee prepares Supervisory Board meetings and presents draft resolutions. The preparatory tasks of the Accounting and Audit Committee include, in particular:
The Chairman of the Accounting and Audit Committee is elected by its members. The personal requirements tied to this office are laid down in the committee’s by-laws: the Chairman must be impartial and possess professional knowledge in the areas of accounting and auditing as well as internal control measures (financial expert). The Chairman must be a shareholder representative. The position of Chairman or Vice- Chairman of the Accounting and Audit Committee should not be assigned to a former member of the Management Board whose appointment was terminated less than two years previously. In the interest of good corporate governance, the Chairman of the Supervisory Board should also not serve as Chairman or Vice-Chairman of the Accounting and Audit Committee at the same time. Based on these requirements, the Accounting and Audit Committee has elected Dr jur. Hans-Jürgen Schinzler as Chairman of the Committee. The requirements of §§ 107 Section 4, 100 Section 5 of the German Stock Corporation Act are thereby fulfilled.
The other members should possess sufficient professional knowledge and experience in accounting and auditing as well as internal control processes. Ideally, one member should, in addition, possess specialist knowledge in the area of corporate governance and compliance.
Members of the Accounting and Audit Committee include, aside from Dr jur. Hans-Jürgen Schinzler, Messrs Klaus Bruns (Vice-Chairman), Prof Dr Dr h. c. mult. Erich Greipl, Franz M. Haniel, Xaver Schiller and Peter Stieger.
The shareholder representatives of the Supervisory Board of METRO AG are elected at the Annual General Meeting. The Supervisory Board submits proposals for election with the support of the Nominations Committee. It regularly looks for suitable candidates and makes recommendations to the Supervisory Board. In the process, the Committee considers both legal stipulations and the recommendations of the German Corporate Governance Code on the appointment of the Supervisory Board. When making suggestions, the Nominations Committee ensures that a qualified appointment to the Committees is possible.
The Nominations Committee is comprised exclusively of shareholder representatives. In line with the by-laws of the Supervisory Board, it consists of the Supervisory Board Chairman as well as two impartial shareholder representatives. With this appointment policy, the Supervisory Board of METRO AG underscored its commitment to take advice from a Committee tied to the interests of all shareholders when determining suitable candidates for Supervisory Board membership.
Members of the Nominations Committee include Messrs Franz M. Haniel (Chairman), Dr-Ing. e. h. Bernd Pischetsrieder and Dr jur. Hans-Jürgen Schinzler.
The German Co-determination Act (MitbestG 1976) prescribes the establishment of a Mediation Committee. The Mediation Committee submits personnel proposals to the Supervisory Board when the two-thirds majority required for appointing and removing members of the Management Board has not been achieved.
Members of the Mediation Committee include Messrs Franz M. Haniel, Klaus Bruns, Prof Dr Dr h. c. mult. Erich Greipl and Werner Klockhaus.
The respective Committee Chairman promptly informs the Supervisory Board of Committee deliberations and resolutions. Usually, an oral report is made at the next Supervisory Board meeting.
The Management Board’s information obligations to the Supervisory Board and its Committees are governed by an information guideline that is part of the Management Board’s by-laws. Its specifications regarding information and reporting policies are substantiated by the meeting and subject schedule of the Supervisory Board and its Committees. It prescribes at what time regular and focus topics must be discussed jointly by the Management and Supervisory Boards or with the Committees. The meeting and subject schedule is part of the Supervisory Board’s by-laws.
The Supervisory Board of METRO AG regularly reviews the efficiency of its activities. The latest efficiency review was conducted in the financial year 2009 based on the evaluation of an intra-Group questionnaire. The efficiency review had concrete consequences for the interaction between the Company’s Management and Supervisory Boards. For example, the previously mentioned meeting and subject schedule was developed in consideration of the results of the 2009 efficiency review.
Good corporate governance presupposes transparency vis-àvis METRO AG shareholders. This website serves as an important information source for METRO AG shareholders, the capital market and the general public. Aside from a host of information on METRO Group operating units and sales divisions, the site contains the financial reports and ad hoc announcements of METRO AG as well as other publications pursuant to the German Securities Trading Act. Dates for the most important regular publications and events (trading statements, annual reports as well as quarterly and half-year reports, the annual business press conference, analysts’ meetings and the Annual General Meeting) appear on the website in a financial calendar at regular intervals in a timely manner. In addition, shareholders and the interested reader can access documentation on the annual business press conference as well as the analysts’ meeting and presentations shown as part of roadshows, investor conferences and information events for retail investors. Furthermore, shareholders and interested readers can subscribe to an electronic investor relations newsletter.
METRO AG’s Annual General Meeting gives its shareholders the opportunity to use their legal rights, that is, to exercise their rights to vote as well as to address questions to the Company’s Management Board, in particular.
To help shareholders exercise their individual rights at the Annual General Meeting, documents and information for each Annual General Meeting are made available ahead of time on the website of METRO Group. In addition to legally prescribed documents, this information includes, in particular, the latest annual report.
The registration and legitimisation procedure for METRO AG’s Annual General Meeting is in line with German Stock Corporation Law and international standards. Each shareholder who would like to participate in an Annual General Meeting of METRO AG and exercise his or her voting right there must register and supply proof of the right to participate and exercise voting rights. Written proof of share ownership in German or English from the institution maintaining the securities deposit account satisfies this requirement. Deposit of shares is not necessary. Proof of share ownership corresponds to the beginning of the 21st day before each Annual General Meeting. Like the registration for the Annual General Meeting, it must be submitted to METRO AG at the address specified in the invitation within the timeframe specified by law and the Articles of Association. Concrete registration and participation conditions are made public in the invitation for each Annual General Meeting.
Shareholders who are unable to or do not wish to attend the Annual General Meeting in person may exercise their voting rights through a proxy. The necessary voting right authorisation must be provided in writing. To the benefit of shareholders, eased formal stipulations apply in certain cases. These are described in the invitation to the Annual General Meeting, for example, for voting right authorisations to banks or shareholder associations.
Shareholders can also authorise Company-appointed proxies to exercise their voting rights (known as proxy voting). The following rules apply: in addition to voting right authorisations, shareholders must also pass instructions on how to exercise these voting rights. The proxies appointed by the Company are obliged to vote according to these instructions. Authorisations and instructions to the proxies appointed by the Company may be submitted via the Internet or in writing. METRO AG proxies are also available for assignment of voting rights during the Annual General Meeting for those shareholders who initially participate in an Annual General Meeting but who want to leave early without forgoing the exercise of their voting rights; naturally, the right to appoint other proxies to exercise one’s voting rights is not affected by this. The details on proxy voting are listed in the invitation to each Annual General Meeting.
In the interest of shareholders, the Chairman of the Annual General Meeting, as a rule the Chairman of the Supervisory Board, works to ensure that the Annual General Meeting is conducted efficiently and effectively. In line with the German Corporate Governance Code, the objective is to complete a standard METRO AG Annual General Meeting after four to six hours at the latest.
Pursuant to § 15a of the German Securities Trading Act (WpHG), members of the Management and Supervisory Boards of METRO AG must inform METRO AG of any transactions involving own Metro shares or related financial instruments, in particular derivatives. This obligation also applies to persons who are in close relationship with members of these two corporate bodies. No disclosure requirement applies as long as the transactions conducted by a Board member and the person who is in close relationship with the Board member do not reach a total amount of €5,000 by the end of the calendar year.
METRO AG is obliged by law to disclose all notifications of socalled directors’ dealings that it has received. In the financial year 2009, METRO AG received no such notifications. Future notifications will, where applicable, be published on the Internet in the section Investor Relations – Publications –
METRO AG also observes transparency recommendations that extend beyond the legal obligations as laid down in Subsection 6.6 of the German Corporate Governance Code. METRO AG thus discloses transactions involving the Company’s shares, ownership of METRO AG shares or related financial instruments by members of the Management or Supervisory Boards when it directly or indirectly exceeds one percent of the shares issued by METRO AG. If the total share ownership of all members of the Management and Supervisory Boards exceeds 1 percent of the shares issued by the Company, the total ownership is stated separately for the Management Board and the Supervisory Board. The threshold values of one percent were not reached in the financial year 2009.
At the Annual General Meeting of METRO AG on 13 May 2009, KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG) was elected to be the auditor for the financial year 2009. The Supervisory Board’s commissioning of the contract to carry out the accounts audit was prepared by the Accounting and Audit Committee and considered the recommendations listed in Subsection 7.2 of the German Corporate Governance Code.
Throughout the audit, KPMG made no reports to the Supervisory Board regarding grounds for disqualification or conflicts. There was also no evidence that any existed. Furthermore, in the course of the audit, there were no unexpected, substantial findings and events concerning Supervisory Board functions. As a result, an extraordinary report from the auditor to the Supervisory Board was not required. The auditor found no deviations from the Management and Supervisory Boards’ statements of compliance with the German Corporate Governance Code.
The remuneration report for 2009 can be found in chapter 8 of the Group management report. The Supervisory Board thoroughly reviewed the remuneration report and adopted its contents in the context of the corporate governance report pursuant to Subsection 3.10 of the German Corporate Governance Code.
METRO AG has been implementing share-based remuneration programmes since 1999 to enable executives to participate in the Company’s performance and reward their contribution to METRO Group’s sustained business success compared to its competitors. The members of the Management Board and other executives of METRO AG as well as managing directors and executives of defined METRO Group companies are eligible.
No rights from the stock option programme were outstanding in the financial year 2009.
The final tranche of the share bonus programme launched in 2004 was granted in 2008. The programme is based on cash bonuses whose size depends on the performance of the Metro share price in parallel consideration of benchmark indices. The programme is divided into a tranche for each year, with the target parameters being calculated separately for each tranche. The full bonus is paid when the share price reaches the target price and so-called equal performance compared to the benchmark indices. The maturity of each tranche is 3 years. The conditions of the tranches for 2004 to 2008 are shown in the following table:
The target bonus values are based on the condition that the target prices are attained. The share bonuses granted in 2007 and 2008 have yet to be paid out. Payments will be made following the end of the respective 3-year term.
The share bonus is granted only if the terms of employment within METRO Group have not been ended unilaterally and a contract termination has not been reached by mutual consent at the time of maturity. In addition, the payment of share bonuses can be limited to the gross amount of the annual fixed salary.
During the reporting year, METRO Group replaced the previous share bonus programme with a performance share plan.
Under this scheme, executives are given an individual target amount for the performance share plan (target value) in accordance with the significance of their functional responsibilities. The target number of performance shares is calculated by dividing this target value by the share price upon allotment (based on the average price of the Metro share during the 3 months up to the allotment date). A performance share entitles its holder to a cash payment matching the price of the Metro share on the payment date (based on the average price of the Metro share during the 3 months up to the payment date).
Based on the relative performance of the Metro share compared to the median of the DAX 30 and Dow Jones Euro Stoxx Retail stock market indices – total return – the final number of payable performance shares is determined after the end of a performance period of at least 3 and at most 4.25 years. It corresponds to the target number of shares when an equal performance with said stock market indices is achieved. Up to an outperformance of 60 percent, the number increases on a straight-line basis to a maximum of 200 percent of the target amount. Up to an underperformance of 30 percent, the number is accordingly reduced to a minimum of 50 percent. In the case of an underperformance of more than 30 percent, the number is reduced to 0.
Payment can be made at 6 possible times. The earliest payment date is 3 years after allotment of the performance shares. From this time, payment can be made every 3 months. Executives can choose the payment date upon which they wish to exercise their performance shares. The payment cap amounts to 5 times the target value. Payment is made only if the terms of employment within METRO Group have not been ended unilaterally and a contract termination has not been reached by mutual consent at the time of maturity.
In order to strengthen executives’ commitment and promote sustainable behaviour, METRO Group introduced so-called share ownership guidelines along with its performance share plan. As a precondition of payments of performance shares, eligible executives are obliged to undertake a significant continuous self-financed investment in Metro shares up to the end of the 3-year blocking period. This ensures that, as shareholders, they will directly participate in share price gains as well as potential losses of the Metro share. The required investment volume amounts to between about 50 percent and 85 percent of the individual target value.
The value of the performance shares allotted in 2009 amounted to €34.6 million at the time of the allotment and was calculated by external experts using recognised financial-mathematical methods (Monte Carlo simulation).
Compensation of members of the Management Board is a component of an integrated compensation system for executives of METRO Group. It creates performance incentives for the longterm growth of the Company’s value and contains both fixed and variable elements. In addition, members of the Management Board as well as other executives have participated in a Company pension plan since 2009. Total remuneration and the individual compensation components are geared appropriately to the responsibilities of each individual board member, his personal performance and the Company’s economic situation, and fulfil legal stipulations regarding customary remuneration. The remuneration structure is geared towards sustainable corporate growth.
The relevant individual amounts for the members of the Management Board in 2009 are as follows:
The individual remuneration components are explained in more detail in the following:
The fixed salary is paid in 12 monthly instalments.
The performance-based compensation of members of the Management Board is determined mainly by the development of net earnings and return on capital employed (RoCE) and can also include the achievement of individually determined targets. The use of the key ratio net earnings in combination with RoCE rewards profitable growth of METRO Group. Net earnings principally amount to profit for the period. The Supervisory Board may resolve an adjustment by special items.
The members of the Management Board receive a set amount per €1 million of net earnings and 0.01 percentage point of RoCE above a minimum value of 7 percent. The amounts are set by the Supervisory Board based on the Company’s strategy and medium-term objectives. They are regularly reviewed and adjusted if necessary.
A cap applies to payouts of performance-based compensation.
Share-based remuneration forms another variable compon ent of Management Board remuneration. Members of the Management Board participate in the performance share plan for executives described above.
Effective from the financial year 2009, the performance share plan was introduced for members of the Management Board by resolution of the Personnel Committee of METRO AG’s Supervisory Board with the consent of the entire Supervisory Board. It corresponds to the performance share plan for METRO Group executives. A cap applies to payouts from the performance share plan. The target value for the 2009 tranche of the performance share plans amounts to €0.6 million for Dr Cordes, which corresponds to an allotment of 16,362 performance shares. The target value amounts to €0.5 million each for Messrs Mierdorf, Muller, Saveuse and Unger. This corresponds to an allotment of 13,635 performance shares. Mr Koch, a member of the Management Board since September 2009, has not yet received any performance shares under the 2009 tranche of the performance share plan.
The members of the Management Board also have to fulfil share ownership guidelines to be eligible for the performance share plan. The size of the self-financed investment in Metro shares was also determined by resolution of the Presidential Committee of the Supervisory Board and the Personnel Committee of METRO AG’s Supervisory Board, and applies to the entire term of the performance share plan. The required investments amount to €0.5 million for Dr Cordes, and €0.4 million each for Messrs Mierdorf, Muller, Saveuse and Unger
The long-term share investment promotes the long-term structure and orientation towards sustainable business development of the remuneration system and results in a healthy balance of the various remuneration elements.
In addition to the tranche of the performance share plan allocated in 2009, the members of the Management Board hold entitlements from the expiring share bonus programme described above. The target values for the 2007 tranche of the share bonus programme amount to €0.33 million each for Messrs Mierdorf, Muller and Unger. For the 2008 tranche of the share bonus programme, the target value for Dr Cordes is €0.40 million; those for Messrs Mierdorf, Muller, Saveuse and Unger amount to €0.33 million each.
The cost from all tranches of share-based remuneration programmes applicable in the financial year 2009 amounts to €0.25 million for Dr Cordes and €0.21 million each for Messrs Mierdorf, Muller, Saveuse and Unger.
Other remuneration consists of non-cash benefits and expense allowances.
Since 1 January 2009, members of the Management Board have received entitlements to Company pension provisions. The entitlements are made as defined-contribution direct benefits. The Company pension plan is financed by the Management Board and the Company based on an apportionment of "7 + 7 + 7". When a member of the Management Board makes a contribution of 7 percent of his defined target remuneration, the Company will contribute the same. Depending on the economic situation, the Company will pay the same amount again.
In view of the macroeconomic environment, the additional amount has been suspended and the Company’s contribution is currently capped at €0.1 million per year.
Contributions bear interest at market rates with a guarantee on paid-in contributions. Payment can be made in the form of capital, instalments or a lifelong pension. A minimum benefit is granted in the case of invalidity or death.
Furthermore, Mr Mierdorf holds entitlements from the time prior to his appointment to the Management Board. According to the material content of this commitment, he will receive a one-off capital amount when he leaves the Company. This commitment is calculated based on the average remuneration of the last 2 calendar years consisting of fixed salary and performance- based remuneration, and amounts to at least the total of 1 annual fixed salary plus performance-based remuneration based on the target bonus for 1 year. In add ition, the commitment comprises benefits that would be paid out when Mr Mierdorf turns 60, if he were to become perman ently incapacitated or his employment contract were to be terminated prematurely or not renewed. In the latter 2 cases, other income would be credited against the pension commitment. The pension commitment for Mr Mierdorf is adjusted annually to cover the increased cost of living.
In the financial year 2009, a total of €0.5 million was used for remuneration of active members of the Management Board of METRO AG for services after the end of their employment. Of this, €0.1 million each went to Dr Cordes, Mr Mierdorf, Mr Muller, Mr Saveuse and Mr Unger, with Mr Koch accounting for €0.03 million. The cash value of these commitments amounts to €4.6 million. Of this, Dr Cordes, Mr Muller, Mr Saveuse and Mr Unger account for €0.1 million each, Mr Koch for €0.03 million and Mr Mierdorf for €4.2 million.
Former members of the Management Board of METRO AG and the companies that were merged into METRO AG as well as their surviving dependants received €4.3 million. The cash value of commitments for current pensions and pension entitlements made for this group totalled €47.4 million.
Remuneration of members of the Supervisory Board of METRO AG is regulated by § 13 of METRO AG’s Articles of Association.
In addition to reimbursement of cash expenses, the members of the Supervisory Board of METRO AG receive a fixed payment and a performance-based payment. Fixed compensation amounts to €35,000 per board member. The performancebased remuneration component is based on earnings before taxes and minority interests (EBT) in the METRO AG financial statements. Each member of the Supervisory Board receives €600 per €25 million in EBT exceeding an average EBT of €100 million for the financial year 2009 and the 2 preceding years. The sales tax payable on the fixed and performance-based compensation is reimbursed to the members of the Supervisory Board in accordance with § 13 Section 5 of METRO AG’s Articles of Association.
The individual amount of fixed and performance-based Supervisory Board remuneration takes into account the duties and responsibilities of the individual members of the Supervisory Board by considering special assignments. The compensation of the Chairman of the Supervisory Board is 3 times higher than that of an ordinary member of the Supervisory Board; that of the Vice-Chairman and the Chairmen of the committees is twice as high; and that of the other members of the committees 1.5 times higher. A member of the Supervisory Board who holds several offices receives compensation for only one office; in the case of different levels of remuneration for the most highly paid office (§ 13 Section 3 Sentence 3 of the Articles of Association).
The total compensation of all members of the Supervisory Board amounted to €1.72 million in the financial year 2009.
The fixed and performance-based components accounted for €0.92 million and €0.8 million, respectively. The performancebased compensation will be payable after METRO AG’s Annual General Meeting on 5 May 2010.
The relevant individual amounts for the financial year 2009 are as follows:
No remuneration applied to membership of the Supervisory Board’s Nominations Committee, with 1 member waiving payment for the committee work. The other members of the Nominations Committee hold other Supervisory Board offices so that additional compensation is precluded in accordance with § 13 Section 3 Sentence 3 of the Articles of Association.
In the financial year 2009, the members of the Supervisory Board of METRO AG received €0.19 million in compensation from the Group companies for Supervisory Board mandates at Group companies. The amounts listed in the following table apply to the individual members of the METRO AG Supervisory Board. Beyond this, the members of the Supervisory Board were not granted any remuneration or benefits for work performed, in particular consulting and brokerage services, on behalf of companies of METRO Group in the sense of Subsection 5.4.6 of the German Corporate Governance Code.
The above amounts do not include the remuneration entitlements of 1 member of the Supervisory Board from intragroup Supervisory Board mandates of which the member of the Supervisory Board waived the payment. The sales tax payable on compensation is reimbursed to the members of the Supervisory Board.
1 As a statement on corporate management pursuant to § 289a of the German Commercial Code, the corporate governance report is also part of the management report of METRO AG 2009
2 Mr Mierdorf’s appointment as a member of the Management Board ended on 1 March 2010
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