The compensation systems of the Executive Board and Supervisory Board are in line with the statutory regulations and the recommendations of the German Corporate Governance Code. In accordance with the provisions of stock corporation law, the Executive Board compensation system and Supervisory Board compensation are submitted to the Annual General Meeting for resolution in the event of significant changes or at least every 4 years.
The remuneration of the Supervisory Board is laid down in the Articles of Association of Deutsche Lufthansa AG. Pursuant to Section 113 (3) of the German Stock Corporation Act (AktG), it will be submitted to the Annual General Meeting on 4 May 2021 for resolution.
The currently existing compensation system for the members of the Executive Board was submitted to the Annual General Meeting on May 5, 2020 for approval in accordance with Section 120a (1) AktG and approved by a majority of 88.22%.
However, the framework agreement of June 29, 2020 concluded between Deutsche Lufthansa AG and the Economic Stabilization Fund (WSF) provides for significant restrictions on Executive Board remuneration. For example, subject to claims against the Company already substantiated before June 21, 2020, no bonuses, other variable or comparable remuneration components may be granted to Executive Board members for the duration of the stabilization measures.
At the same time, no Executive Board member may receive basic compensation (including any compensation from Group mandates) in excess of the basic compensation of the respective Executive Board member as of December 31, 2019 until at least 75% of the total of Silent Participations I and II (including coupons and any additional compensation) and the shareholding have been fulfilled, repaid or redeemed, sold or terminated in full by contribution or otherwise.
In order to implement the remuneration restrictions agreed with the WSF, Deutsche Lufthansa AG has concluded corresponding supplementary agreements to the existing Executive Board employment contracts with all members of the Executive Board.
The Executive Board and Supervisory Board are liable to pay damages to the Company in the event of a culpable breach of their duties. A pecuniary loss liability insurance policy (D&O) has been taken out for both boards, which until the 2020 financial year provided for a deductible for the members of the Executive Board and Supervisory Board in line with the requirements of the German Stock Corporation Act (AktG). Now that the German Corporate Governance Code, as amended on December 16, 2019, no longer recommends a deductible for members of the Supervisory Board, a deductible for members of the Supervisory Board is no longer included in the D&O insurance policy in the Lufthansa Group since December 2020. The deductible for the members of the Executive Board remains unchanged. The Supervisory Board also has the option of withholding or reclaiming the one-year and multi-year variable remuneration of Executive Board members in cases of intentional or grossly negligent breach of statutory duties or violation of internal company guidelines (compliance penalty and clawback) or in cases where variable remuneration components linked to the achievement of certain targets were wrongly paid out on the basis of incorrect data (performance clawback).