BASF implements law on executive compensation
In early August 2009, Germany introduced a new "law governing the appropriateness of executive remuneration" (VorstAG). Based on the idea of sustainable corporate development, the law requires the introduction of an assessment basis which extends over several years, as well as options for limiting the variable component of the earnings of executives. BASF is the first DAX company to react to this immediately: All members of the Board of Executive Directors will be given new contracts as of January 1, 2010.
The law only applies to new contracts and to existing contracts which are extended, since ongoing contracts cannot be interfered with. Nevertheless, the Supervisory Board of BASF has decided that all contracts will be amended as of January 1, 2010, in agreement with the Board of Executive Directors. "Given the different terms that exist for different contracts, we want to avoid a two-tier system. This would contradict the team spirit, since ultimately we all bear joint responsibility," emphasizes Supervisory Board chairman Dr. h. c. Eggert Voscherau.
The earnings of BASF's Executive Directors are made up of three parts: fixed salary, bonus, and a third component, governed by the company's stock price, the "stock-price-based long-term element". There is no change to any fixed salary, but there are changes to the variable components of the remuneration: The level of bonus payment will initially be determined, as has previously been the case, by the total return on equity achieved. As an additional element for calculating this, the Supervisory Board will now also agree medium-term and long-term targets with the Board of Executive Directors to be assessed on the basis of a three-year period.
In addition, the bonus payment for each member of the Board of Executive Directors will be limited to a maximum of two million euros; for the chairman of the Board of Executive Directors the payment will be limited to four million euros. Within the framework of the stock-price-based long-term element, the members of the Board of Executive Directors must purchase BASF stocks for ten percent of their bonus and keep them for at least four years - even after they leave office.
On April 29, 2010, the Annual General Meeting of BASF SE will hold a vote on the new system of remuneration. Although this decision will not be legally binding, it will allow stockholders to have their say on the new regulation and express their approval or any misgivings they may have.