GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
individual members of the management board is appropriate in relation to their tasks and per - formance as well as the economic situation of the company. In addition, the supervisory board must ensure the customary remuneration is not exceeded. Further, the remuneration in listed companies has to be aimed at a sustainable and long-term-oriented development of the compa - ny, and variable remuneration should be granted based on long-term incentives accordingly. If the supervisory board culpably disregards the statutory requirements when determining the remuneration for the management board, it may be held liable for damages. Characteristics The DCGK makes further recommendations with respect to the characteristics of the remunera - tion. For example, it recommends that the varia - ble remuneration based on long-term incentives exceeds the one based on short-term incentives. Variable remuneration shall be predominantly invested in shares of the company or granted as share-based remuneration. The DCGK further recommends that payments to members of the management board due to early termination of their activity do not exceed twice the annual remuneration (severance cap) and do not constitute remuneration for more than the remaining term of the contract. Anoth - er suggestion is that change-of-control clauses should not be agreed upon. Supervisory Board The remuneration of the supervisory board members may be specified in the articles of association or granted by the general meeting. It should be appropriate in relation to the tasks of the members of the supervisory board and the company’s economic situation. In listed compa -
nies, the general meeting has to resolve on the remuneration of the supervisory board members at least every four years, also in a non-binding manner, with the resolution including or refer - encing the same details that are to be included in the remuneration system of the management board with respect to the remuneration of the supervisory board members, if applicable. The DCGK further recommends taking into consid - eration the status as chair or deputy chair of the supervisory board or committee in this context. It is suggested that the supervisory board remu - neration be a fixed remuneration. Managing Directors and General Partners In a GmbH, the remuneration of managing direc - tors is the responsibility of the shareholders’ meeting, which must not adhere to any restrict - ing rules. In a KGaA, the general partners generally receive no remuneration for their activities, but are enti - tled to receive a fee for taking over the liability of the KGaA vis-à-vis third parties. In the case of a capital company as general partner, the remu - neration of its management members is to be set according to the rules applying to the respective All capital companies are required to disclose the total remuneration of the management board in the annual financial statements. An exception is made only for capital companies that fulfil at least two of the following criteria (small capital companies): • the balance sheet total does not exceed EUR7,5 million; • the sales revenues within the last 12 months amount to less than EUR15 million; and legal form of such a capital company. 4.11 Disclosure of Payments to Directors/Officers
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