Compensation Report

1 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 relevant legal regulations; it also takes into account the recommendations of the German Corporate Governance Code in the version dated May 5, 2015.

Compensation Paid to the Executive Board

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

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. There were individual changes to the compensation system in financial year 2015 that are discussed in detail in connection with the respective compensation components below. In financial year 2015, Executive Board compensation consisted of 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, the Executive Board members received performance-based variable annual compensation in the form of a performance bonus. The structure of the performance bonus as contained in the individual Executive Board employment agreements is principally identical: The amount of the performance bonus depends on the achievement of annual targets defined at the start of each year for the defined target parameters for the respective financial year. Unlike the previous bonus system, from 2015 the Supervisory Board is responsible not only for determining the underlying targets, but also for the amount of the performance targets for the performance bonus at its own discretion. This means that the performance bonus can be better tailored to the Company’s situation and the responsibilities of the respective Executive Board member. The Supervisory Board defines at least two performance targets for each Executive Board member and the relative weighting of these parameters. A target bonus per financial year is defined for the performance targets in their entirety. If the target is exceeded, the performance bonus may be higher than the target bonus; however, it may not exceed 200 % of the target bonus. If the targets are not met, the performance bonus may be lower than the target bonus or may not be paid at all. The target agreements for 2015 defined performance targets for the Executive Board members calculated on the basis of Group EBITDA and net financial debt as well as individual targets corresponding to the allocation of responsibilities within the Executive Board.
  The personal target agreement for Dr. Christian Wegner is largely based on the revenue and EBITDA targets of the Digital & Adjacent segment.
• In addition, Executive Board members receive a long-term share-based compensation component. The Group Share Plan, which was established in 2012, is organized as a share bonus program and is served by the Company’s own shares. Participants are issued with performance share units (PSUs) entitling them to receive shares after the expiry of a four-year holding period from the beginning of the year of grant. The conversion factor by which the PSUs are exchanged for ProSiebenSat.1 shares 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 Group EBITDA. The performance factor can vary between 0 % and 150 % (performance-related cap). The number of PSUs is also adjusted in the event of the payment of a superdividend by applying a corresponding dilution ratio. In the event of exceptional developments, the Supervisory Board can also raise or lower the conversion factor by up to 25 percentage points under consideration of the individual performance of the Executive Board members. Any superdividend dilution ratio and the performance factor are applied at the date on which the performance share units are converted into shares. 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 Group net income is generated in the according financial year in question and the EBITDA of ProSiebenSat.1 Group does not fall below a defined minimum. The Group Share Plan replaced the previous Long Term Incentive Plan (LTIP), under which stock options were last issued to Executive Board members in 2009; 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 Mid-Term Incentive Plan that was introduced in 2015, the Executive Board members receive an additional multi-year variable compensation component. This is a medium-term cash compensation instrument for members of ProSiebenSat.1 Group’s Executive Board and selected other managers. The plan term of the Mid-Term Incentive Plan is three years beginning from financial year 2016. The payment amount depends on the recurring EBITDA of ProSiebenSat.1 Group at the end of the plan term and 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. The members of the Executive Board and the other participants in the Mid-Term Incentive Plan each receive a one-off allocation for the entire plan term. Participants who leave the Company prior to the end of the plan term receive a payment amount that is reduced on a pro rata basis. The one-time allocation to the Executive Board members under the Mid-Term Incentive Plan was made in February and April 2015. The Mid-Term Incentive Plan is not included in the table of benefits for 2015 according to GCGC as the plan term within the meaning of the German Corporate Governance Code (GCGC) does not begin until 2016. The target value, i.e. the value granted to the Executive Board member in the event of 100 % target attainment, is EUR 1.5 million for Thomas Ebeling and EUR 1.0 million for each of Dr. Gunnar Wiedenfels, Conrad Albert, Dr. Christian Wegner and Dr. Ralf Schremper.
• 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 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 attains the age of 60, or 62 in the case of Dr. Ralf Schremper and Dr. Gunnar Wiedenfels, and was a member for at least a full three 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.
• The Executive Board members also receive other non-performance-based fringe benefits in the form of typical non-cash benefits (especially company cars and participation in group accident insurance).
• In the case of the premature termination of the employment relationship by the Company without good cause, the Executive Board agreements include a settlement payment commitment amounting to two years’ total compensation according to Section 4.2.3 of the GCGC up to a maximum of the compensation that would have been paid up to the end of the agreement period.
• The Executive Board agreements contain clauses providing for a change of control at the Company. A change of control as defined in the Executive Board agreements 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, each Executive Board member is entitled to terminate the Executive Board agreement giving three months’ notice to the end of the month and to step down from the Executive Board if the change of control involves a significant interference of the position of the Executive Board. If this right of termination is exercised effectively, the Executive Board member shall receive a cash settlement payment that counts in full towards any waiting allowance. The cash settlement payment corresponds to three times the annual compensation of the respective Executive Board member but is limited to the compensation for the remaining term of the respective employment agreement discounted to the termination date. For the purposes of the cash settlement payment, annual compensation is defined as the total amount contractually due to the respective Executive Board member for the last complete financial year, consisting of the fixed compensation, performance bonus, multi-year compensation components and pension contributions.

Compensation of Executive Board Members for Financial Year 2015 According to GAS 17

The following total compensation was determined for the Executive Board members active in financial year 2015 in accordance with German Accounting Standard (GAS) 17:

Axel Salzmann stepped down from the Executive Board as of March 31, 2015; his employment contract ended with effect from the same date. In accordance with his termination agreement, Axel Salzmann received a settlement payment that was composed as follows: Fixed compensation for April to December 2015 (EUR 506,250), pro rata variable compensation based on average target achievement for 2012 to 2014 (163.5 %) in the amount of EUR 551,813, a waiting allowance for a post-contractual non-competition clause of EUR 337,500, fringe benefits already granted in the amount of EUR 14,886, and pension contributions of EUR 101,250 for April to December 2015. As no performance share units for 2015 were granted from the Group Share Plan by the termination date, Axel Salzmann received EUR 200,000 as a supplement to the settlement payment. The termination agreement also stated that all of the performance share units granted to Axel Salzmann that would have vested by the end of the original contractual term (December 31, 2015) are considered to have vested with effect from the severance date.

Additional Disclosures on Share-based Compensation Instruments (Stock Option Plan and Group Share Plan)

The stock options and performance share units granted to active members of the Executive Board for their activity as members of the Executive Board developed as follows in financial year 2015:

Since financial year 2010, no more stock options from the Long-Term Incentive Plan have been granted to members of the Executive Board. In accordance with a Supervisory Board resolution, the Company repurchased the 165,000 stock options of the LTIP from the 2009 cycle in 2014 that were still outstanding at the start of financial year 2014 from the relevant Executive Board members; since then, no more stock options have been outstanding under the LTIP.

In financial year 2015, no performance share units from the Group Share Plan were exercised and 19,133 performance share units expired. For more information on the performance share units granted for financial year 2015, refer to Note 37 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.

Third-party Compensation

Following the sale of all of its indirectly held shares in ProSiebenSat.1 Media SE, Lavena 3 S.à r.l., ProSiebenSat.1 Media SE’s former indirect majority shareholder, made a voluntary one-off special payment of EUR 59.7 million at the end of June 2014 to those Executive Board members of ProSiebenSat.1 Media SE who were active in financial year 2014. This was not recognized as an expense for ProSiebenSat.1 Media SE or the Group companies, as the special payment was not a payment by the Company or the Group. Further information can be found in the Compensation Report in the 2014 Annual Report.

Compensation of Executive Board Members for Financial Year 2015 According to 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.

Grants Granted According to GCGC

The table below shows the grants granted for financial year 2015 including fringe benefits and the minimum and maximum compensation achievable for financial year 2015 as granted to the active members of the Executive Board for their activity as members of the Executive Board. In deviation from the presentation of total compensation according to GAS 17, to comply with the GCGC, the annual variable compensation must be given 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 according to IAS 19, must be included in total compensation according to the GCGC.

Information on the termination agreement with Axel Salzmann can be found below the “Compensation of Executive Board members for financial year 2015 according to GAS 17” table.

Receipt According to 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 what amount they received for their activity as members o the Executive Board for 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. The Executive Board did not receive any share-based compensation in financial year 2015.

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 it is not an actual receipt in the narrower sense.

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. If this is applied, the Executive Board members receive a monthly waiting allowance for the duration of the post-contractual non-competition clause amounting to 1/12 of 75 % of their most recent annual compensation. For the purposes of the waiting allowance, annual compensation is defined as the total of the fixed remuneration, performance bonus and any additional multi-year compensation components granted. The calculation of the waiting allowance assumes target achievement of 100 % for the performance bonus and applies the allocation value for the multi-year compensation components or, if no annual allocation takes place, the pro rata allocation value attributable to one year of the plan term. Any income generated from work performed by the respective Executive Board member while the non-competition clause is in force counts towards the waiting allowance to the extent that, extrapolated to one year, it exceeds 50 % of the respective member’s most recent annual compensation. The Company may waive the non-competition clause prior to the termination of the agreement; in this case, the respective Executive Board member shall only be entitled to receive the waiting allowance for the period between the termination of the agreement and six months after receipt of the waiver. Above and beyond this, the provisions of Sections 74 ff. of the German Commercial Code apply accordingly.

The following table shows the net present value of the compensation payable for the post-contractual non-competition clause. This consists of the present value of the amounts to be paid assuming that Executive Board members were to leave the Company at the end of their regular contractual term and that the contractual benefits received immediately prior to the termination of the employment agreement are the same as their most recent annual compensation. It is assumed that the actual compensation for 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 agreement is terminated and the level of the compensation received at this date.

Total Compensation of Former Executive Board Members

Heidi Stopper stepped down from the Executive Board effective September 30, 2014; her employment agreement ended effective March 31, 2015. In addition to Heidi Stopper’s total compensation as a member of the Executive Board, she received the following compensation for financial year 2014 in the months from October to December: Fixed compensation of EUR 125,000, fringe benefits of EUR 3,049 and pro rata variable annual compensation of EUR 104,250. In accordance with her termination agreement, Heidi Stopper received the following compensation for the months from January to March 2015: Fixed compensation of EUR 125,000, fringe benefits of EUR 4,809, pro rata variable compensation on the basis of average target achievement for 2012 to 2014 (163 %) of EUR 102,875 and pension contributions of EUR 25,000. She also received a settlement payment comprised as follows: Fixed compensation for April to December 2015 (EUR 375,000), pro rata variable compensation on the basis of average target achievement for 2012 to 2014 (163 %) of EUR 305,625, fringe benefits already granted of EUR 14,427, and pension contributions of EUR 75,000 for April to December 2015. As no performance share units for 2015 were granted from the Group Share Plan by the termination date, Heidi Stopper received EUR 200,000 as a supplement to the settlement payment. The termination agreement also stated that all of the performance share units granted to Heidi Stopper that would have vested by the end of the original contractual term (December 31, 2015) are considered to have vested with effect from the termination date.

Axel Salzmann stepped down from the Executive Board as of March 31, 2015; his employment contract ended with effect from the same date. In addition to Axel Salzmann’s total compensation as a member of the Executive Board for financial year 2015, he received a settlement payment in accordance with his termination agreement that was composed as follows: Fixed compensation for April to December 2015 (EUR 506,250), pro rata variable compensation based on average target achievement for 2012 to 2014 (163.5 %) in the amount of EUR 551,813, a waiting allowance for a post-contractual non-competition clause of EUR 337,500, fringe benefits already granted in the amount of EUR 14,886, and pension contributions of EUR 101,250 for April to December 2015. As no performance share units for 2015 were granted from the Group Share Plan by the termination date, Axel Salzmann received EUR 200,000 as a supplement to the settlement payment. The termination agreement also stated that all of the performance share units granted to Axel Salzmann that would have vested by the end of the original contractual term (December 31, 2015) are considered to have vested with effect from the termination date.

The total compensation of the former Executive Board members Heidi Stopper and Axel Salzmann amounted to EUR 2.9 million in financial year 2015.

At the start of financial year 2015, the number of performance share units for the former Executive Board member Heidi Stopper was 70,258. A total of 19,133 performance share units expired during the financial year 2015, with 51,125 remaining at the end of financial year 2015. Information on the share-based compensation instruments for Axel Salzmann can be found in the table showing the development of these instruments.

In addition, total compensation (pensions) was paid to former Executive Board members amounting to EUR 0.3 million in financial year 2015 (previous year: EUR 0.3 million). As of December 31, 2015, pension provisions for former members of the Executive Board according to IFRS amounted to EUR 11.4 million (previous year: EUR 11.2 million). The provisions for Axel Salzmann can be found in the table showing the total compensation of the Executive Board in accordance with GAS 17.

Provisions for Pensions

In financial year 2015, there were additions to provisions for pensions for active and former Executive Board members in line with IFRS totaling EUR 3.1 million (previous year: EUR 4.3 million). EUR 0.6 million of this related to service costs (previous year: EUR 0.5 million), EUR 0.5 million to interest expenses (previous year: EUR 0.6 million) as well as minus EUR 0.1 million to actuarial losses (previous year: EUR 1.8 million) and minus EUR 0.3 million (previous year: minus EUR 0.3 million) to pension payments. Furthermore, deferred compensation in the amount of EUR 2.4 million was deferred in the past financial year (previous year: EUR 1.8 million). As of December 31, 2015, provisions for pensions for active and former Executive Board members totaled EUR 22.9 million (previous year: EUR 19.8 million).

D&O Insurance

The Executive Board members participate in 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 insurance 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 compensation in the calendar year in which the infringement of duty occurred.

Compensation Paid to the Supervisory Board

Compensation System for the Supervisory Board

The compensation of the Supervisory Board is set out in the Company’s articles of association.

The Supervisory Board compensation was changed at the Annual General Meeting on June 26, 2014, and incorporated into the articles of association of ProSiebenSat.1 Media AG. The new compensation system for the Supervisory Board applied for the first time for the tenures of the Supervisory Board members elected at the Annual General Meeting on June 26, 2014. By resolution of the Annual General Meeting on May 21, 2015 on the conversion of the Company into an SE, this compensation system was incorporated into the articles of association of ProSiebenSat.1 Media SE with its content unchanged, meaning that it also applies to the members of the Supervisory Board of ProSiebenSat.1 Media SE. The compensation system is composed as follows:

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. In the event of multiple meetings held on one day, the meeting honorarium is only paid once. No performance-based variable compensation is granted.

The current members of the Supervisory Board guaranteed to the Supervisory Board in a “self-commitment” to use each 20% of their annually fixed compensation, in accordance with Article 14 (1) and (2) of the Articles of Association (before tax deduction), to annually buy shares of ProSiebenSat.1 Media SE and hold them for a period of four years, but for the period of their membership in the Supervisory Board of ProSiebenSat.1 Media SE at the longest; in case of reelection, the obligation to hold shares applies to the single 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 Company’s long-term, sustainable success.

The previous compensation system for the Supervisory Board applied until June 25, 2014. On the basis of the Company’s articles of association in the version adopted by the Annual General Meeting on June 4, 2009, the members of the Supervisory Board received fixed annual compensation. This amounted to EUR 50,000 for the ordinary Supervisory Board members and EUR 100,000 each for the Chairman and the Vice Chairman. In addition, meeting honoraria were paid for contributing to the committees. This amounted to EUR 3,000 per meeting attended for ordinary members of the Audit and Finance Committee, and EUR 1,500 per meeting attended for ordinary members of any other committee. Committee Chairmen received twice the standard meeting honorarium. No performance-based variable compensation was granted.

Compensation of Supervisory Board Members for Financial Year 2015

Supervisory Board members received the following compensation for financial year 2015:

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

D&O insurance covers the personal liability risk should Supervisory 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 financial year 2015. Members of the Supervisory Board do not receive loans from the Company.