Fixed remuneration components

Basic remuneration

The basic remuneration is determined for all Board of Management members in line with market standards in accordance with the requirements of stock corporation law and is paid on a monthly basis. It takes their specific role, experience, and the area of responsibility into consideration. In the event of temporary incapacity for work caused by illness or any other reason for which the respective Board of Management member is not responsible, the basic remuneration will continue to be paid for up to six months or until the termination of the service contract, whichever comes first.

Remuneration in kind

In line with market and corporate standards, the Company grants all members of the Board of Management additional benefits, some of which are viewed as non-cash benefits and taxed accordingly. Members of the Board of Management are eligible, for example, for a company car for business and private use. Where necessary, they may also make use of the service of a driver. Members of the Board of Management can also take advantage of additional mobility solutions offered by Deutsche Telekom AG. The Company grants the members of the Board of Management accident and liability insurance and also covers the costs of the annual health checkup. In addition, required means of communication are made available to the members of the Board of Management at their homes free of charge. Members of the Board of Management can also receive consultation regarding security-related measures. If necessary, costs for structural safety measures are covered, too.

Other fringe benefits

Other fringe benefits are an additional component of the Board of Management remuneration which is only granted by the Supervisory Board, if necessary. The aim of the Supervisory Board here is to be able to balance out relevant circumstances, in particular when a new member is appointed to the Board of Management who previously worked for a different employer. If the member of the Board of Management moves to the Company’s registered office at the request of Deutsche Telekom AG, the Supervisory Board can grant specific allowances in particular for relocation, dual household maintenance, accommodation, language courses, and school costs for children or a lump-sum allowance. Tax consulting costs can also be assumed. Furthermore, the Supervisory Board can define a compensation payment if a new member appointed to the Board of Management loses variable remuneration components as a result of their transfer to Deutsche Telekom AG.

Pension commitment for the Chair of the Board of Management (grandfather clause)

Of the current members of the Board of Management, only Timotheus Höttges has a defined benefit plan in the form of lifelong pension payments at a later point in time, in which up to 50 % of the pension entitlement can optionally be paid out as a lump-sum payment upon entering retirement. By including this lump-sum payout option, the Supervisory Board is intending to converge with the defined contribution plans applicable to Board of Management members from 2009 through 2020, whereby vested pension benefits have only been payable as a lump-sum upon occurrence of the insured event. Due to the long duration of the commitment to Timotheus Höttges and the pension entitlement already acquired, replacement of this commitment would involve a considerable financial outlay. The Supervisory Board therefore decided to continue Timotheus Höttges’ pension commitment also under the new Board of Management remuneration system. The pension commitment does not count towards the maximum remuneration under the German Stock Corporation Act.

The company pension scheme of Timotheus Höttges is directly linked to his annual basic remuneration. Up until 2018, Timotheus Höttges received a defined percentage of the most recent basic remuneration prior to the qualifying event as a contribution to the company pension scheme for each completed year of service. The pension commitment may be in the form of a life-long retirement pension upon reaching the age of 62 or in the form of an early retirement pension upon reaching the age of 60. In the event of early retirement, which is no longer possible, appropriate actuarial deductions are made. The company pension is calculated by multiplying a basic percentage rate of 5 % by the number of years of service as a member of the Board of Management. After ten years of service, Timotheus Höttges had attained the maximum pension level of 50 % of the last annual basic remuneration. Following Timotheus Höttges’ reappointment in 2019 and the adjustment to his basic remuneration, the Supervisory Board decided to dynamically increase his pension entitlements accrued up to December 31, 2018 by 2.4 % per year. The primary measurement base for the dynamization was the basic remuneration valid up to December 31, 2018. Future increases in his remuneration will thus not lead to higher pension payments. The pension payments to be made upon retirement increase dynamically, at a rate of 1 % per year. In addition, the pension agreement includes arrangements for pensions for surviving dependents in the form of entitlements for widows and orphans. In specifically defined exceptional cases, entitlement to a widow’s pension is ruled out. The criteria for eligibility in the pension commitment are in line with market standards. In the event of a permanent incapacity for work (invalidity), the beneficiary is also entitled to the pension credit accrued.