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Determination of and process to review Supervisory Board compensation

The compensation of Supervisory Board members, which is subject to the compensation system described here, is regulated in § 13 of the Deutsche Telekom AG Articles of Incorporation. This is as follows:

“§ 13 Remuneration

  1. In addition to reimbursement for cash expenses and value-added tax paid on remuneration and expenses, the members of the Supervisory Board shall receive fixed annual remuneration of EUR 100,000.
  2. The Chairman of the Supervisory Board shall receive EUR 100,000 in addition to the remuneration stated in (1) hereof, and the Deputy Chairman EUR 50,000.
  3. Members of the Supervisory Board also receive compensation as follows for activities on Supervisory Board committees:
    • The Chairman of the Audit and Finance Committee EUR 120,000, all other Audit and Finance Committee members EUR 50,000,
    • The Chairman of the General Committee EUR 70,000, all other General Committee members EUR 30,000,
    • The Chairman of the Nomination Committee EUR 25,000, all other Nomination Committee members EUR 12,500,
    • The Chairman of the Strategy, ESG and Innovation Committee EUR 70,000, all other Strategy, ESG and Innovation Committee members EUR 30,000,
    • The Chairman of another committee EUR 40,000, all other members of a committee EUR 25,000. Chairpersonship and membership of the Mediation Committee are not remunerated.
  4. Further, members of the Supervisory Board shall receive an attendance fee amounting to EUR 2,000 for each meeting of the Supervisory Board or its committees attended by them, but only one meeting per day shall be taken into account.
  5. Members of the Supervisory Board who are on the Supervisory Board for only part of the financial year in question shall receive one twelfth of the remuneration for every month of membership or part thereof. The same shall apply to the increase in remuneration for the Supervisory Board Chairman and Deputy Chairman pursuant to (2) hereof and to the increase in remuneration for Supervisory Board committee membership or chairmanship pursuant to (3) hereof.
  6. The remuneration pursuant to (1) hereof and the attendance fee shall fall due at the end of the shareholders’ meeting to which the consolidated financial statements for the financial year in question are presented or which decides on its approval.”

The Supervisory Board reviews on an ad hoc basis the appropriateness of the components, amount, and structure of its compensation. The Supervisory Board is supported by the General Committee in these efforts. To this end, the General Committee evaluates Supervisory Board remuneration at similar companies, particularly those also represented in the DAX index; compares them with the compensation of the Supervisory Board at Deutsche Telekom AG with regard to components, amount, and structure of said remuneration; and reports the results to the Supervisory Board. Based on this analysis and taking into account the importance and effort required by the work on the Supervisory Board and its committees, the Supervisory Board then decides whether changes to its remuneration are necessary. The last change to Supervisory Board remuneration in 2016 was also made in accordance with this process, on the initiative of the Supervisory Board.

Due to the particular nature of the Supervisory Board compensation, which is granted for activities that are fundamentally different from the activities of employees of Deutsche Telekom AG and the Deutsche Telekom Group, a “vertical comparison” with employee compensation is not relevant to the review and determination of the compensation. Accordingly, the definition of a group of employees who must be included in such a comparison is unnecessary.

Since the amendment of the German Stock Corporation Act through the Act Implementing the Second Shareholders’ Rights Directive (ARUG II) § 113 (3) sentence 1 AktG provides that the shareholders’ meeting must resolve on the compensation of Supervisory Board members every four years; a resolution that confirms the compensation is permitted. In preparation for this resolution, the Supervisory Board will perform an analysis of its compensation at least every four years in future. The Supervisory Board and Board of Management will submit the compensation of the Supervisory Board members for resolution at least every four years. In the event there are grounds for changing the compensation of the Supervisory Board members, the Board of Management and Supervisory Board will also submit a proposal for a corresponding amendment of § 13 of the Deutsche Telekom AG Articles of Incorporation in this context. This may also provide that the Supervisory Board compensation be determined according to the changed provision in the Articles of Incorporation for the entire financial year in which the change to the Articles of Incorporation is entered in the commercial register. Should the shareholders’ meeting fail to reach the necessary majority for a resolution, a reviewed Supervisory Board compensation must be submitted at the next ordinary shareholders’ meeting at the latest.

It is only natural that the members of the Supervisory Board be involved in the structuring of the compensation and underlying compensation system that is applicable to them. The resulting conflict of interest is offset, however, by the fact that the final decision on the structure of the compensation and the underlying compensation system is assigned by force of law to the shareholders’ meeting, which is presented a resolution proposal by both the Supervisory Board and the Board of Management.

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