45. Remuneration based on performance shares

Performance share plan on the basis of Volkswagen preferred shares

The Supervisory Board resolved on March 3, 2023 to amend the remuneration system, effective January 1, 2023, in particular to accommodate demands by investors to give long-term variable remuneration a higher weighting. To this end, the relative share of the fixed remuneration components was reduced and the relative share of the long-term variable remuneration was increased. Moreover, the option to agree a special bonus with a future effect was removed to reinforce the pay-for-performance principle and implement investor demands. The maximum target achievement values for the annual bonus and the performance share plan and their respective maximum payment amounts were also increased in order to adequately reward higher levels of target achievement. In this process, the maximum remuneration and the cash remuneration cap were likewise raised to accommodate current market conditions. The Annual General Meeting approved the amended remuneration system on May 10, 2023 with 98.82% of the votes cast.

A four-year performance period applies to members of the Board of Management. Penalty and clawback rules apply at the same time: if there is relevant misconduct during the assessment period, payments under the performance share plan can be reduced or demanded back.

Board of Management members appointed before December 14, 2020 and whose service contract has not yet been renewed are still subject to a three-year performance period. In these cases, penalty and clawback rules will likewise only apply on renewal of their contracts.

The group of beneficiaries of the performance share plan was expanded at the end of 2018 by including members of top management and at the end of 2019 by adding all other members of management and selected participants below management level. Performance shares were first granted to members of top management at the beginning of 2019. All other beneficiaries were allocated benefits on the basis of performance shares for the first time at the beginning of 2020. The function of the performance share plan for top management and other beneficiaries is largely identical to the performance share plan that was granted to the members of the Board of Management. The performance period for beneficiaries below Board of Management level is three years. When the performance share plan was launched, members of top management were guaranteed a minimum bonus amount for the first three years on the basis of the remuneration for 2018, while all other beneficiaries were given a guarantee for the first three years on the basis of the remuneration for 2019.

Each performance period of the performance share plan has a term of three or four years. For members of the Board of Management and of top management, the annual target amount under the LTI is converted at the time of granting into performance shares on the basis of the initial reference price of Volkswagen’s preferred shares. This annual target amount is allocated to the respective beneficiaries as a pure calculation position. Based on the degree of target achievement for the annual earnings per Volkswagen preferred share, the number of performance shares is definitively determined on the basis of a three- or four-year, forward-looking performance period. After the end of the performance period, a cash settlement is made. The payment amount corresponds to the number of determined performance shares, multiplied by the closing reference price at the end of the period plus a dividend equivalent.

For all other beneficiaries, the payment amount is determined by multiplying the target amount by the degree of target achievement for the annual earnings per Volkswagen preferred share and the ratio of the closing reference price at the end of the period, plus a dividend equivalent, to the initial reference price. Target achievement is determined on the basis of a three-year performance period with a forward-looking horizon of one year. For all beneficiaries, the payment amount under the performance share plan is limited to 200% (Board of Management from 2023: 250%).

Members of management and selected participants below management level

In the fiscal year, beneficiary members of management and selected participants below management level were allocated a target amount of €714 million (previous year: €688 million) on which target achievement of 100% is based. As of December 31, 2023, the total carrying amount of the obligation, which corresponded to the intrinsic value of the liabilities, was €986 million (previous year: €841 million). A total expense of €998 million (previous year: €886 million) was recognized for this commitment in the reporting period.

Other performance share plans

Group companies also have their own performance share plans, which are largely based on Volkswagen AG’s performance share plan.

The performance share plan of Porsche AG is different in that the level of target achievement is determined on the basis of the annual earnings and share price performance of Porsche preferred shares. For Board of Management members and top management, the performance share plan is applied with a forward-looking four-year horizon. For members of management, the performance share plan is generally applied with a four-year term and a forward-looking horizon of one year.

For the performance share plan of the TRATON Group, the level of target achievement is determined on the basis of the annual earnings and share price performance of Traton shares. For the members of the Board of Management and of the brand boards of management of the TRATON Group who are not members of the Board of Management of TRATON SE as defined under stock corporation law, and for members of management at Navistar, the performance share plan is applied with a forward-looking horizon of three or four years. For members of management and selected beneficiaries below the TRATON Group’s management, the performance share plan is generally applied with a four-year term and a forward-looking horizon of one year.

As of December 31, 2023, the total carrying amount of the obligation was €131 million (previous year: €36 million) and the intrinsic value of the liabilities was €92 million (previous year: €24 million). A total expense of €119 million (previous year: €31 million) was recognized in the reporting period.