Welcome to LANXESS Annual Report 2012!

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Rewarding performance

LANXESS has established a fair remuneration policy that is linked to the long-term success of the company and offers employees worldwide a transparent market-rate compensation system. Collective bargaining agreements provide the main basis for the compensation of non-managerial staff in Germany and numerous other countries. The fixed salaries of managerial staff, and of some non-managerial staff, are supplemented by performance-based compensation components that are linked, on the one hand, to the attainment of the Group’s defined EBITDA targets and, on the other, to employees’ individual performance.

In 2012, we used a total of €100 million to give our employees worldwide a share in the company’s success. Some of this amount was already paid out at the end of 2011.

Our managers are also able to reward outstanding employee performance quickly and unbureaucratically. All employees worldwide are entitled to such rewards on the basis of a prompt assessment of their performance. In fiscal 2012, this resulted in payments of €9 million worldwide – €6.4 million to employees in Germany – for outstanding individual performance. We are planning to implement a new employee dialogue and feedback tool in 2013. The Employee Dialog project was launched at the end of 2012. It represents an innovative approach to performance management based on an ongoing dialogue and thus also on active management of the relationship between supervisors and employees. Compared with the rigid and more formal structures of traditional approaches, the focus is on trust and individual motivation as success factors. In the long term, this creates a culture in which leadership and employee development are seen as a joint task for supervisors and employees – which benefits individual productivity and satisfaction.

We again offered an employee stock plan in 2012. All LANXESS Group employees in Germany were given the opportunity to buy LANXESS shares at a 50-percent discount. The shares were purchased at an average price of €54.78 on the Frankfurt Stock Exchange. The participation rate was 73 percent. At the reporting date, our employees and Board of Management members held around 1 percent of LANXESS’s shares through stock plans.

For some time now, we have also offered a long-term incentive program for managers in Germany and similar programs in the United States, Canada, India and China. This plan compares the performance of LANXESS stock against the Dow Jones STOXX 600 ChemicalsSM Index over a period of three years. Since participants make a personal investment and there is the chance that the stock will increase in value, the program is an attractive long-term incentive and a means of boosting employee loyalty.

For the period 2010 to 2013, the Board of Management has introduced a new long-term compensation component to replace LANXESS’s Long-Term Incentive Plan (LTIP). The Long-Term Stock Performance Plan 2010-2013 (LTSP) comprises four tranches, one commencing each year. This plan compares the performance of LANXESS stock against the Dow Jones STOXX 600 ChemicalsSM Index over a period of four years. The participation rate is 89 percent.

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