Resolution on the approval of the compensation report for fiscal year 2023
The report on the compensation awarded or due to present and former members of the Managing Board and Supervisory Board of HUGO BOSS AG for fiscal year 2023 has been prepared in accordance with Sec. 162 AktG. While the compensation system for the members of the Managing Board was approved by a large majority at the 2021 Annual General Meeting (approval rate: 93.83%), the 2023 compensation report received a lower approval rate of 68.78% at the Annual General Meeting on May 14, 2024, in accordance with Sec. 120a (4) AktG. The Supervisory Board and Managing Board primarily attribute this outcome to possible concerns regarding the CEO Investment Opportunity, which is explicitly not part of the compensation system and explained in more detail in this chapter. At the same time, the Supervisory Board views the voting results as an opportunity to thoroughly review and refine specific aspects of the Managing Board’s compensation system. The aim is to further enhance transparency, take even greater account of shareholder interests, and incorporate feedback gathered from capital market participants as part of the Company’s annual Corporate Governance roadshow. In any case, the current structure is to remain in place in its basic features and thus continue to be competitive and performance-oriented. The proposed adjustments will be presented in detail and submitted for approval at the upcoming Annual General Meeting on May 15, 2025 as part of the regular voting cycle.
Application of the compensation system for the Managing Board in fiscal year 2024
The current compensation system for the Managing Board, for which the main features are presented later in this report, was approved at the Annual General Meeting on May 11, 2021, with a majority of 93.83% of the capital represented, and applies to all new appointments and agreement extensions. In addition, individual compensation was granted to the members of the Managing Board within the meaning of Sec. 162 AktG in fiscal year 2024, which had been agreed in previous fiscal years under the compensation system applicable at the time. This compensation is also presented and explained below, where relevant.
The Personnel Committee regularly reviews the appropriateness and customarily nature of the compensation of the Managing Board members and, if necessary, proposes adjustments to the Supervisory Board in order to ensure that compensation for the members of the Managing Board is customary for the market and competitive within the applicable framework. The suitability was reviewed in March 2024 and again in September 2024. In this context, the compensation of the members of the Managing Board was compared with the companies of the DAX and MDAX as well as relevant competitors, taking into account the size criteria of revenues, employees, and market capitalization (horizontal comparison). The review led to the conclusion that the compensation of the members of the HUGO BOSS Managing Board is considered to be in line with market practices. In addition, the appropriateness of the Managing Board compensation within the Group is reviewed annually based on the development of the Managing Board compensation compared to the development of the senior management compensation, defined as the first management level below the Managing Board, and to the development of the compensation of the employees as a whole, defined as the average compensation of the Group’s full-time employees (vertical comparison).
In fiscal year 2024, there were no personnel changes on the Managing Board of HUGO BOSS AG. To ensure continuity in the Managing Board ahead of time, in March 2024, the Supervisory Board renewed the existing employment agreements of Daniel Grieder, Chief Executive Officer (CEO), and Yves Müller, Chief Financial Officer (CFO) and Chief Operations Officer (COO). Consequently, Daniel Grieder was appointed Chairman of the Managing Board and CEO of HUGO BOSS AG until December 31, 2028. The Supervisory Board also renewed Yves Müller’s (CFO/COO) contract until December 31, 2027. In this context, Oliver Timm, Chief Sales Officer (CSO), whose contract runs until December 31, 2026, was named Deputy CEO alongside his current role. In accordance with the applicable compensation system, the Supervisory Board has set specific target compensation for each member of the Managing Board. As part of the renewal of the existing employment agreements, the target compensation set for the members of the Managing Board was adjusted in fiscal year 2024. No adjustments are planned for fiscal year 2025, apart from any possible adjustments in the context of individual agreement extensions.
The Company’s “CLAIM 5” strategy is aimed at driving notable top- and bottom-line improvements. Since its introduction in August 2021, and driven by three years of successful execution, HUGO BOSS has significantly accelerated growth. In this context, the design of the compensation system is aimed at providing important incentives for the ongoing successful execution of the Group strategy. Consequently, the compensation of the Managing Board is closely linked to the Group strategy of HUGO BOSS, as the performance-related compensation components (STI and LTI) are, among other things, based on the development of financial performance criteria such as sales, operating profit (EBIT), and return on capital employed (ROCE). The inclusion of two non-financial performance criteria also emphasizes the Company’s responsibility for environmental, social, and governance (ESG) topics as well as the objective of a sustainable, long-term successful business performance.
In fiscal year 2024, the financial performance of HUGO BOSS was negatively affected by the overall deterioration of the global market environment, which particularly impacted the EBIT development, falling short of initial expectations. As a result, in the case of the short-term incentive (STI), the overall target achievement amounted to 57% in 2024. The final target achievement for the long-term incentive (LTI) tranche issued in fiscal year 2021 amounts to 178% of the target value (payment in fiscal year 2025).
In the past fiscal year, the Supervisory Board did not make use of the options provided by the compensation system in accordance with legal provisions to temporarily deviate from the compensation system or to make adjustments to the target achievement in certain circumstances.
This compensation report, prepared jointly by the Managing Board and the Supervisory Board, is audited by the external auditor as part of the formal audit required by law pursuant to Sec. 162 (3) AktG. The corresponding report on the audit of the compensation report is attached to this compensation report. Report of the Independent Auditor on the Audit of the Compensation Report in accordance with Section 162 (3) AktG
Application of the compensation system for the Supervisory Board in fiscal year 2024
The compensation system for the Supervisory Board was adopted by the Annual General Meeting on May 27, 2020 and confirmed unchanged by the Annual General Meeting on May 14, 2024 with a majority of 98.91%. The compensation system was applied in fiscal year 2024 in full, as set out in Art. 12 of the Company’s Articles of Association.
In fiscal year 2024, there were no personnel changes on the Supervisory Board of HUGO BOSS AG.