REMUNERATION REPORT

The Remuneration Report presents the principles, structure and amount of Management Board and Supervisory Board remuneration. The report complies with the legal provisions and gives consideration to the Code’s recommendations.

MANAGEMENT BOARD REMUNERATION

The Management Board’s remuneration system is intended to provide an incentive for performance-oriented and sustainable corporate management. Therefore, the aggregate remuneration of the Management Board members consists of different components: fixed components, an annual cash bonus based on the achievement of individual and corporate targets (short-term incentive – STI), a variable compensation component with a long-term incentive (long-term incentive – LTI) and other remuneration components. The variable remuneration component with long-term incentive consists of a performance share plan and convertible bond programs from prior years. Management Board members also receive fringe benefits in the form of non-cash benefits, mainly the use of a company car and the payment of insurance premiums. All remuneration packages are reviewed annually for their scope and appropriateness by the Remuneration and Nomination Committee and compared to the results of an annual management board remuneration analysis. The amount of compensation paid to Management Board members highly depends on their individual areas of responsibility, their personal achievement of goals, the Company’s economic situation and success and the Company’s business prospects versus its competition. All decisions concerning adjustments to the remuneration package are made by the entire Supervisory Board. The Management Board’s remuneration and index- linked pension scheme were last adjusted in July 2015.

OVERVIEW

In the 2015 financial year, total benefits of € 4,464,154 (2014: € 5,065,240) were granted to the Management Board in accordance with the provisions of the Corporate Governance Code.

Of the remuneration for the year 2015, € 2,613,470 was cash compensation and € 1,850,684, or 41%, resulted from personnel expenses for share-based compensation (performance share plan and convertible bond plan) (remuneration with long-term incentive – LTI).

The total amount of benefits paid to the Management Board in the 2015 financial year was € 9,508,884 (2014: € 6,984,419). In addition to cash compensation payments of € 2,869,901 (2014: € 2,893,199), this amount includes the value of exercised convertible bonds and the transfer of treasury shares from a performance-based share plan (share-based compensation) amounting to € 6,638,983 (2014: € 4,091,220) relevant under German tax law.

Management Board members exercised 51,800 convertible bonds in the course of 2015. On June 1, 2015 a total of 71,949 treasury shares were transferred to the Management Board from the 2011 performance-based share plan because the vesting period for this LTI program had expired. All transactions in MorphoSys shares executed by members of the Management Board were reported as required by law and published in the Corporate Governance Report and on the Company’s website.

In accordance with the requirements of Item 4.2.5, Para. 3 of the Code, the following table provides detailed mandatory information on the remuneration of the individual Management Board members.

Please note that the following tables are provided in the context of the Corporate Governance Report and differ from the information on Management Board remuneration presented in the Notes of this Annual Report (Item 7.4). These differences are due to the varying presentation requirements under the Corporate Governance Code and IFRSIFRS: International Financial Reporting Standards; future EU-wide standards produced by the IASB.

FIXED REMUNERATION AND FRINGE BENEFITS

The non-performance-related remuneration of the Management Board consists of fixed remuneration and additional benefits, which primarily include the use of company cars, as well as subsidies for health, welfare and disability insurance. The Chief Financial Officer, Mr. Jens Holstein, receives an additional expense allowance for maintaining two households.

PENSION EXPENSES

The Company also provides payments to Management Board members equal to a maximum of 10 % of the member’s fixed annual salary plus any payable taxes. This compensation is intended for the members’ individual retirement plans. Additionally, all Management Board members participate in a pension plan in the form of a provident fund, which was introduced in cooperation with Allianz Pensions-Management e.V. The pension obligations of the provident fund are met by Allianz Pensions-Management e.V.

PERFORMANCE-BASED COMPENSATION (SHORT-TERM INCENTIVE – STI)

Each member of the Management Board receives performancebased compensation in the form of an annual bonus of up to 70 % of the gross base salary when 100 % of his or her goals have been achieved. These bonus payments are dependent on the achievement of both corporate and personal goals specified by the Supervisory Board at the start of each financial year. Corporate goals comprise 80 % of performance-based compensation. These are based on the Company’s performance measured by revenue, operating result, the progress of the partnered pipeline, the Company’s proprietary portfolio and the achievement of technology targets. Individual goals comprise 20 % of annual performance-based compensation and include operating objectives that the respective Management Board members are expected to fulfill. At the start of the year, the Supervisory Board assesses the degree to which corporate and personal goals were achieved in the prior year and uses this information to determine the bonus. The bonus may not exceed 125 % of the target amount (corresponding to 87.5 % of gross base salary). Performance-based compensation can be omitted if the goals are not achieved. The bonus for the 2015 financial year will be paid in February 2016.

LONG-TERM INCENTIVE COMPENSATION (LONG-TERM INCENTIVE – LTI)

In 2011, MorphoSys introduced a new, long-term incentive compensation plan (Performance Share Plan) for the Management Board and members of the Senior Management Group. The LTI-program is based on the allocation of shares linked to the achievement of predefined performance targets over a four-year period.

Each year, the Supervisory Board determines the number of shares to be allocated to the Management Board. On April 1, 2015, the Management Board was granted 21,948 shares. Each Management Board member received an entitlement benefit for a specific number of shares. For more information, please refer to Item 8.2.5 in the Notes to the Consolidated Financial Statements and the explanation on share buybacks in the Corporate Governance Report.

The Supervisory Board sets the long-term performance targets along with the allocation of shares for a given year. The target for the 2015 LTI-program was the performance of the MorphoSys share compared to a benchmark index consisting equally of the Nasdaq Biotechnology IndexNasdaq Biotechnology Index: stock market index made up of biotechnological or pharmaceutical companies listed at the US stock exchange NASDAQ and the TecDAXTecDAX: Index of the 30 largest ­technology companies listed on the Frankfurt Stock Exchange Index. LTI-program participants are awarded shares annually based on the daily relative performance of the MorphoSys share versus the benchmark index. There is a hurdle of 50 % and a cap of 200 % for the price performance in any given year. For example, if the relative performance of the MorphoSys shares versus the benchmark index is less than 50 %, participants will not receive any entitlement benefits for the relevant year. Participants also do not receive entitlement benefits for additional shares when the share price performance exceeds 200 %.

The ultimate number of performance shares allocated to the LTI-program participants is determined at the completion of the program, namely after four years. This calculation incorporates the number of shares initially allocated after adjusting for the share price development of the MorphoSys share versus the benchmark index and a “company factor” that is determined at the Supervisory Board’s discretion. This company factor is a number between zero and two that is set by the Supervisory Board based on the Company’s situation. The company factor’s predefined default value is one.

MISCELLANEOUS

Management Board members were not granted any loans or similar benefits in the reporting year nor have they received any benefits from third parties that were promised or granted based on their position as a member of the Management Board.

TERMINATION OF MANAGEMENT BOARD EMPLOYMENT CONTRACTS/ CHANGE OF CONTROL

If a Management Board member’s employment contract terminates due to member’s death, the member’s spouse or life partner is entitled to the fixed monthly salary for the month of death and the 12 months thereafter. In the event of a change in control, Management Board members are entitled to exercise their extraordinary right to terminate their employment contracts and receive any outstanding fixed salary for the remainder of the agreed contract period. Moreover, in such a case, all convertible bonds and performance shares granted will become vested immediately and can be exercised after the expiration of the statutory vesting period. A change of control has occurred when (i) MorphoSys transfers assets or a substantial portion of its assets to unaffiliated third parties, (ii) MorphoSys merges with an unaffiliated company or (iii) a shareholder or third party holds 30 % or more of MorphoSys’s voting rights.

15 TABLE Compensation of the Management Board in 2015 and 2014 (Disclosure in Accordance with the German Corporate Governance Code)

Zoom

Zoom

SUPERVISORY BOARD REMUNERATION

The remuneration of Supervisory Board members is governed by the Company’s Articles of Association and a corresponding Annual General Meeting resolution on Supervisory Board remuneration. In the 2015 financial year, Supervisory Board members received fixed compensation, attendance fees and expense allowances for their participation in Supervisory Board and committee meetings. Since 2014, each Supervisory Board member has received annual fixed compensation (€ 85,400 for Chairpersons, € 51,240 for Deputy Chairpersons and € 34,160 for all other members) for their membership of the Supervisory Board. The Chairperson receives € 4,000 for each Supervisory Board meeting chaired and the other members receive € 2,000 for each Supervisory Board meeting attended. For committee work, the committee Chairperson receives € 12,000 and other committee members each receive € 6,000. Committee members also receive € 1,200 for their participation in a committee meeting. Compensation is paid quarterly on a pro-rated basis. A resolution of the Annual General Meeting on May 8, 2015 made two changes to the rules governing Supervisory Board remuneration: Participation in a Supervisory Board meeting by telephone or video conference results in a 50 % reduction in compensation for meeting participation and, in certain cases, a fixed expense allowance is granted for travel time when a meeting is personally attended. Therefore, Supervisory Board members residing outside of Europe who personally take part in a Supervisory Board or committee meeting are entitled to a fixed expense allowance of € 2,000 (plus any sales tax due) for additional travel time in addition to attendance fees and reimbursed expenses.

Supervisory Board members are also reimbursed for travel expenses and value-added taxes (VAT) on their compensation.

In the 2015 financial year, Supervisory Board members received a total of € 529,270 (2014: € 514,480) excluding the reimbursement of travel expenses. This amount consists of fixed compensation and attendance fees for participating in Supervisory Board and committee meetings.

No loans were granted to Supervisory Board members by the Company.

The table below details the Supervisory Board’s remuneration.

16 TABLE Compensation of the Supervisory Board in 2015 and 2014

Fixed Compensation Attendance Fees3 Total Compensation
in € 2015 2014 2015 2014 2015 2014
Dr. Gerald Möller 93,521 97,400 36,200 38,000 129,721 135,400
Dr. Walter Blättler1 16,188 46,160 13,000 25,200 29,188 71,360
Dr. Daniel Camus1 16,188 46,160 8,400 23,200 24,588 69,360
Dr. Marc Cluzel 50,089 46,160 28,000 32,400 78,089 78,560
Karin Eastham 50,089 46,160 36,800 32,400 86,889 78,560
Dr. Geoffrey Vernon1 20,073 57,240 8,400 24,000 28,473 81,240
Dr. Frank Morich2 37,324 14,200 51,524
Wendy Johnson2 30,099 26,400 56,499
Klaus Kühn2 30,099 14,200 44,299
Total 343,670 339,280 185,600 175,200 529,270 514,480

1 Dr. Walter Blättler, Dr. Daniel Camus and Dr. Geoffrey Vernon left the Supervisory Board of MorphoSys AG on May 8, 2015.
2 Dr. Frank Morich, Wendy Johnson and Klaus Kühn joined the Supervisory Board of MorphoSys AG on May 8, 2015.
3 The attendance fee contains expense allowances for the attendance on Supervisory Board and committee meeting.

Top Previous Next