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Value-Based Reward at ContinentalGlobal Principles and Overview for Executives and Senior Executives
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1
Continental AktiengesellschaftP.O. Box 1 69, 30001 Hanover, GermanyVahrenwalder Strasse 9, 30165 Hanover, GermanyPhone: +49 511 938 - 01, Fax: +49 511 938 - [email protected]
Lor acium in pate inienda idipiendunt.
Continental AktiengesellschaftHuman Relations Compensation & Benefits, International Mobility (CBIM) Vahrenwalder Straße 9, 30165 Hanover, GermanyPhone: +49 511 938 - 01, Fax: +49 511 938 - 81770www.continental-corporation.com
Firs
t Edi
tion
, 20
15
Legal noticeThis brochure provides you with a simplified overview of the Value-Based Reward at Continental. Legally binding information is provided exclusively by the guidelines that apply in each case. Augmented reality (AR)
contentA number of additional augmented reality (AR) content await you in this brochure. Use your smartphone or tablet now to get information via innovative media. Look out for the symbol and enter an interactive world!
Contents
Enter aninteractiveworld.
Quick Start1. Simply download the AR Kiosk app free of charge on
your smartphone or tablet using the following QR code.
2. Start the AR Kiosk app and search this brochure for the symbol, which highlights the augmented reality (AR) content.
3. Scan the corresponding page of the brochure with the app and experience interactive content.
Augmented Reality
Balance of Cooperation (BoC) – One of the four Core Initiatives aiming to establish a globally shared understanding of our cooperation across organizational interfaces and geographical boundaries.
Benefits – Benefits are indirect payments, given in addition to base pay which include pensions, sick pay, life assurance, company provided cars, etc.
CBIM – Corporate department of Compensation & Benefits and International Mobility
Code of Conduct – Guiding framework for the application of ethical standards such as integrity, honesty, and law-abiding conduct
Cost of capital – The cost of equity and debt instruments used for financing a business.
CVC – The Continental Value Contribution (CVC) represents the absolute amount of additional value created.
CVSB – Continental Value Sharing Bonus. Employees who are not part of the senior management participate in an annual global value sharing bonus based on the CVC.
Delta CVC – The delta CVC represents the change in absolute value creation compared to the prior year.
EBIT – Earnings Before Interest and Taxes. EBIT represents the results of operations.
Four Corporate Values – Trust, Passion To Win, Freedom To Act and, For One Another summarized in our BASICS.
Governance – The way in wich a company or institution is managed in order to control risk.
Grades – Grades are used to provide structure reflecting levels of responsibilities, skills and, requirements.
Group Executive Bonus Plan – Short-term incentive plan for Executives and Senior Executives.
Job Evaluation – A systematic process for determining the relative worth of jobs within an organization resulting in a Conti Grade.
LTI – Long-Term Incentive (LTI) bonus for Senior Executives that allows for participation in the long-term success of Continental.
Market Capitalization – The total Euro market value of all of a company’s outstanding shares.
Median – The middle value of a series of values ordered from lowest to highest value.
Midpoint – Middle value in Continental’s compensation ranges.
ROCE – Return On Capital Employed. We define ROCE as the ratio of EBIT to average operating assets for the fiscal year.
TSR – The Total Shareholder Return (TSR) takes account of the development of the share price and all dividend payouts during a certain period.
Value Creation – We define value creation as the growth of our company value measured by the CVC.
WACC – Weighted Average Cost of Capital. The WACC represents the weighted average cost of the required return on equity and net interest bearing liabilities.
Glossary
The Continental Story 6 Growth and Reward
8 Value Creation at Continental
1O Continental Value Contribution Explanation
Our Reward Philosophy 14 Holistic Approach to Total Reward
16 Elements of Total Reward
18 Continental Job Grades
2O Market Positioning
22 Compensation Structure
Total Remuneration 26 Base Pay
28 Salary Increase
3O Group Executive Bonus Plan
34 Long Term Incentive Plan
36 Benefits
Reward in Practice 4O Governance
42 Continental Value Sharing Bonus
44 International Assignments
46 Timeline and Glossary
Contents Augmented Reality (AR)
Download the AR kiosk app onto your smart-
phone or tablet.
Scan the page with the AR kiosk app when you
see this symbol.
Experience augmented reality.
Useful links and further information for Continental employees:
> http://links.conti.de/executive_reward
Download a QR code reader app of your choice and scan the code with this app. Then your smartphone reads the code and navigates to the respective Intranet site.
Balance of Cooperation (BoC) – One of the four Core Initiatives aiming to establish a globally shared understanding of our cooperation across organizational interfaces and geographical boundaries.
Benefits – Benefits are indirect payments, given in addition to base pay which include pensions, sick pay, life assurance, company provided cars, etc.
CBIM – Corporate department of Compensation & Benefits and International Mobility
Code of Conduct – Guiding framework for the application of ethical standards such as integrity, honesty, and law-abiding conduct
Cost of capital – The cost of equity and debt instruments used for financing a business.
CVC – The Continental Value Contribution (CVC) represents the absolute amount of additional value created.
CVSB – Continental Value Sharing Bonus. Employees who are not part of the senior management participate in an annual global value sharing bonus based on the CVC.
Delta CVC – The delta CVC represents the change in absolute value creation compared to the prior year.
EBIT – Earnings Before Interest and Taxes. EBIT represents the results of operations.
Four Corporate Values – Trust, Passion To Win, Freedom To Act and, For One Another summarized in our BASICS.
Governance – The way in wich a company or institution is managed in order to control risk.
Grades – Grades are used to provide structure reflecting levels of responsibilities, skills and, requirements.
Group Executive Bonus Plan – Short-term incentive plan for Executives and Senior Executives.
Job Evaluation – A systematic process for determining the relative worth of jobs within an organization resulting in a Conti Grade.
LTI – Long-Term Incentive (LTI) bonus for Senior Executives that allows for participation in the long-term success of Continental.
Market Capitalization – The total Euro market value of all of a company’s outstanding shares.
Median – The middle value of a series of values ordered from lowest to highest value.
Midpoint – Middle value in Continental’s compensation ranges.
ROCE – Return On Capital Employed. We define ROCE as the ratio of EBIT to average operating assets for the fiscal year.
TSR – The Total Shareholder Return (TSR) takes account of the development of the share price and all dividend payouts during a certain period.
Value Creation – We define value creation as the growth of our company value measured by the CVC.
WACC – Weighted Average Cost of Capital. The WACC represents the weighted average cost of the required return on equity and net interest bearing liabilities.
Glossary
3
Dear Executives and Senior Executives,
Our organization is growing faster than the average market. Our business is faced with challenges arising from the digitalization of our industries and the increasingly complex and viable markets around us.
We want to ensure our growth by being the leading technology company in our industries, and to be regarded as the most attractive and progressive employer.
After all, our viability depends on employing a highly motivated global team that lives our four corporate values. This is why we intend to attract and retain the best-fitting talent to strengthen and enhance our workforce.
As leaders you help our employees to grow and push their limits as a prerequisite for our company to do so as well.
We firmly believe that values create value! You are the role models for setting the daily standards that inspire and encourage the people around you. In doing so, you ensure that our employees are motivated and committed and encourage them to
demonstrate initiative to benefit both themselves and the company.
Your most significant leadership tasks will include clearing the way for our employees’ further growth and working together to achieve the best overall performance for our global organization.
Our value-based reward system is designed to support you in your leadership role. This system is comprehensive, clear and consistent. It applies throughout our organization and to all of our leaders at all levels, including the members of the Executive Board.
As an executive or senior executive, we continuously expect your performance to be at the highest level. In return you can expect to be rewarded with appropriate recognition and fair, competitive reward.
We are looking forward to your future contributions and are counting on you to continue to fully support our ambitious goals.
The Continental Story
5
Our Reward Philosophy
Total Remuneration
Reward in Practice
The Continental Story
The
Cont
inen
tal
Stor
y
6The Continental Story | Growth and Reward
Continental of today is the result of organic growth supported by acquisitions and internationalization
> Continental was founded in 1871 as a rubber manufacturer and entered into the automotive industry in 1995 to become one of the leading automotive suppliers worldwide in the 21st century.
> As a result of rapid growth, Continental employs in 2015 more than 208,000 people with diverse cultural backgrounds in 53 countries.
> Becoming the leading technology company in our industries and offering pioneering software for system solutions will continue to drive growth.
> Our entire reward structure has been aligned with this growth strategy, as exemplified by our current value-based reward approach and has therefore contributed to the continued expansion of Continental.
50,000
150,000
100,000
0
200,000
Employees
7
Automotive Electronics Business
Introduction of CVC in Variable Compensation
Introduction of Long Term
Incentives (Replacement
of Stock Option Plan)
Introduction of Group Strategic
Goals as part of Variable
Compensation
Introduction of Continental Value Sharing
Bonus
Introduction of Total
Shareholder Return for Long Term Incentives
Introduction of Stock
Option Plan
Global Job Evaluation
Introduction of Financial Goals of the Upper Unit
Introduction of ROCE in
Variable Compensation
31,340
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20151871 1979 • • •• • •
Employment growth and major acquisitions
Reward milestones
ROCE = Return on Capital EmployedCVC = Continental Value Contribution
68,829
80,586 79,84985,224
151,654
139,155134,434
148,228
163,788169,639
177,762
189,168
208,138
*as of 30.09.2015
*
■ “Automotive Systems” (2003-2006) ■ Chassis & Safety ■ Interior ■ Powertrain ■ Tires ■ ContiTech
Augmented Reality
8The Continental Story | Value Creation at Continental
What is the capital employed?The funds used by the company to generate its sales.
What is the cost of capital?The cost of equity and debt instruments used for financing a business.
The Continental Value Contribution (CVC) is the key concept to ensuring sustainable value creation
> The operational and financial objectives of Continental center around the sustainable enhancement of the value of each individual business unit.
> Value creation is achieved by generating a positive return on the capital employed in each respective business unit by exceeding the cost of capital.
> Since its introduction, the key concept of CVC has resulted in significant investment growth beyond the depreciation rate, higher Research & Development activities and an increased overall value of Continental.
> It is integrated in all management processes and fundamental to our reward approach.
9
10
30
20
0
40 Bn €
in Mio. €
3,600
3,200
2,800
2,400
2,000
1,600
1,200
800
400
0
0
– 400
– 800
– 1,200
– 1,600
– 2,000
– 2,400
■ Continental Value Contribution (CVC)■ Market Capitalization
2000 2002 2004 2006 2008 2010 20121999 2001 2003 2005 2007 20132009 2011 2014
Introduction of Continental
Value Contribution-
based Management
Focus on Value Creation
Augmented Reality
10The Continental Story | Continental Value Contribution Explanation
What is goodwill?Goodwill corresponds to the difference between the purchase cost and the fair value of the acquired assets and liabilities of a business.
CVC measures efficiency of capital employed at Continental
> Continental creates value when its Earnings before Interest and Taxes (EBIT) exceed the cost of capital employed (positive CVC measured in Euros).
> Cost of capital employed equals the Weighted Average Cost of Capital (WACC) multiplied by the capital employed.
> WACC is about 10% based on a multi-year average cost of capital for our company (cost of equity and debt instruments).
> Capital Employed is the funds used by Continental to run its business (including goodwill measured quarterly).
11
EBIT Cost of Capital
Employed
Positive CVC
EBIT
Cost of Capital
Employed
Negative CVC
EBIT = Earnings before Interest and Taxes CVC = Continental Value Contribution
Value Creation Loss of Value
CVC EBITCost of Capital
Employed
What does the CVC express?
Our Reward Philosophy
13
Total Remuneration
The Continental Story
Our Reward PhilosophyReward in Practice
Our
Rew
ard
Ph
iloso
phy
14Our Reward Philosophy | Holistic Approach to Total Reward
Reward is more than just money
> At Continental, all elements of Total Reward are key to making Continental the most attractive and progressive employer.
> The Total Reward strategy has to be aligned with the respective business models in order to attract, motivate, and retain the right talented people within various target groups.
> Different cultures, expectations, and market practices require a flexible focus on each element of Total Reward.
> Various career opportunities offer personal and professional development in an international environment.
> The roots of our people culture are our corporate values: Trust, Passion To Win, Freedom To Act and For One Another, shaping the way in which we interact and work together on a daily basis.
15
The four elements of Total Reward
Reward
Compen- sation Career
People Culture Benefits
Augmented Reality
16Our Reward Philosophy | Elements of Total Reward
> Base Pay Annual basic salary plus additional guaranteed salary elements such as specific allowances.
> Short Term Incentives (STI) Variable compensation rewarding annual performance.
> Group Executive Bonus > Continental Value Sharing Bonus
(CVSB) for Executives
> Long Term Incentives (LTI) Variable compensation rewarding performance for more than one year.
> Continental Long Term Incentive Plan for Senior Executives (4-year performance)
> Benefits Other additional tangible entitlements offered by the company such as pension, risk benefits, company car, health care, etc.
> Career Opportunities provided by the company to advance individual skills and competencies in both short and long term careers.
> People Culture Cooperation and individual and professional development of our people in order to achieve the highest value possible for themselves and our organization.
What is the Continental Value Sharing Bonus (CVSB)?The Continental Value Sharing Bonus allows Continental employees to participate directly in the success of our company. The amount of the bonus depends on the value that we jointly achieve in a given year measured by CVC (see page 42).
What is the Group Executive Bonus (GEB)?Continental grants Group Executives a Short Term Incentive dependent on their Continental Grade.
How are Executives and Senior Executives defined?Executives cover Continental Grade 13–14 and Senior Executives cover Continental Grade 15–18.
Let’s talk Reward: Common wording
17
Various reward elements define the employment offer
Total Reward
+ CareerBenefits People Culture
+ + + +
Total Compensation
Total Remuneration
Total Cash
Short Term Incentives
Base Pay
Long Term Incentives *
* For Senior Executives only
18Our Reward Philosophy | Continental Job Grades
What is the Hay™ Methodology?A globally standardized methodology used by companies to map out job roles in the context of the organizational structure.
What is a job family?A job family describes a number of different roles which are engaged in similar work.
What are business criteria in a grading orientation?For example for the purchasing function, important business criteria are the purchase volume and level of power to decide.
Continental Grades ensure a consistent structure on a global basis
> All executive and senior executive positions (not the position holder) at Continental are graded using the Hay™ Methodology.
> The scope of the position (job description) and the level within the organizational structure is the main input for evaluating a position.
> The technical job evaluation analyzes the value of a position by scoring its requirements and scope in the categories Know-How, Problem Solving and Accountability resulting in a Continental Grade.
> To provide a grading orientation for the business, Continental communicates the key drivers of a job evaluation for each job family.
> Regarding the selection of the best position holder, the line manager, the Human Relations department and if applicable the Executive Board is involved.
19
Account- ability
Know- How
Problem Solving
Job Description Hay™ job evaluation Continental Grades
18
17
16
15
14
13
Position
Continental grading orientations provide business criteria for differentiating between Continental Grades in a job family.
Continental grading approach
20Our Reward Philosophy | Market Positioning
What is a median?The median is the middle value of compensation packages paid in the market. This means 50% of incumbents in the market earn more than the median and 50% earn less.
What is a quartile?The first quartile Q1 corresponds to the middle number between the smallest compensation package in the market and the median. Q3 corresponds to the middle compensation package between the median and the highest one.
What was the bonus payout experience in the last five years?The overall bonus payouts were significantly above target bonus.
Continental ensures a market-related and competitive compensation package
> Continental positions base pay and target bonus around the market median.
> The bonus philosophy of Continental is to offer a maximum bonus opportunity above market level.
> For each country, market surveys are conducted on a regular basis by the Compensation and Benefits function to ensure attractive compensation packages.
> Market surveys use standard methods of data gathering and statistical analysis to determine how much companies pay for specific jobs across industries that fall into a Continental Grade.
21
Compensation at Continental compared to the market
Market
Upper Quartile
25%
Lower Quartile
25%
Å Q3
Å Median
Å Q1
ContinentalCompensation Positioning
Total Cash Opportunity
Base Pay + Target Bonus
22Our Reward Philosophy | Compensation Structure
The compensation structure at Continental has an upward earning potential
> As well as the salary ranges, the target bonus percentages of the Group Executive Bonus are linked to the Continental Grades.
> The maximum bonus opportunity significantly exceeds the target bonus more than twice.
> Senior Executives’ compensation structure includes an LTI, while Executives benefit from the Continental Value Sharing Bonus.
> For Continental Grade 12 and below, the compensation structure is designed at country level in alignment with the Executive compensation structure (subject to tariff conditions).
CVSB = Continental Value Sharing BonusLTI = Long Term Incentive
23
Compensation structure by Continental Grade
Executives Senior Executives
ContinentalGrade
157%
143%
119%
104%
75%
30%40%
45%50%
55%
13 14 15 16 17 1812
■ Maximum Bonus in % of Base Pay
■ Target Bonus in % of Base Pay
■ Base Pay
Average
Bonus Payout2009–2014
49%
20%
+ LTI
+ LTI
+ LTI
+ LTI
+ CVSB
+ CVSB
100% 100% 100% 100% 100% 100%
Total Rem uneration
25
Tota
l R
emun
erat
ion
Our Reward Philosophy
The Continental Story
Reward in PracticeTotal Rem unerationTo
tal
Rem
uner
atio
n
26Total Remuneration | Base Pay
Is there an optimal midpoint relation?Continental does not stipulate an optimal midpoint relation as it is dependent upon each individual case. Midpoint relation can vary depending on experience, skill, education, external market pressure, performance, and the individual point in career.
How does my job fall into the market?The salary range represents a compilation of the market practice for the jobs in that Continental grade.
What is Total Target Cash?Base Pay + Group Executive Bonus at 100% goal achievement.
Compensation at Continental is internally fair and reflects market practice
> Based on job evaluation, each position is assigned to a Continental Grade which corresponds to a salary range enabling pay that reflects market practice.
> The salary ranges aim to cover Q1 and Q3 of the market (see page 20). The spread of these ranges is generally +/- 25% of midpoint, or larger in dynamic markets. The midpoint overall reflects the market median.
> Midpoint relation expresses individual salary divided by the midpoint of the salary range and it is a rough indication of one’s market position.
> The individual salary within the range depends on job-specific experience and performance as well as on market demand.
> Salary ranges can be provided for Base Pay, Total Target Cash or other reward elements. Continental is generally using salary ranges that show Total Target Cash.
27
13 14 15 16 17 18
+ 25%
– 25%
+ 25%
– 25%
+ 25%
– 25%
+ 25%
– 25%
+ 25%
– 25%
+ 25%
– 25%
ContinentalGrade
––– Midpoint
––– Midpoint + 25%
––– Midpoint – 25%
Continental Range
Market Range
Range end
Range start
Individual position in salary range
28Total Remuneration | Salary Increase
Is the salary increase budget the same within a country?Not necessarily, since in some countries different collective bargaining agreements exist which impact Executive compensation.
Who defines the salary increase budget?It is defined by Controlling and HR on Corporate and Divisional level with involvement of the countries.
The salary increase reflects individual performance and position in salary range
> Each year, a salary increase budget, which takes into account market positioning, inflation, and business competitiveness, is determined per country by the company.
> Based on the individual performance rating in relation to others, the superior (n+1) will recommend a salary increase within the Salary Increase Matrix.
> This will be approved by the next level superior (n+2) to ensure internal fairness while considering the overall budget in the organization.
> The salary increase will be communicated to the Executive or Senior Executive by the superior along with feedback on performance.
29
% = Generic indication of salary increase amount (the larger the symbol, the higher the increase)
= Salary increase near budget amount
+ 25%
– 25%
Exceeds expectations
Sometimes exceeds
Meets expectations
Expected more
Individual Performance
Act
ual P
ositi
on in
Sal
ary
Rang
e
Midpoint
Salary Increase Matrix
30Total Remuneration | Group Executive Bonus Plan
All Executives and Senior Executives are eligible to the Group Executive Bonus Plan
> The Group Executive Bonus Plan is based on three components:
> The Group Strategic Goal as specified by the Executive Board
> The Financial Goals, subdivided into the respective own and upper organizational unit
> The Specific Individual Goals for Grades 13–16
> The bonus payout is calculated as the sum of the achievements of all bonus components.
31
Group Strategic
Goal
Financial Goals
Specific Individual
Goals
15%
30%
55%
18
15%
30%
55%
17
15%
20%
45%
20%
16
15%
15%
45%
25%
15
15%
15%
35%
35%
14
15%
15%
30%
40%
13
Upper Unit
Own Unit
ContinentalGrade
100% of Target
+ + = Bonus Payout
0%
Group Executive Bonus components
32Total Remuneration | Group Executive Bonus Plan
> The Group Strategic Goal reflects the annual priority of Continental which is defined by the Executive Board (e.g. Fixed Costs Dynamics). It is the same goal for all Executives and Senior Executives.
When do we use CVC Drivers?CVC Drivers are used if CVC and ROCE are not suitable. These KPIs have an impact on CVC.
What’s the scale in case of negative CVC in the previous year?The performance is measured only by CVC improvement and the maximum goal achievement is at a CVC improvement level of 100%.
Group and Divisions
Own Organizational Unit Upper Organizational Unit
Standard
Markets and Plants
C1
C2
C3
C41) Use of CVC Drivers 2) As defined in BoC Policy
B1
B2
Business Unit Division
ContiTech PMS Business Unit
Tire Market 1 Division
Tire Plant 1 Division
Other Plants 1 Split Business Unit(s)
Markets 1, 2 Continental Group
A1
A2
A3
Continental Group Continental Group
Automotive Group Automotive Group
Division Division
PMS = Product Market Segment BoC = Balance of Cooperation
> The Financial Goals reflect the business performance of the Own Organizational Unit and the applicable Upper Organizational Unit (shown in the table). Performance is measured by CVC improvement (weighted 60%), called Delta CVC, and ROCE (weighted 40%).
> The Specific Individual Goals reflect the respective functional responsibility of the Executive or Senior Executive and can be defined in a broad range from mirroring Financial Goals to leadership or innovation related goals. Specific Individual Goals have to be measurable and attainable and should be achieved in line with our four values.
Deep dive: Group Executive Bonus
33
CVC improvement vs. prior year (weighted 60%)
300%
200%
100%
0%–22.5% 0% 22.5% 45%
Goa
l Ach
ieve
men
t (Max.)
ROCE (weighted 40%)
300%
200%
100%
0%10% 15% 20% 25%
Goa
l Ach
ieve
men
t (Max.)
In case of negative CVC in the prior year, a different scale applies.
Financial Goals
Goal structure
200%
100%
0%Not achieved Significantly
overachievedFully achieved
Goa
l Ach
ieve
men
t (Max.)
Specific Individual Goals
200%
100%
0%
Goa
l Ach
ieve
men
t (Max.)
Threshold Stretch GoalTarget
Group Strategic Goal
34Total Remuneration | Long Term Incentive Plan
Who is eligible?All Senior Executives (Continental Grade 15 and higher) are eligible for the LTI and the individual grant amount is approved by the Executive Board.
What is an LTI tranche?It is the annual design of the plan covering grant volume, performance conditions, and allocation if the Executive Board decides to apply the LTI program in a given year.
Senior Executive Compensation: The Long Term Incentive Plan (LTI) focuses on sustainable long term value creation
> With its four-year term, the LTI is focused on sustainable value growth of the Continental Group as a whole in the interests of all stakeholders.
> As it is a one-time additional voluntary payment, the individual grant amount is approved by the Executive Board annually.
> It includes the external performance perception of the company by taking under consideration the share price development plus dividends over a period of 4 years.
> The alignment of the LTI logic for Senior Executives with that of the Executive Board ensures consistency.
35
LTI structure
LTI GrantThe assigned gross personal grant in euros. It provides the basis for calculation of the LTI Payout.
CVC
LTI PayoutThe LTI Payout will normally take place in the third quarter of a year. The maximum LTI Payout is 200% of the LTI grant. €
Total Shareholder Return (TSR)The TSR takes account of the development of the share price and of all dividend payouts during the term of the tranche
(final share price – initial share price) + dividends TSR = ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
initial share price
Continental Value Contribution (CVC)Cost of Capital Employed subtracted from the Earnings Before Interest and Taxes (see page 10).
TSR
Grant
* Equivalent paid in local currency
*
36Total Remuneration | Benefits
Continental benefits are country-specific and competitive in our industries
> Benefits are provided in a country through three pillars (State, Company, and Individual) reflecting the shared responsibility.
> Employee benefits levels and components significantly vary between countries due to different benefit levels provided by social security, different legal environments, and different tax regulations.
> Continental supports core benefits in the area of pensions, healthcare, etc. to supplement different statutory coverage where necessary.
> Additional benefits can be provided by the company to ensure an attractive remuneration package in line with local market practice (e.g. company car).
37
Benefits vary by country
State Company Individual
Empl
oyer
soc
ial s
ecur
ity
cont
ribu
tion
rate
s
State
0% 10% 20% 30% 40%
Core Benefits (Pensions, health care, …)
Additional Benefits (Company car …)
Reward in Practice
39
Our Reward Philosophy
The Continental Story
Total Remuneration
Reward in PracticeR
ewar
d
in P
ract
ice
40Reward in Practice | Governance
What is the German Governance Code?It presents essential statutory regulations for the management and supervision of German listed companies.
What is the Code of Conduct?It forms a guiding framework for the application of ethical standards such as integrity, honesty, and law-abiding conduct.
What is the Balance of Cooperation?It is one of our four Core Initiatives and aims to establish a globally shared understanding of our cooperation across organizational seams and geographical boundaries.
The reward governance ensures fair and transparent compensation decisions
> Continental is a publicly listed company in Germany; the German Corporate Governance Code sets the framework for compensation decisions of the Executive Board and the Supervisory Board.
> Below the executive and supervisory board level, all compensation decisions are made by the business following the principle: the direct superior (n+1) reviews, the superiors’ superior (n+2) approves to avoid conflicts of interest.
> HR steers and supports compensation decisions by advising, challenging, and facilitating the process in line with Continental’s HR policies and standards.
> The reward governance reflects our values, follows legal requirements, and avoids conflicts of interest.
41
BU H
R*
advi
ses
and
chal
leng
es
Div
isio
n* /
Cor
pora
te H
R ad
vise
s an
d ch
alle
nges
Cou
ntry
HR
faci
litat
es a
nd m
onito
rsC
BIM
fa
cilit
ates
and
m
onito
rs
18
17
16
15
14
Continental Governance
> Balance of Cooperation
> Code of Conduct
> HR Policies and Standards
13
HR Support
Superior n+2approves
Superior n+1reviews
Executive
Business
German Governance Code
Governance model for all compensation decisions
* Can be delegated
42Reward in Practice | Continental Value Sharing Bonus
How are countries assigned to one of the two groups?Based on the corporate controlling approach, all countries are assigned to the best cost or the high cost group of countries.
Are there exceptions?There are limited exceptions from this value sharing program i.e. due to legal restrictions in a country, an offset with local profit sharing programs or the current economic situation of one legal entity.
Who is eligible?Eligible for the value sharing bonus are all employees up to Continental Grade 14 who have been with the company for the full bonus year and whose employment agreement has not been terminated at the time of payout (normally in April).
Continental shares its value creation with all employees worldwide
> The bonus is generally paid to employees worldwide, thus emphasizing our value “For One Another” that extends across national borders.
> The amount of the bonus depends on the value that was jointly achieved as measured by the Continental Value Contribution (CVC) in the previous year.
> It is calculated in euros in a transparent way by taking 10% of the CVC divided by the number of worldwide permanent staff as of December 31 of the previous year.
> Reflecting different costs of living and wage levels, two groups of countries with different pay out amounts have been defined (independent of individual compensation level).
43
Sharing Value Creation
10%
CVC
44Reward in Practice | International Assignments
Is every mission abroad an international assignment?No, international assignments refer to stays abroad in one location longer than six months.
What is the objective of dual careers?They aim to support accompanying partners to find an appropriate job abroad or to continue their personal career development.
International Assignments are an essential part driving international careers
> As Continental expands globally, an increasing number of employees are going on international assignments. These opportunities add value to the business, foster diversity and the employees’ personal development.
> Continental ensures a comparable living standard in the host country by offering expats specific allowances as well as providing benefits for accompanying family members such as housing, schooling, and spousal support (e.g. dual careers).
> International assignees are going abroad for a defined period (up to five years) and subsequently return to the home country after the assignment.
> Continental has implemented different international assignment programs depending on length and purpose of the assignment.
45
International Assignments drive our business
■ More than 100 expats
■ Less than 100 expats
■ Less than 10 expats
Augmented Reality
46Reward in Practice | Timeline and Glossary
Q1 Q2 Q3 Q4
Publishing of Annual Results
Employee Dialogue
Salary Increase
Group Executive Bonus Payout
CVSB Payout
LTI Payout
Business Year
The Continental Story 6 Growth and Reward
8 Value Creation at Continental
1O Continental Value Contribution Explanation
Our Reward Philosophy 14 Holistic Approach to Total Reward
16 Elements of Total Reward
18 Continental Job Grades
2O Market Positioning
22 Compensation Structure
Total Remuneration 26 Base Pay
28 Salary Increase
3O Group Executive Bonus Plan
34 Long Term Incentive Plan
36 Benefits
Reward in Practice 4O Governance
42 Continental Value Sharing Bonus
44 International Assignments
46 Timeline and Glossary
Contents Augmented Reality (AR)
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Scan the page with the AR kiosk app when you
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Useful links and further information for Continental employees:
> http://links.conti.de/executive_reward
Download a QR code reader app of your choice and scan the code with this app. Then your smartphone reads the code and navigates to the respective Intranet site.
Balance of Cooperation (BoC) – One of the four Core Initiatives aiming to establish a globally shared understanding of our cooperation across organizational interfaces and geographical boundaries.
Benefits – Benefits are indirect payments, given in addition to base pay which include pensions, sick pay, life assurance, company provided cars, etc.
CBIM – Corporate department of Compensation & Benefits and International Mobility
Code of Conduct – Guiding framework for the application of ethical standards such as integrity, honesty, and law-abiding conduct
Cost of capital – The cost of equity and debt instruments used for financing a business.
CVC – The Continental Value Contribution (CVC) represents the absolute amount of additional value created.
CVSB – Continental Value Sharing Bonus. Employees who are not part of the senior management participate in an annual global value sharing bonus based on the CVC.
Delta CVC – The delta CVC represents the change in absolute value creation compared to the prior year.
EBIT – Earnings Before Interest and Taxes. EBIT represents the results of operations.
Four Corporate Values – Trust, Passion To Win, Freedom To Act and, For One Another summarized in our BASICS.
Governance – The way in wich a company or institution is managed in order to control risk.
Grades – Grades are used to provide structure reflecting levels of responsibilities, skills and, requirements.
Group Executive Bonus Plan – Short-term incentive plan for Executives and Senior Executives.
Job Evaluation – A systematic process for determining the relative worth of jobs within an organization resulting in a Conti Grade.
LTI – Long-Term Incentive (LTI) bonus for Senior Executives that allows for participation in the long-term success of Continental.
Market Capitalization – The total Euro market value of all of a company’s outstanding shares.
Median – The middle value of a series of values ordered from lowest to highest value.
Midpoint – Middle value in Continental’s compensation ranges.
ROCE – Return On Capital Employed. We define ROCE as the ratio of EBIT to average operating assets for the fiscal year.
TSR – The Total Shareholder Return (TSR) takes account of the development of the share price and all dividend payouts during a certain period.
Value Creation – We define value creation as the growth of our company value measured by the CVC.
WACC – Weighted Average Cost of Capital. The WACC represents the weighted average cost of the required return on equity and net interest bearing liabilities.
Glossary
Value-Based Reward at ContinentalGlobal Principles and Overview for Executives and Senior Executives
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Continental AktiengesellschaftP.O. Box 1 69, 30001 Hanover, GermanyVahrenwalder Strasse 9, 30165 Hanover, GermanyPhone: +49 511 938 - 01, Fax: +49 511 938 - [email protected]
Lor acium in pate inienda idipiendunt.
Continental AktiengesellschaftHuman Relations Compensation & Benefits, International Mobility (CBIM) Vahrenwalder Straße 9, 30165 Hanover, GermanyPhone: +49 511 938 - 01, Fax: +49 511 938 - 81770www.continental-corporation.com
Firs
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Legal noticeThis brochure provides you with a simplified overview of the Value-Based Reward at Continental. Legally binding information is provided exclusively by the guidelines that apply in each case. Augmented reality (AR)
contentA number of additional augmented reality (AR) content await you in this brochure. Use your smartphone or tablet now to get information via innovative media. Look out for the symbol and enter an interactive world!
Contents
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Quick Start1. Simply download the AR Kiosk app free of charge on
your smartphone or tablet using the following QR code.
2. Start the AR Kiosk app and search this brochure for the symbol, which highlights the augmented reality (AR) content.
3. Scan the corresponding page of the brochure with the app and experience interactive content.
Augmented Reality
Balance of Cooperation (BoC) – One of the four Core Initiatives aiming to establish a globally shared understanding of our cooperation across organizational interfaces and geographical boundaries.
Benefits – Benefits are indirect payments, given in addition to base pay which include pensions, sick pay, life assurance, company provided cars, etc.
CBIM – Corporate department of Compensation & Benefits and International Mobility
Code of Conduct – Guiding framework for the application of ethical standards such as integrity, honesty, and law-abiding conduct
Cost of capital – The cost of equity and debt instruments used for financing a business.
CVC – The Continental Value Contribution (CVC) represents the absolute amount of additional value created.
CVSB – Continental Value Sharing Bonus. Employees who are not part of the senior management participate in an annual global value sharing bonus based on the CVC.
Delta CVC – The delta CVC represents the change in absolute value creation compared to the prior year.
EBIT – Earnings Before Interest and Taxes. EBIT represents the results of operations.
Four Corporate Values – Trust, Passion To Win, Freedom To Act and, For One Another summarized in our BASICS.
Governance – The way in wich a company or institution is managed in order to control risk.
Grades – Grades are used to provide structure reflecting levels of responsibilities, skills and, requirements.
Group Executive Bonus Plan – Short-term incentive plan for Executives and Senior Executives.
Job Evaluation – A systematic process for determining the relative worth of jobs within an organization resulting in a Conti Grade.
LTI – Long-Term Incentive (LTI) bonus for Senior Executives that allows for participation in the long-term success of Continental.
Market Capitalization – The total Euro market value of all of a company’s outstanding shares.
Median – The middle value of a series of values ordered from lowest to highest value.
Midpoint – Middle value in Continental’s compensation ranges.
ROCE – Return On Capital Employed. We define ROCE as the ratio of EBIT to average operating assets for the fiscal year.
TSR – The Total Shareholder Return (TSR) takes account of the development of the share price and all dividend payouts during a certain period.
Value Creation – We define value creation as the growth of our company value measured by the CVC.
WACC – Weighted Average Cost of Capital. The WACC represents the weighted average cost of the required return on equity and net interest bearing liabilities.
Glossary
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