Compensation report

HUGO BOSS considers transparent and comprehensible reporting on the compensation of the Managing Board and the Supervisory Board to be an important element of good corporate governance. The following compensation report pursuant to Sec. 162 AktG [“Aktiengesetz”: German Stock Corporation Act] presents and describes the compensation of the current and former members of the Managing Board and of the Supervisory Board of HUGO BOSS AG in fiscal year 2021. In order to facilitate the context of the information provided and to promote understanding, the main features of the compensation systems for the Managing Board and the Supervisory Board applicable in fiscal year 2021 are also presented. A detailed description of the compensation systems for the Managing Board and the Supervisory Board can be found at compensation.hugoboss.com.

Review of compensation in fiscal year 2021

Resolution on the approval of the compensation system for the Managing Board

In view of the Act Implementing the Shareholder Rights Directive II (“SRD II”) and the revision of the German Corporate Governance Code (GCGC), structural changes to the compensation system for the members of the Managing Board became necessary. Based on the recommendation of its Personnel Committee, the Supervisory Board decided to submit the changes to the compensation system for the members of the Managing Board to the Annual Shareholders’ Meeting. This amended compensation system was approved by the shareholders at the Annual Shareholders’ Meeting on May 11, 2021, by a majority of 93.83% of the represented capital. An overview of the major changes to the formerly applicable compensation system is published on the Company’s website at the above link.

Application of the compensation system for the Managing Board in fiscal year 2021

The amended compensation system for the Managing Board, for which the main features are presented later in this report, was approved at the Annual Shareholders’ Meeting on May 11, 2021, and applies to all new appointments and agreement extensions. In addition, the existing service agreements of the current members of the Managing Board of HUGO BOSS are to be adapted accordingly, although they already largely correspond to the compensation system described. If adjustments are only made in the context of new appointments or agreement extensions, this is expressly indicated in the following. In addition, individual compensation was granted to the members of the Managing Board within the meaning of Sec. 162 AktG in fiscal year 2021, 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 last reviewed when developing the current compensation system. In this context, the compensation of the members of the Managing Board was compared with the companies of the DAX and MDAX, 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 continues to be considered in line with the market. 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 accordance with the applicable compensation system, the Supervisory Board has set specific target compensation for each member of the Managing Board. The target compensation set for the members of the Managing Board was not adjusted in fiscal year 2021, nor is any adjustment planned for fiscal year 2022 – with the exception of possible adjustments in the context of individual agreement extensions.

In fiscal year 2021, there were two key personnel changes on the Managing Board of HUGO BOSS. Effective June 1, 2021, Daniel Grieder joined the Managing Board of HUGO BOSS as new Chief Executive Officer (CEO). The Supervisory Board of HUGO BOSS AG had appointed Daniel Grieder as Chief Executive Officer for a period of five years on June 16, 2020. Chief Financial Officer (CFO) Yves Müller had temporarily assumed the role of Spokesperson of the Managing Board effective July 16, 2020. Correspondingly, Daniel Grieder receives a pro-rata compensation for fiscal year 2021. Yves Müller received a performance-related allowance for the interim assumption of the additional responsibility. In addition, effective January 1, 2021, Oliver Timm joined the Managing Board of HUGO BOSS AG as the new Chief Sales Officer (CSO). Oliver Timm was appointed CSO on June 29, 2020.

Chief Brand Officer (CBO) Ingo Wilts informed the Supervisory Board of HUGO BOSS AG on February 23, 2022 that he will resign from his office as a member of the Managing Board for personal reasons with effect from February 28, 2022 and will thus leave the Managing Board of HUGO BOSS AG. The duties falling under the responsibility of Ingo Wilts shall be assumed by Chief Executive Officer Daniel Grieder.

The “CLAIM 5” growth strategy, presented on August 4, 2021, is aimed at significantly accelerating top- and bottom-line growth by 2025. The compensation of the Managing Board is closely linked to this strategy, as the performance-related compensation components (STI and LTI) are based on the development of financial performance criteria such as sales, operating profit (EBIT) and relative total shareholder return (RTSR), among other things. The inclusion of two non-financial performance criteria also emphasizes the Company’s social and environmental responsibility as well as the objective of a sustainable, long-term successful business performance, which is also firmly anchored in “CLAIM 5”. Overall, the design of the compensation system thus provides important incentives for the successful execution of the Group strategy.

In the case of the short-term incentive (STI), the strong sales and earnings development in fiscal year 2021, which, in addition to the general market recovery, is due to the successful execution of the “CLAIM 5” strategy, resulted in a financial outperformance of criteria targets set for fiscal year 2021 at the beginning of the reporting year. The average level of target achievement for the STI 2021 amounted to 139%. The payment due for fiscal year 2021 from the long-term incentive (LTI) tranche issued in fiscal year 2018 amounts to 60% of the target value (payment in fiscal year 2022).

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 is prepared jointly by the Managing Board and the Supervisory Board. The compensation report is reviewed separately by the external auditor. In addition to the formal audit required by law pursuant to Sec. 162 (1) and (2) AktG, the content of the compensation report is also audited. The corresponding report on the audit of the compensation report is attached to this compensation report. Independent Auditor’s Report on the Audit of the Content of the Remuneration Report prepared to comply with Sec. 162 AktG

Application of the compensation system for the Supervisory Board in fiscal year 2021

The compensation system for the Supervisory Board, which is unchanged from the prior year, was applied in full as set out in Art. 12 of the Company’s Articles of Association.

Effective August 31, 2021, Antonio Simina, the long-serving Deputy Chairman of the Supervisory Board, retired. Bernd Simbeck, who had previously been a member of the Supervisory Board of HUGO BOSS AG from 2010 to 2015, re-joined the Supervisory Board on September 1, 2021, as the successor to the retired Antonio Simina. As set out in Art. 12 of the Company’s Articles of Association, both receive pro-rata compensation for their activities in fiscal year 2021.