Remuneration report

The compensation of ADVA’s management board members consists of fixed and variable components. In addition to a fixed salary, the members of the management board receive two kinds of variable compensation which are assessed based either on short-term aspects or on long-term criteria focusing on the sustainable development of the group. As additional long-term variable compensation, the management board members receive stock options within the scope of ADVA’s stock option program. The variable compensation for the members of the management board includes capped components (short-term variable compensation, long-term variable compensation, newly issued options), and provides upper and lower limits for the four targets of the short-term variable compensation.

In 2019, the fixed salaries of all members of the management board remained unchanged. The short-term variable compensation of all four members of the management board was based on the group’s pro forma operating income1 (40%), the group’s revenues (20%), and the group’s net debt (20%) as well as individual goals agreed with each member of the management board at the beginning of the year (20%). The short-term variable compensation is determined annually as compensation for the current year at the discretion of the supervisory board. Furthermore, a long-term variable compensation focusing on the sustainable development of the group was agreed which will be paid to the members of the management board after three years, provided that a year-by-year increased minimum group pro forma operating income is met for each of the three years. All members of the management board additionally receive a company car or a car allowance. Moreover, ADVA bears the costs of the directors & officers liability insurance for the management board members, taking into account the statutory deductible amount. These benefits are partially taxable by the members of the management board as non-cash benefits. In addition, ADVA grants stock options to members of the management board. These option rights authorize the members of the management board to purchase a set number of shares in the company once a fixed vesting period has elapsed and the goal to increase the share price by at least 20% has been reached.

Total management board compensation payable for 2019 and 2018 was EUR 1,695 thousand and EUR 2,099 thousand, respectively. During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the management board. In 2019 and 2018, no loans were granted to the members of the management board. As of Total management board compensation payable for 2019 and 2018 was EUR 1,695 thousand and EUR 2,099 thousand, respectively. During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the management board. In 2019 and 2018, no loans were granted to the members of the management board. As of December 31, 2019 and 2018, no receivables outstanding from members of the management board have been reported.

The compensation of the members of ADVA’s supervisory board, beyond the reimbursement of out of pocket expenses, only consists of fixed compensation paid out quarterly.

The total compensation payable to the members of ADVA’s supervisory board for 2019 and 2018 amounted to EUR 235 thousand, each.

Furthermore, ADVA bears the cost of the directors and officers liability insurance for all members of the supervisory board. During 2019, no loans or advance payments were granted to members of the supervisory board.

Detailed information on the compensation structure of the individual members of the management and supervisory boards can be found in note (41) to the consolidated financial statements.

The compensation of ADVA Optical Networking’s management board members consists of fixed and variable components. In addition to a fixed salary, the members of the management board receive two kinds of variable compensation which are assessed based either on short-term aspects or on long-term criteria focusing on the sustainable development of the group. As additional long-term variable compensation, the management board members receive stock options within the scope of ADVA Optical Networking’s stock option program. The compensation for the members of the management board includes capped variable compensation components (short-term variable compensation, long-term variable compensation, newly issued options), and provides upper and lower limits for the four targets of the short-term variable compensation.

In 2018, the fixed salaries of all members of the management board remained unchanged. The short-term variable compensation of all four members of the management board was based on the group’s pro forma operating income1 (40%), the group’s revenues (20%), and the group’s net liquidity2 (20%) as well as individual goals agreed with each member of the management board at the beginning of the year (20%). The short-term variable compensation is determined annually as compensation for the current year at the discretion of the supervisory board. Furthermore, a long-term variable compensation focusing on the sustainable development of the Group was agreed which will be paid to the members of the management board after three years, provided that a year-by-year increased minimum group pro forma operating income is met for each of the three years. All members of the management board additionally receive a company car or a car allowance. Moreover, ADVA Optical Networking bears the costs of the directors & officers liability insurance for the management board members, taking into account the statutory deductible amount. These benefits are partially taxable by the members of the management board as non-cash benefits. In addition, ADVA Optical Networking grants stock options to members of the management board. These option rights authorize the members of the management board to purchase a set number of shares in the company once a fixed vesting period has elapsed and the goal to increase the share price by at least 20% has been reached.

Total management board compensation payable for 2018 and 2017 was EUR 2,099 thousand and EUR 1,538 thousand, respectively. During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the management board. In 2018 and 2017, no loans were granted to the members of the management board. As of December 31, 2018 and 2017, no receivables outstanding from members of the management board have been reported.

The compensation of the members of ADVA Optical Networking’s supervisory board, beyond the reimbursement of out of pocket expenses, only consists of fixed compensation paid out quarterly.
The total compensation payable to the members of the supervisory board of ADVA Optical Networking for 2018 amounted to EUR 235 thousand, after EUR 235 thousand for 2017.

Furthermore, ADVA Optical Networking bears the cost of the directors & officers liability insurance for all members of the supervisory board. During 2018, no loans or advance payments were granted to members of the supervisory board.

Detailed information on the compensation structure of the individual members of the management and supervisory boards can be found in note (40) to the consolidated financial statements.

The compensation of ADVA Optical Networking's management board members consists of fixed and variable components. In addition to a fixed salary, the members of the management board receive two kinds of variable compensation which are assessed based either on short-term aspects or on long-term criteria focusing on the sustainable development of the group. As additional long-term variable compensation, the management board members receive stock options within the scope of ADVA Optical Networking's stock option program. The maximum amount of compensation for the members of the management board is capped, both overall and for its variable compensation components (annual bonus, long term bonus, newly issued options).

In 2017, the fixed salaries of the CEO, the CTO/COO and the CFO remained unchanged. The fixed salary of the CMSO who joined the management board at the beginning of the fourth quarter initially appointed until September 30, 2018 was agreed pro rata temporis according to the existing salary structure. The short-term variable compensation of all four members of the management board was based on the group's pro forma operating income1 (40%), the group's revenues (20%), and the group's net liquidity2 (20%) as well as individual goals agreed with each member of the management board at the beginning of the year (20%). The short-term variable compensation is determined annually as compensation for the current year at the discretion of the supervisory board. Furthermore, a long-term variable compensation focusing on the sustainable development of the Group was agreed which will be paid to the members of the management board after three years, provided that minimum group pro forma operating income margins, increasing year-by-year, are met for each of the three years. All members of the management board additionally receive a company car or a car allowance. Moreover, ADVA Optical Networking bears the costs of pecuniary damage liability insurance for the management board members, taking into account the statutory deductible amount. These benefits are partially taxable by the members of the management board as non-cash benefits. In addition, ADVA Optical Networking grants stock options to members of the management board. These option rights authorize the members of the management board to purchase a set number of shares in the company once a fixed vesting period has elapsed and the goal to increase the share price by at least 20% has been reached.

Total management board compensation payable for 2017 and 2016 was EUR 1,538 thousand and EUR 2,429 thousand, respectively. During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the management board. In 2017 and 2016, no loans were granted to the members of the management board At December 31, 2017 and 2016, no receivables outstanding from members of the management board have been reported.

The compensation of ADVA Optical Networking’s Management Board members consists of fixed and variable components. In addition to a fixed salary, the members of the Management Board receive two kinds of variable compensation which are assessed based either on short-term aspects or on long-term criteria focusing on the sustainable development of the Group. As additional long-term variable compensation, the Management Board members receive stock options within the scope of ADVA Optical Networking’s stock option program. The maximum amount of compensation for the members of the Management Board is capped, both overall and for its variable compensation components (annual bonus, long term bonus, newly issued options)

In 2016, the fixed salaries of the CEO and CTO remained unchanged, while the fixed salary of the CFO has been converted from USD to EUR and matched with the fixed salary of the other two members of the Management Board. The short-term variable compensation was based on the Group’s pro forma operating income (40%), the Group’s revenues (20%), and the Group’s net liquidity (20%) as well as individual goals agreed with each member of the Management Board at the beginning of the year (20%). The short-term variable compensation is determined annually as compensation for the current year at the discretion of the Supervisory Board.

Furthermore, a long-term variable compensation focusing on the sustainable development of the Group was agreed in 2015 which will be paid to the members of the Management Board after three years, provided that minimum Group pro forma operating income margins, increasing year-by-year, are met for each of the three years. All members of the Management Board additionally receive a company car or a car allowance. Moreover, ADVA Optical Networking bears the costs of pecuniary damage liability insurance for the Management Board members, taking into account the statutory deductible amount. These benefits are partially taxable by the members of the Management Board as non-cash benefits. In addition, ADVA Optical Networking grants stock options to members of the Management Board. These option rights authorize the members of the Management Board to purchase a set number of shares in the Company once a fixed vesting period has elapsed and the goal to increase the share price by at least 20% has been reached.

Total Management Board compensation payable for 2016 and 2015 was EUR 2,429 thousand and EUR 1,764 thousand, respectively. During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the Management Board. In 2016 and 2015, no loans were granted to the members of the Management Board. At December 31, 2015, ADVA Optical Networking reports a receivable of EUR 62 thousand from Brian Protiva relating to payroll tax on exercised stock options. The receivable has been offset from remuneration paid in January and February 2016. At December 31, 2016, no receivables outstanding from members of the management board have been reported.

The compensation of ADVA Optical Networking’s Management Board members consists of fixed and variable components. In addition to a fixed salary, the members of the Management Board receive variable compensation in the form of bonus payments which are assessed based in part on short-term aspects and in part on long-term criteria focusing on the sustainable development of the Group. As additional long-term variable compensation, the Management Board members receive stock options within the scope of ADVA Optical Networking’s stock option program. The maximum amount of compensation for the members of the Management Board is capped, both overall and for its variable compensation components (annual bonus, long term bonus, newly issued options). Information on the details of the stock option plans affecting the members of the Management Board is provided in note (33) to the consolidated financial statements 2015, which are contained in the Annual Report 2015.

In 2015, the combined fixed salary of the two members of the Management Board in office throughout the years 2014 and 2015 remained unchanged. The short-term variable compensation for both years was based on the Group’s pro forma operating income (40%), the Group’s revenues (20%), the Group’s net liquidity (20%) as well as individual goals agreed with each member of the Management Board at the beginning of the respective year (20%). The short-term variable compensation is determined annually as compensation for the current year at the discretion of the Supervisory Board. Furthermore, a new long-term variable compensation focusing on the sustainable development of the Group was agreed in 2015 after the previous long-term variable compensation became obsolete. The new long-term variable compensation will be paid to the members of the Management Board after three years, provided that minimum Group pro forma operating income margins, increasing year-by-year, are met for each of the three years. All members of the Management Board additionally receive a company car or a car allowance, as well as – in Germany – reimbursement of half of their social security contributions. Moreover, ADVA Optical Networking bears the costs of pecuniary damage liability insurance for the Management Board members, taking into account the statutory deductible amount. These benefits are partially taxable by the members of the Management Board as non-cash benefits. In addition, ADVA Optical Networking grants stock options to members of the Management Board. These option rights authorize the members of the Management Board to purchase a set number of shares in the Company once a fixed vesting period has elapsed.

Jaswir Singh left the Company at the end of 2014 by mutual agreement. From January 1, 2015, Ulrich Dopfer took over responsibility as Chief Financial Officer and Christoph Glingener took over responsibility as Chief Operating Officer. In addition to Jaswir Singh’s remuneration for his services performed in 2014, he received an additional compensation amounting to EUR 490 thousand (USD 660 thousand).

Total Management Board compensation payable for 2015 and 2014 was EUR 3,732 thousand and EUR 1,943 thousand, respectively. This compensation breaks down to the individual members of the Management Board as follows (see also note (35) to the consolidated financial statements 2015):

Value of benefits granted for the reporting period

Actual contribution for the reporting period

During both years, there were no long-term service contracts in the sense of IAS 19 for any member of the Management Board. In 2015 and 2014, no loans were granted to the members of the Management Board. At December 31, 2015, ADVA Optical Networking reports a receivable of EUR 62 thousand from Brian Protiva relating to payroll tax on exercised stock options. The receivable has been offset from remuneration paid in January and February 2016.