Conti Plans Cutting Dividend, Links Sustainability to Remuneration

  • 2020-06-05 12:00:00
  • Reporter

The German tire and automotive systems major, Continental AG, announced on June 3 that in light of the ongoing economic uncertainty, the Executive Board and Supervisory Board of the company have decided to cut the dividend proposal from 4 euro to 3 euro ($3.39) per share. The total distribution is 600 million euro ($679.7 million). The dividend proposal is 37% lower than last year’s dividend of 4.75 euro ($5.38) per share.

The reduced proposal will be put to a vote by Continental’s shareholders at the virtual Annual Shareholders’ Meeting on July 14, 2020. The company explained that in view of the coronavirus pandemic and the way it has “sharply intensified”, the Executive Board and Supervisory Board are retroactively adjusting their resolutions from February and March 2020.

“In this challenging situation, ample capital resources and adequate liquidity are of top priority. At the same time, due consideration must be given to the divergent expectations of the company’s stakeholders”  Professor Wolfgang Reitzle, chairman of Continental’s Supervisory Board, explained, “The new dividend proposal strikes a balance between the short-term and long-term interests of Continental, its shareholders and other stakeholders,” he added.

Reitzle also welcomed the appointment of Andreas Wolf as a member of the Executive Board of Continental AG, calling Mr Wolf one of the company’s most experienced managers. It therefore makes sense for him to focus fully on driving forward the powertrain” business as a member of the Executive Board until the planned spin-off. On behalf of my colleagues on the Supervisory Board, I would like to wish him all the best and every success,” Professor Reitzle said.

Mr Wolf has led Vitesco Technologies, which specializes in the electrification of the powertrain, since October 2018. He has been appointed to the Executive Board of Continental AG with effect from June 3, 2020, for a term of three years. If the planned spin-off of the powertrain business is completed within this period, his term will end ahead of time.

Dr. Elmar Degenhart, CEO of Continental said he was confident Mr Wolf would successfully implement the spin-off of the powertrain business as soon as the market environment allows and subsequently lead Vitesco Technologies to become a top, independent player in the fast-growing electrification market.

Continental’s Supervisory Board has decided to present a new remuneration system for the company’s Executive Board members to the Annual Shareholders’ Meeting for approval. Continental explains that this is part of the recently revised and now uniform remuneration system for its executives.

Now, the remuneration of Executive Board members and executives is even more closely linked to the sustainable and long-term development of the company. The major portion of the variable component is measured over several years and is linked in part to the performance of the Continental share price, compared to relevant listed companies in the automotive sector. It is also based on the achievement of sustainability goals. In a sense, the company is directly integrating its sustainability strategy into its remuneration system. Relevant aspects include the complete transition to renewable sources for all externally procured electricity in 2020, a gradually increased representation of women in management positions, a reduction in the rate of accidents and sickness in the company, and a higher proportion of recycled waste. In addition, the Executive Board commits to acquire and permanently hold shares in Continental AG during its appointment. The new remuneration system also sets a cap on pay for members of the Executive Board. It thus fulfils all the legal requirements and the recommendations of the German Corporate Governance Code, with retroactive effect from January 1, 2020.

Continental says the changes in Executive Board remuneration will be supplemented by additional changes affecting all employees worldwide. The introduction of this new remuneration system, which covers all levels, will take place gradually. The variable salary component for executives will also be linked to the achievement of sustainability goals and the relative performance of the Continental share price. The value-sharing program for all other employees will also be adapted accordingly.

The Hannover, Germany-headquartered company states that by linking this new remuneration system with its sustainability, competitiveness and viability, Continental is driving forward the fundamental transformation process that is currently underway in the entire automotive industry.

Additionally, based on a resolution on June 3, the remuneration of the Continental Supervisory Board members is also to be changed. Going forward, they will receive only a fixed remuneration without any variable component. This amendment follows a suggestion of the German Corporate Governance Code and is to be proposed to the Annual General Meeting on July 14, 2020, for resolution. The new regulation is to take effect retroactively from January 1, 2020. Additionally, the the members of the Supervisory Board agreed to forgo part of their fixed remuneration this year, in line with the decision of the Executive Board of Continental. In March 2020, the Executive Board of the company decided on a salary waiver for its members and for executives, in solidarity with employees who have been affected by short-time work and other curtailments. For Executive Board members, this means that their fixed salary has been cut by 10% in the four months from April to July, in addition to their variable remuneration, which will be much lower. There is a similar provision for the executives, the implementation of which will vary depending on the legal regulations in the various countries.

In addition to these steps, Continental is also implanting programs and health and safety measures to ensure its employees are healthy and safe, including temporary plant closures and the introduction of a comprehensive plan for pandemic-proof production.

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