25. Related party disclosures

Business transactions between the Group and non-consolidated subsidiaries and associates or their subsidiaries as well as joint ventures are carried out at arm’s length and are included in the following items of the Consolidated Financial Statements:

Receivables from and liabilities to associates and joint ventures as well as non-consolidated subsidiaries comprise both direct and indirect relationships.

In addition, there are business transactions with core shareholders that have a significant influence due to the consolidation of the voestalpine shares using the equity method. Business transactions are carried out at arm’s length and are presented as follows:

Interest expense of EUR 1.8 million (2018/19: EUR 1.5 million) was recognized in connection with the aforementioned financial liabilities as well as trade and other payables.

Under the first type of factoring agreement (see Note 28. Disclosures of transactions not recorded in the statement of financial position), receivables were sold to core shareholders at arm’s length as of the business year 2019/20. As of March 31, 2020, these receivables were recognized at a total of EUR 244.1 million (2018/19: EUR 218.1 million). Interest expense of EUR 1.0 million (2018/19: EUR 0.6 million) was recognized for the business year 2019/20 in this connection.

The non-inclusion of non-consolidated entities in the Consolidated Financial Statements has no material impact on the Group’s net assets, financial position, and results of operations.

Management Board

The fixed compensation of the Management Board is determined by the General Committee of the Supervisory Board pursuant to Austrian legal requirements and is reviewed periodically.

The award of a bonus is subject to a target agreement to be concluded with the General Committee of the Supervisory Board that consists of quantitative and qualitative targets. The maximum bonus is limited to 200% of the annual gross salary for members of the Management Board and to 250% of the annual gross salary for the chairman of the Management Board. If the agreed targets regarding quantitative targets are achieved exactly, 60% of the maximum bonus applies; if the agreed targets regarding qualitative targets are achieved, 20% of the maximum bonus applies. Any overachievement of the targets is taken into consideration proportionately until the maximum bonus is reached. The quantitative targets are “earnings before interest and taxes” (EBIT), the “return on capital employed” (ROCE), and working capital as a percentage of revenue; for the time being, the latter applies only to the business year 2019/20. Specific target amounts are determined periodically (in each case for a period of three years) by the General Committee of the Supervisory Board in consultation with the Management Board. They are computed independently of the respective budget and/or the medium-term business plan, i.e., budget compliance does not mean that a bonus is granted. The stipulated qualitative targets for the business year 2019/20 were, first, presentation of a report to the Supervisory Board regarding a long-term digitalization strategy and, second, presentation of an initial, indicative profitability analysis of a current technological scenario regarding CO₂-reduced steel production.

The amount of the contractually stipulated company pension payable to the members of the Management Board, Dipl.-Ing. Herbert Eibensteiner, Dr. Wolfgang Eder (until July 3, 2019), and Mag. Dipl.-Ing. Robert Ottel depends on the length of their service. The amount of the annual pension equals 1.2% of the most recent annual gross salary for each year of service. However, the pension benefit cannot exceed 40% of the most recent annual gross salary (excluding variable compensation). A defined contribution arrangement was put in place for the following members of the Management Board: Dipl.-Ing. Franz Rotter; Dipl.-Ing. Dr. Franz Kainersdorfer; Dipl.-Ing. Dr. Peter Schwab; and Dipl.-Ing. Hubert Zajicek; pursuant to the agreement, the company pays 15% of their annual gross salary (excluding bonuses) into the pension fund.

An extraordinary supplementary payment to the defined contribution system was resolved in the business year 2018/19 for the Management Board members, Dipl.-Ing. Franz Rotter, Dipl.-Ing. Dr. Franz Kainersdorfer, and Dipl.-Ing. Dr. Peter Schwab. The payment to the pension fund shall be made in five equal annual instalments starting on March 31, 2020.

Upon termination of their director’s contracts, Management Board members are granted severance pay that is modeled on the approach set forth in the Austrian Employment Act (Angestelltengesetz – AngG), pursuant to which the maximum allowable under the law may not be surpassed.

D&O insurance has been purchased for the members of the Management Board (as well as for the Group’s executives) and for the members of the Supervisory Board at a cost of EUR 0.3 million (2018/19: EUR 0.2 million) that is borne by the company.

The compensation paid to the members of the Management Board of voestalpine AG for the business year 2019/20 comprises the following:

The variable compensation specified in the foregoing table for the previous year includes EUR 0.42 million in long-service bonuses. No long-service bonuses were paid in the business year 2019/20. In addition to the compensation contained in the above table, a total of EUR 3.41 million in severance payments were made to Dr. Wolfgang Eder in the business year 2019/20. Furthermore, the following service costs (personnel expenses) are recognized in the Consolidated Financial Statements for members of the Management Board with defined benefit pension agreements: Dr. Wolfgang Eder (until July 3, 2019) EUR 0.00 million (2018/19: EUR 0.00 million); Mag. Dipl.-Ing. Robert Ottel EUR 0.42 million (2018/19: EUR 0.32 million); and Dipl.-Ing. Herbert Eibensteiner EUR 0.40 million (2018/19: EUR 0.29 million). In the business year 2019/20, expenses for ongoing pension fund contributions as well as expenses—to the extent relevant—for the aforementioned supplementary defined contribution payment were recognized in the Consolidated Financial Statements as follows for the Management Board members with defined contribution pension agreements: Dipl.-Ing. Franz Rotter EUR 0.59 million (2018/19: EUR 1.14 million); Dipl.-Ing. Dr. Franz Kainersdorfer EUR 0.52 million (2018/19: EUR 0.37 million); Dipl.-Ing. Dr. Peter Schwab EUR 0.69 million (2018/19: EUR 1.15 million); and Dipl.-Ing. Hubert Zajicek EUR 0.06 million. Pension payments in the amount of EUR 1.52 million (2018/19: EUR 1.02 million) were paid by the pension fund for former members of the Management Board with defined benefit pension agreements.

As of the reporting date, the outstanding balance of the variable compensation was EUR 1.57 million (2018/19: EUR 5.87 million). No advances or loans were granted to the members of the Management Board of voestalpine AG.

Directors’ dealings notices of the members of the Management Board are published on the company’s website (www.voestalpine.com).

Supervisory Board

Under Article 15 of the Articles of Association, the shareholder representatives on the Supervisory Board of voestalpine AG are paid compensation of 0.1% of the profit after tax pursuant to the adopted Consolidated Financial Statements. The total amount is distributed as follows based on an allocation key: 100% for the Chairman, 75% for the Deputy Chairman, and 50% for each of the other members, with a minimum compensation of EUR 27,000 for the Chairman, EUR 20,000 for the Deputy Chairman, and EUR 13,000 for each of the other members of the Supervisory Board pursuant to the amendment of Article 15 of the Articles of Association resolved by the Annual General Meeting 2016. The compensation of the Supervisory Board is limited to four times the stated amounts. The members of the Supervisory Board nominated by the Works Council do not receive any compensation. All members of the Supervisory Board are paid an attendance fee of EUR 500 per meeting. No separate compensation is paid for meetings of the committees of the Supervisory Board, but an attendance fee of EUR 500 per meeting is paid nonetheless.

According to this arrangement, the shareholder representatives on the Supervisory Board were paid the following compensation for the business year 2019/20: Dr. Joachim Lemppenau (Chairman): EUR 27,000 (2018/19: EUR 96,000); Dr. Heinrich Schaller (Deputy Chairman): EUR 20,000 (2018/19: EUR 72,000); and all other shareholder representatives: EUR 13,000 (2018/19: EUR 48,000) each.

The Articles of Association have contained finalized rules as to the annual compensation of the members of the Supervisory Board and the method of calculating it since the Annual General Meeting 2006. As a result, the Annual General Meeting need not adopt a separate resolution every year.

The total compensation paid to the members of the Supervisory Board (including attendance fees) for the business year 2019/20 is EUR 0.19 million (2018/19: EUR 0.50 million). The compensation of the Supervisory Board for the business year 2019/20 will be paid at the latest 14 days after the Annual General Meeting on July 1, 2020. No advances or loans were granted to members of the Supervisory Board of voestalpine AG.

Directors’ dealings notices of the members of the Supervisory Board are published on the company’s website (www.voestalpine.com).