26. Related party disclosures

Business transactions between the Group and non-consolidated subsidiaries and associates or their subsidiaries as well as joint ventures primarily relate to supply relationships in connection with the purchase of raw materials or the sale of finished goods and are carried out at arm’s length. They 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 document a significant influence because the voestalpine shares are consolidated using the equity method.

Business transactions are carried out at arm’s length and are presented as follows:

Interest expense of EUR 1.4 million (2020/21: 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 29. Disclosures of transactions not recorded in the statement of financial position), receivables are sold to core shareholders at arm’s length. As of March 31, 2022, these receivables were recognized at a total of EUR 327.0 million (2020/21: EUR 204.2 million). Interest expense of EUR 1.2 million (2020/21: EUR 0.9 million) was recognized for the business year 2021/22 in this connection.

The non-inclusion of the 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 quantitative targets are achieved exactly, 60% of the maximum bonus applies; if the agreed qualitative targets are achieved, 20% of the maximum bonus applies. Any overachievement of the quantitative targets is taken into consideration proportionately until the maximum bonus is reached. The quantitative targets are “earnings before interest and taxes” (EBIT); “return on capital employed” (ROCE); “free cash flow”; operating working capital as a percentage of revenue; and “value added per employee.” The specific target amounts applicable to EBIT and ROCE 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. The target amount for operating working capital in percent of revenue for the business years 2019/20, 2020/21, and 2021/22 was determined each year. The new targets—“free cash flow” and “value added per employee”—were stipulated for the first time in the business year 2021/22. The given target amounts 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 qualitative targets defined for the business year 2021/22 were, first, the preparation of several alternative scenarios for both furnace-based plants in response to the pressure to decarbonize and, second, the work on the “Trentino” project (sale of the majority stake in the Texas HBI plant) up to and including submission of the decision-ready documentation to the Supervisory Board.

The amount of the contractually stipulated company pension payable to the members of the Management Board, Dipl.-Ing. Herbert Eibensteiner and Mag. Dipl.-Ing. Robert Ottel, MBA, 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, MBA; and Dipl.-Ing. Hubert Zajicek, MBA. 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, MBA. 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; the cost is borne by the company.

The compensation paid to the members of the Management Board of voestalpine AG for the business year 2021/22 comprises the following:

The fixed compensation specified in the foregoing table for the business year 2020/21 includes EUR 0.04 million in long-service bonuses. No long-service bonuses were paid in the business year 2021/22. 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: Mag. Dipl.-Ing. Robert Ottel, MBA: EUR 0.52 million (2020/21: EUR 0.41 million) and Dipl.-Ing. Herbert Eibensteiner: EUR 0.61 million (2020/21: EUR 0.51 million). In the business year 2021/22, payments for ongoing pension fund contributions as well as payments—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 0.61 million (2020/21: EUR 0.60 million); Dipl.-Ing. Dr. Franz Kainersdorfer: EUR 0.53 million (2020/21: EUR 0.52 million); Dipl.-Ing. Dr. Peter Schwab, MBA: EUR 0.71 million (2020/21: EUR 0.70 million); and Dipl.-Ing. Hubert Zajicek, MBA: EUR 0.14 million (2020/21: EUR 0.13 million). Pension payments in the amount of EUR 1.56 million (2020/21: EUR 1.54 million) were paid by the pension fund for former members of the Management Board with defined benefit pension agreements. In the business year 2021/22, payments to a pension fund totaling EUR 0.12 million (2020/21: EUR 0.08 million) concerning four members of the Management Board were made under the existing severance payment regulations.

As of the reporting date, the outstanding balance of the variable compensation was EUR 10.90 million (2020/21: EUR 4.21 million). No advances or loans were granted to the members of the Management Board of voestalpine AG.

Supervisory Board

The Articles of Association (AoA) of voestalpine AG contained definitive provisions regarding the compensation of the members of the Supervisory Board for the business years 2005/06 through 2020/21. Effective as of the business year 2021/22, however, Article 15 of the AoA now requires the amount of the compensation and of the attendance fee payable to the Supervisory Board members elected by the Annual General Meeting (AGM)—i.e., the shareholder representatives—to be determined by the AGM.

The members of the Supervisory Board nominated by the Works Council are not entitled to any compensation for their work on the Supervisory Board nor to any attendance fees.

The Management Board and the Supervisory Board will propose the following Supervisory Board compensation and the amount of the attendance fee to the Annual General Meeting on July 6, 2022:

Subject to approval by the Annual General Meeting on July 6, 2022, the total compensation payable to the Supervisory Board (including attendance fees) for the business year 2021/22 is EUR 0.53 million (2020/21: EUR 0.18 million).

The compensation of the Supervisory Board for the business year 2021/22 will be paid at the latest 14 days after the Annual General Meeting on July 6, 2022.

No advances or loans were granted to members of the Supervisory Board of voestalpine AG.