infineon global compensation philosophy€¦ · in this respect, we reward individual performance,...

Copyright © Infineon Technologies 2012. All rights reserved.

Infineon Global Compensation Philosophy

GEO DACH Chapter Konferenz, Frankfurt a. M., 13. September 2012

Infineon Technologies AG Maik Metzdorf Vice President HR Compensation & Benefits


About Infineon Infineon at a Glance

Revenue FY 2010/2011 (30.09.): 3,997 billion EUR

Forecast FY 2011/2012*: ~ 3,8 – 3,9 billion EUR

26,526 employees worldwide (as per August 31, 2010)

APAC (w/o Japan): 13,568

Germany: 8,364

Europe (w/o GER): 3,990

America: 490

Japan: 114

* Note: according to IFX press release, July 31, 2012

Focus

Energy Efficiency

Mobility

Security

Our Target Markets

Automotive

Industrial Power Control

Power Management & Multimarket

Chip Card & Security


Preface What is a Compensation Philosophy for?

The Compensation Philosophy …

… describes the core principles for compensating and rewarding employees.

… sets a framework for developing compensation programs and policies.

… applies – in general – to all employees in all countries.

… should be stable for longer period of time.

… communicated proactively, creates a common understanding between the different stakeholders.


Comparability

External Competitiveness

Employee Contribution

Affordability & Flexibility

Success Participation

Compensation Philosophy

The Compensation Philosophy is based on 5 Core Principles to lever High Performance


As functions naturally are different regarding their value to the organization, we need a systematic approach to evaluate and structure these differences.

Within IFX we use the Global Grading System to structure jobs by level.

Therefore, we have developed a

comprehensible and transparent framework to ensure internal and external comparability as well as having a basis for the definition of eligibility and individual differences in our compensation programs.

Compensation Philosophy Comparability

Jo

b L

eve

l

Compensation


We strive for both competitive and attractive compensation packages as well as competitive compensation cost structures.

To be able to balance both objectives, we orientate on the market and external competitiveness.

Compensation Philosophy External Competitiveness

Competitiveness of

Costs

Market Orientation

Compensation

Attractiveness


We honor our employees' contributions to the company success.

In this respect, we reward individual performance, competency development and increases in job responsibility through differentiated …

performance-based income development (differentiation within a job level)

career progression / development (moving to and performing at a higher job level)

Compensation Philosophy Employee Contribution

Employee

Contribution


Compensation at Infineon is designed to keep personnel costs flexible, calculable and predictable.

Our compensation structures are flexible in order to maintain affordable costs, support changing business environments and achieve financial objectives over the cycle.

Rather than simply focusing on costs, we consider compensation as an investment in our employees that will enhance performance and lead to increased productivity.

Compensation Philosophy Affordability & Flexibility

Upturn

Down- turn

Boom

Crisis

Time

Mark

et


Compensation Philosophy Success Participation

We share risks and success with our employees through strong correlation between compensation and company success.

We enhance the employees’ identification with the company goals and encourage their commitment to achieve Infineon’s business objectives and, hence, contribute to the overall company success.

Fixed Income

Variable Income


Variable Compensation (Short Term) Plan Design


Variable Compensation Annual Success Bonus vs. other Short Term Incentives

Employees can be only on one short-term incentive scheme at a time.

The predominant short-term incentive scheme at Infineon is the Annual Success Bonus (ASB).

There might be other Short Term Incentives (STI) as locally defined schemes, where the ASB is not applicable or implementation not possible due to legal reasons.

Other STI may use local criteria to consider special circumstances (e.g. production site productivity schemes), but ensure that those schemes also consider the overall company success.

Annual Success Bonus (ASB)

ASB

Other STI

Global Grade 12+

Global Grade 11-

or

Other STI

ASB gilt in Deutschland auch für

Tarifangestellte


Variable Compensation STI - Annual Success Bonus

The ASB currently applies globally to all employ-ees in GG/TL 12 and higher (for GG/TL 11 and lower where agreed locally and legally feasible).

The purpose of the ASB is to let employees directly participate in Infineon’s

success and profit enhance employee identification with the overall

company success and encourage their commitment

align all employees with the company targets underline the importance of results orientation support Infineon to achieve mid-term and long-

term strategic, operational and financial targets

The terms and conditions of the ASB (e.g. target structure, key performance indicators, etc.) are governed in the annually renewed IFX Bonus Guideline.

Annual Fixed

Income

Annual Success Bonus

(100 %)

250%

0%


Variable Compensation ASB - Target Structure (KPIs and Target Weights)

Divisions Operations SMD Central Functions

Division Segment

Result Margin 1)

50%

Infineon Segment

Result Margin 1)

50%

Division Segment

Result Margin 2)

25%

Specific Sales

Targets3)

25%

1) ROCE, FCF and Segment Result Margin all from continuing operations

2) For SMD employees who do not dedicatedly work for one specific Division, the Infineon Segment Result Margin target

has to be applied.

3) Targets according to SMD Incentive Guideline FY 11/12; targets preferably within own area of responsibility (e.g.

regional/customer-related revenue, design-win volume or must-win projects);

Target functions for ROCE, FCF and Division/Infineon Segment Result Margin approved by IFX Management Board.

Return on Capital Employed (ROCE) 1)

25%

Free Cash Flow (FCF) 1)

25%


Outlook:

New Long Term Incentive Plan

Design as of FY 13/14


Long-Term Incentive Plan Design Basic model employees (summary)

Topic Regulation

Plan type Performance Share Plan (PSP) with equity share settlement, Performance Unit Plan (PUP) with cash settlement

Vesting period 4 years

Allocation LTI allocation amount (in EUR, per Global Grade; will be converted in no. of allocated shares upon grant based on average stock price in last business quarter prior to grant date)

Performance hurdle / payout conditions

50% of total allocation amount depending on achievement of relative performance hurdle: outperformance of Philadelphia Semiconductor Index (SOX) over total duration of vesting period

Settlement in shares / in cash [tbd.]

Personal investment

• voluntary (but prerequisite for participation in LTI plan) • x% of actual LTI allocation amount (to be held privately in

custody account during vesting period) [tbd.]

DRAFT


Long-Term Incentive Plan Design Basic model employees (details)

Example: performance hurdle after vesting period met

Conditional

LTI

allocation

amount

value

+/-0%

60.000

40.000

4 years share price

development

Payout

50.000

LTI allocation

amount

(replacement SOP)

50.000 50.000

25.000

25.000

Final

LTI

allocation

amount

Performance hurdle

Allocation

15% self investment

7.500

DRAFT

Self Investment


Long-Term Incentive Plan Design Basic model employees (details)

Example: performance hurdle after vesting period not met

Conditional

LTI

allocation

amount value

+/-0%

4 years

share price

development

Payout

50.000

LTI allocation

amount

(replacement SOP)

50.000

25.000

25.000

Final

LTI

allocation

amount

30.000

20.000

25.000

Performance hurdle

15% self investment

7.500

DRAFT

Allocation Self Investment


Vielen Dank für Ihre Aufmerksamkeit!

infineon global compensation philosophy€¦ · in this respect, we reward individual performance,...

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