Compensation report

HUGO BOSS considers transparent and comprehensible reporting on the compensation of the Managing Board and the Supervisory Board as an important element of good corporate governance. The following compensation report pursuant to Sec. 162 AktG [“Aktiengesetz”: German Stock Corporation Act] outlines and explains the compensation of the current and former members of the Managing Board and of the Supervisory Board of HUGO BOSS AG in fiscal year 2022. In order to facilitate the context of the disclosures and to enhance understanding, the main features of the compensation systems for the Managing Board and the Supervisory Board applicable in fiscal year 2022 are also outlined. In addition, a detailed description of the compensation systems for the Managing Board and the Supervisory Board can be found at compensation.hugoboss.com.

Review of compensation in fiscal year 2022

Resolution on the approval of the compensation report for fiscal year 2021

The report in accordance with Sec. 162 AktG on the compensation awarded or due to present and former members of the Managing Board and Supervisory Board of HUGO BOSS AG in fiscal year 2021, which was prepared in accordance with the requirements of Sec. 162 AktG, was approved by the Annual Shareholders’ Meeting on May 24, 2022 with a majority of 74.74% of the capital represented in accordance with Sec. 120a (4) AktG. The Managing Board and Supervisory Board see this vote as a confirmation of the format used for the compensation report 2021 for the first time. Therefore this format has been retained in its basic features in the present compensation report 2022. In addition, further improvements, such as in the disclosure of the so-called CEO Investment Opportunity, were implemented. The latter continues to be considered as a compensation by a third party, thus explicitly not being part of the compensation system in accordance with Sec. 87a AktG.

Application of the compensation system for the Managing Board in fiscal year 2022

The current compensation system for the Managing Board, for which the main features are presented later in this report, was approved at the Annual Shareholders’ Meeting on May 11, 2021 with a majority of 93.83% of the capital represented, and applies to all new appointments and agreement extensions. In addition, individual compensation was granted to the members of the Managing Board within the meaning of Sec. 162 AktG in fiscal year 2022, which had been agreed in previous fiscal years under the compensation system applicable at the time. This compensation is also presented and explained below, where relevant.

The Personnel Committee regularly reviews the appropriateness and customarily nature of the compensation of the Managing Board members and, if necessary, proposes adjustments to the Supervisory Board in order to ensure that compensation for the members of the Managing Board is customary for the market and competitive within the applicable framework. The suitability was last reviewed in March 2022. In this context, the compensation of the members of the Managing Board was compared with the companies of the DAX and MDAX as well as relevant competitors, taking into account the size criteria of revenues, employees, and market capitalization (horizontal comparison). The review led to the conclusion that the compensation of the members of the HUGO BOSS Managing Board continues to be considered in line with market practices. In addition, the appropriateness of the Managing Board compensation within the Group is reviewed annually based on the development of the Managing Board compensation compared to the development of the senior management compensation, defined as the first management level below the Managing Board, and to the development of the compensation of the employees as a whole, defined as the average compensation of the Group’s full-time employees (vertical comparison).

In accordance with the applicable compensation system, the Supervisory Board has set specific target compensation for each member of the Managing Board. The target compensation set for the members of the Managing Board was not adjusted in fiscal year 2022, nor are adjustments planned for fiscal year 2023, apart from any possible adjustments in the context of individual agreement extensions.

In fiscal year 2022, there were two personnel changes on the Managing Board of HUGO BOSS AG. Effective February 28, 2022, Chief Brand Officer (CBO) Ingo Wilts left the Managing Board for personal reasons. The duties that fell under the responsibility of Ingo Wilts were assumed by Chief Executive Officer (CEO) Daniel Grieder. Effective May 31, 2022, Chief Operating Officer (COO) Dr. Heiko Schäfer left the Managing Board to pursue a new professional assignment outside the Group. All functional areas, reporting to Dr. Heiko Schäfer were divided among the remaining Managing Board members, with Chief Financial Officer (CFO) Yves Müller additionally assuming the role of COO.

The “CLAIM 5” growth strategy, presented on August 4, 2021, aims at significantly accelerating top- and bottom-line growth until 2025. In this context, the design of the compensation system provides important incentives for the successful execution of the Group strategy. In particular, the compensation of the Managing Board is closely linked to “CLAIM 5”, as the performance-related compensation components (STI and LTI) are, among others, based on the development of financial performance criteria such as sales, operating profit (EBIT), and relative total shareholder return (RTSR). The inclusion of two non-financial performance criteria also emphasizes the Company’s social and environmental responsibility as well as the objective of a sustainable, long-term successful business performance, which is also firmly anchored in “CLAIM 5”.

In the case of the short-term incentive (STI), the strong sales and EBIT development in fiscal year 2022, primarily reflecting the successful execution of the “CLAIM 5” strategy, resulted in a financial outperformance of criteria targets set for fiscal year 2022 at the beginning of the reporting year. The average level of target achievement for the STI 2022 amounted to 150%. The payment due for fiscal year 2022 from the long-term incentive (LTI) tranche issued in fiscal year 2019 amounts to 81% of the target value (payment in fiscal year 2023).

In the past fiscal year, the Supervisory Board did not make use of the options provided by the compensation system in accordance with legal provisions to temporarily deviate from the compensation system or to make adjustments to the target achievement in certain circumstances.

This compensation report is prepared jointly by the Managing Board and the Supervisory Board. The compensation report is audited by the external auditor as part of the formal audit required by law pursuant to Sec. 162 (3) AktG. The corresponding report on the audit of the compensation report is attached to this compensation report. Report of the Independent Auditor on the Audit of the Compensation Report in accordance with Section 162 (3) AktG

Application of the compensation system for the Supervisory Board in fiscal year 2022

The compensation system for the Supervisory Board, which is unchanged from the prior year, was applied in full as set out in Art. 12 of the Company’s Articles of Association.