Henkel has implemented a globally consistent system of performance-related remuneration for its managerial staff:

• Base Salary is a fixed pay component determined by the requirements of the job local market conditions, individual performance, skills and potential for development.
• Short-Term Incentive is based on an annual incentive plan which applies to all managers. The purpose of this plan is to acknowledge and reward the achievement of yearly target agreements ("Target Dialogue").
• Long-Term Incentive is a reward for our core management team for the long-term creation of shareholder value.

The Henkel "Target Dialogue"

The underlying philosophy of the Henkel Target Dialogue is to strengthen personal performance through targets which can be individually influenced and measured in numbers.

Targets for the Target Dialogue are set using a cascading approach of corporate, team and individual targets. Once corporate targets for the entire company are set, they form the basis for setting team targets. Individual targets should be set so that they support the team and group targets.

All targets in the Target Dialogue should be consistent from Group to Team to Individual. They should be ambitious, quantifiable and fair, and monitored during the whole year. We regard accurate target setting as a key management responsibility, linking individual achievement incentives with Henkel’s strategic focus.