BASF Report 2021 Management’s Report – We Value People and Treat Them with Respect 101 Good to know development of our employees’ digital skills will remain crucial going Compensation and benefits forward. The portfolio includes offerings for self-directed learning, as well as individual consulting and support for teams and leaders We want to attract and retain engaged and qualified employees, around the digital transformation. Employees and leaders can also and motivate them to achieve top performance with a total offer hold joint workshops in an avatar-based 3D working and learning package that includes market-oriented compensation, individual environment. In addition, the many academies in the divisions and development opportunities and a good working environment so that service units also offer training on specific professional content. they contribute to the company’s long-term success. Our employ- ees’ compensation is based on global compensation principles We enable our employees to take responsibility for their own according to position, market and performance. As a rule, compen- professional development within the company with digital and novel sation comprises fixed and variable components as well as benefits offerings. To support multidisciplinary teams in the development that often exceed legal requirements. In many countries, these Future of Work @ BASF of products, services or business models, workshops on design benefits include company pension benefits, supplementary health thinking empower participants to find creative and innovative insurance and share programs. We regularly review our compensa- The coronavirus pandemic has fundamentally changed how we solutions to complex problems. By providing interactive spaces, the tion systems at the global and local levels. work. That is why our Future of Work @ BASF initiative addresses concept also lends itself to hybrid working methods. This fosters an the question of how our teams can find the right balance bet ween agile learning and working culture, which will ultimately also help us We want our employees to contribute to the company’s long-term on-site and remote working to continue to perform at their best to master the digital transformation. success. This is why the compensation granted to the vast majority in the future. Connectedness and close dialog remain our number of our employees includes variable compensation components, with one priorities – both are key to team spirit, creativity and innova- Against the backdrop of the digital transformation, we support our which they participate in the success of the BASF Group as a whole tion. The wide range of jobs, tasks and local conditions make leaders in questions about shaping the working world of the and are recognized for their individual performance. The same prin- different working models necessary. To reflect this, our local future. For example, the #liveitleadit program provides insights into ciples basically apply for all employees worldwide. The amount of teams are developing tailored solutions within global guidelines various areas of the organization and the opportunity to discuss the variable component is determined by economic success as well that meet individual requirements. Workshop concepts and topics such as hybrid working or living a failure culture. as the employee’s individual performance. We use the BASF Group’s training support the process. return on capital employed (ROCE) to measure economic success for the purposes of variable compensation. This links variable One example is the Flex Work @ LU project at the Ludwigshafen 1 Individual performance is compensation to our ROCE target. site in Germany. The focus is on the shift toward greater flexibility assessed as part of a globally consistent performance management as well as practical solutions on how to maintain and strengthen process. In numerous Group companies, our “plus” share program connectedness in an increasingly hybrid working environment – ensures employees’ long-term participation in the company’s from new office concepts to IT solutions and tips for teamwork. success through incentive shares. In 2021, for example, around The ideas are tested together with pilot units. Successful con- 23,600 employees worldwide (2020: around 27,600) participated in cepts are made available to all units at the site in the form of a the “plus” share program. toolbox. Since 2020, BASF has offered senior executives the opportunity to 2 participate in a long-term incentive (LTI) program in the form of a performance share plan. The LTI program has a term of four years 1 In calculating ROCE, adjustments are made for negative and positive special items resulting from acquisitions and divestitures (for example, integration costs in connection with acquisitions and gains or losses from the divestiture of businesses) when these exceed a corridor of +/–1% of the average cost of capital basis. An adjustment of the ROCE (in the first 12 months after closing) therefore only occurs in cases of exceptionally high special items resulting from acquisitions and divestitures. 2 The LTI program referred to here is aimed at management levels 2 to 4 as well as individual employees who have attained senior executive status by virtue of special expertise. For more information on the compensation of the Board of Executive Directors and the Supervisory Board, see the Compensation Report at basf.com/compensationreport