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 2023. In order to facilitate the context of the disclosures, the main features of the compensation systems for the Managing Board and the Supervisory Board applicable in fiscal year 2023 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 2023

Resolution on the approval of the compensation report for fiscal year 2022

The report 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 2022 was prepared in accordance with Sec. 162 AktG and approved by the Annual General Meeting on May 9, 2023 with a majority of 66.37% of the capital represented in accordance with Sec. 120a (4) AktG. The Managing Board and the Supervisory Board acknowledged this vote while at the same time taking it as an opportunity to discuss the reasons for the comparatively low approval rate directly with key capital market participants. It is the joint understanding of the Managing Board and the Supervisory Board that this vote was neither directly related to the main features of the compensation system nor to the format of the compensation report. Consequently, regarding the latter, the current format in the compensation report for fiscal year 2023 remains unchanged in its fundamental aspects. At the same time, the disclosures provided in the further course of this Compensation Report on the so-called CEO Investment Opportunity, which is explicitly not part of the HUGO BOSS compensation system, were extended compared to the previous year, aimed at further increasing transparency in this regard.

Application of the compensation system for the Managing Board in fiscal year 2023

The current compensation system for the Managing Board, for which the main features are presented later in this report, was approved at the Annual General 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 2023, 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 2023. 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 is considered to be 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 2023. Similarly, no adjustments are planned for fiscal year 2024, apart from any possible adjustments in the context of individual agreement extensions.

In fiscal year 2023, there were no personnel changes on the Managing Board of HUGO BOSS AG.

The Company’s “CLAIM 5” growth strategy, presented on August 4, 2021, aims at driving strong top- and bottom-line growth. At its Capital Markets Day in June 2023, HUGO BOSS presented an update on “CLAIM 5” and, in this context, raised its mid-term financial ambition. This development reflects the very successful execution of all strategic initiatives, which led to a significant acceleration in sales and earnings growth. In this context, the design of the compensation system continues to provide important incentives for the ongoing successful execution of the Group strategy. Consequently, 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 responsibility for environmental, social, and governance topics 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 operative development in fiscal year 2023, once again reflecting the successful execution of the “CLAIM 5” strategy, resulted in the targets set at the beginning of the reporting year for the two financial performance criteria of sales and EBIT for fiscal year 2023 being exceeded. With regard to the third STI component, trade net working capital (TNWC) as a percentage of sales, however, the minimum target was not achieved in 2023. Consequently, the average level of overall target achievement for the STI 2023 amounted to 105%. The payment due for fiscal year 2023 from the long-term incentive (LTI) tranche issued in fiscal year 2020 amounts to 159% of the target value (payment in fiscal year 2024).

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 2023

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.

In fiscal year 2023, there were two personnel changes on the Supervisory Board of HUGO BOSS AG. Effective May 9, 2023, the two employee representatives Anita Kessel and Martin Sambeth both resigned from the Supervisory Board. Daniela Liburdi joined the Supervisory Board on May 9, 2023, as the successor to Anita Kessel. Andreas Flach joined the Supervisory Board on May 9, 2023, as the successor to Martin Sambeth. As set out in Art. 12 of the Company’s Articles of Association, all four receive pro-rata compensation for their activities in fiscal year 2023.