Compensation of the Executive Board Members

For adidas, clear, transparent, and comprehensible reporting on the compensation of the Executive Board and Supervisory Board is an essential element of good corporate governance. This Compensation Report was prepared in accordance with § 162 of the German Stock Corporation Act (AktG) and outlines in accordance with statutory requirements the amount and structure of the compensation granted and due to Executive Board members and Supervisory Board members in and for the 2021 financial year.

COMPENSATION OF THE EXECUTIVE BOARD MEMBERS

The current compensation system for the Executive Board was approved by shareholders at the Annual General Meeting on May 12, 2021, in accordance with § 120a section 4 AktG and applies to all Executive Board service contracts concluded from January 1, 2021. It furthermore generally applies to all previously concluded Executive Board service contracts. The Executive Board compensation system is clear, easy to understand, and uses transparent performance criteria. It meets all requirements of the German Stock Corporation Act and is designed in line with the recommendations of the German Corporate Governance Code. The current compensation system is permanently available on the company’s website. adidas-group.com/s/compensation

The aim of this Compensation Report is to ensure consistent reporting and to disclose clearly and transparently the correlation between the compensation paid for a particular financial year and the achievement of targets set for that financial year, regardless of when the payment is made, in accordance with our ‘Pay-for-Performance’ approach. Against this background, the achievement of the targets set for the 2021 financial year for the variable performance-related compensation based on the current compensation system is reported in a detailed and transparent manner. The compensation of Executive Board members is presented in accordance with the market-standard based on the compensation tables of the German Corporate Governance Code from February 7, 2017.

For details on the 2021 financial year target achievement and compensation payout: SEE SECTION ‘EXECUTIVE BOARD COMPENSATION 2021’

Regarding the targets for the variable performance-related compensation components of the 2022 financial year: SEE SECTION ‘OUTLOOK 2022’

COMPENSATION SYSTEM

PRINCIPLES OF THE COMPENSATION SYSTEM

The compensation system for members of the Executive Board is geared toward creating an incentive for successful, sustainable, and long-term corporate management and development, whereby the compensation is structured with an appropriate balance of fixed non-performance-related components and variable performance-related components. The variable performance-related compensation is measured based on the achievement of ambitious, pre-agreed targets; subsequent changes to performance targets or parameters are not permitted. By applying a consistent ‘Pay-for-Performance’ approach, the compensation system aims at appropriately remunerating exceptional performance, while diminishing the variable performance-related compensation when targets are not met. Moreover, the incentive to achieve the long-term targets that determine the multi-year variable performance-related compensation component is higher than the incentive to achieve the targets that determine the one-year variable performance-related compensation component.

The implementation of the ‘Own the Game’ strategy, which applies from the 2021 financial year onward, will be supported by the selection of appropriate performance targets directly derived from the strategy for the variable performance-related compensation. The variable performance-related compensation is therefore directly linked to the externally communicated operating, financial, and strategic short- and long-term targets. Thus, the compensation system for the Executive Board members is directly geared toward providing an incentive for successful, sustainable, and long-term corporate management and development and is in line with the interests of shareholders, employees, consumers, and other stakeholders. In order to achieve a continuous, sustainable increase in company value, the long-term variable compensation also depends on the development of the share price (capital market performance of adidas AG). This results in a harmonization of the interests of the shareholders and the Executive Board.

Another important aspect is the high level of consistency between the Executive Board compensation system and the compensation system of the senior management levels beneath the Executive Board. This ensures that all decision-makers pursue the same targets in order to secure the sustainable long-term success of the Company.

When designing the compensation system, the Supervisory Board has particularly taken into account the following guidelines:

• Promoting the implementation of the long-term strategy, including sustainability targets
• Strong Pay-for-Performance approach and long-term orientation
• Strong focus on shareholder and other stakeholder interests
• Intuitive, clearly comprehensible compensation system and transparent disclosure of performance criteria
• High level of consistency with the compensation system of the senior management levels
• Conformity with applicable regulatory requirements (Stock Corporation Act and German Corporate Governance Code)
• Further development of the market-standard elements of the compensation system for the Executive Board (e.g., malus and clawback provisions as well as Share Ownership Guidelines)

PROCEDURE FOR ESTABLISHING, REVIEW, AND IMPLEMENTATION OF THE COMPENSATION SYSTEM

In accordance with § 87a section 1 AktG, the Supervisory Board resolves upon a compensation system for the Executive Board members. Based on the compensation system, the Supervisory Board determines the specific overall target compensation for the individual Executive Board members. In doing so, the Supervisory Board takes into account the size and global orientation, the economic situation, the success, and the outlook of the Company. Compared with competitors, the compensation should be attractive, offering incentives to attract qualified members to the Executive Board and retain them on a long-term basis within the Company. In addition, when determining the compensation, the complexity and significance of the tasks of the respective Executive Board member, their experience (especially for new appointments) and their contribution to the Company’s success are taken into consideration. The Supervisory Board regularly reviews the appropriateness of the Executive Board compensation. For this purpose, it uses a horizontal as well as a vertical comparison.

Horizontal (external) comparison

When determining the compensation of the Executive Board, the Supervisory Board takes into account current market compensation levels, especially among the DAX companies as well as comparable other German companies. In addition, the adidas Executive Board compensation is compared with the compensation of selected national and international companies within the sporting goods and textile industry. When selecting these companies, the Supervisory Board also takes into consideration the comparability of the market position and company size. The Supervisory Board conducts regular horizontal comparisons to ascertain the appropriateness and competitiveness of the Executive Board compensation in relation to the economic situation of the Company. The most recent appropriateness test, conducted in the 2020 financial year, compared the compensation of companies listed in the German Stock Index (DAX) as well as the following national and international companies in particular: Nike, Under Armour, VF, Puma, Lululemon, Skechers, Anta, H&M, and Inditex.

Vertical (internal) comparison

The Supervisory Board also takes into account the Company’s internal compensation structure and levels when determining the Executive Board compensation. Every year, the Executive Board compensation is compared to that of senior management and employees overall in Germany (employees covered by collective agreements as well as employees not covered by collective agreements), also with regard to their development over time.

The Supervisory Board considers the compensation of Executive Board members to be appropriate, also in light of the horizontal and vertical comparisons that were conducted.

COMPENSATION COMPONENTS: OVERVIEW AND STRUCTURE

With effect from January 1, 2021, the Executive Board compensation system contains the following components:

Compensation system for the Executive Board members

The compensation of the Executive Board members is made up of non-performance related (fixed) and performance-related (variable) compensation components and consists of a fixed compensation, an annual cash bonus (‘Performance Bonus’), a long-term share-based bonus (Long-Term Incentive Plan – ‘LTIP Bonus’), as well as other benefits and pension benefits.

In case of 100% target achievement, the target direct compensation (total annual compensation without other benefits and pension benefits) is composed of

• 30% fixed compensation,
• 25% Performance Bonus, and
• 45% LTIP Bonus.

TOTAL ANNUAL COMPENSATION AND MAXIMUM COMPENSATION

The notional maximum total annual compensation of an individual Executive Board member can be derived from the fixed compensation, the capped variable performance-related compensation components, the other benefits, and the pension benefits. The percentage of the fixed compensation components (fixed compensation, other benefits,¹ and pension benefits) amounts to approximately 41% of the target total annual compensation. Based on a 100% target achievement, the percentage of the Performance Bonus amounts to approximately 21% and the percentage of the LTIP Bonus amounts to approximately 38% of the target total annual compensation.

In addition, in accordance with § 87a section 1, sentence 2, no. 1 AktG, the Supervisory Board has determined an absolute amount (in euros) for the annual maximum compensation. The annual maximum compensation amounts to € 11,500,000 for the Chief Executive Officer and € 5,150,000 for each of the ordinary Executive Board members per financial year. The maximum compensation includes all fixed and variable compensation components.

Composition of target direct compensation and annual total target compensation

FIXED NON-PERFORMANCE-RELATED COMPONENTS

The fixed non-performance-related compensation consists of the fixed compensation, other benefits, and pension benefits.

Fixed compensation

The fixed compensation consists of an annual fixed salary, which is based on the responsibilities and the experience of the individual Executive Board member as well as on market conditions. It ensures an adequate income for the Executive Board members and thus avoids the assumption of inadequate risks for the Company. In principle, the fixed compensation is paid in twelve equal monthly installments and generally remains unchanged during the term of the service contract. The fixed compensation constitutes 30% of the target direct compensation of the respective Executive Board member.

Other benefits

The other benefits regularly granted to the Executive Board members serve to offset the costs and economic disadvantages directly connected with the Executive Board mandate. They include payment for, or providing the monetary value of, non-cash benefits such as premiums or contributions to insurance schemes in line with market practice, the provision of a company car or the payment of a car allowance, reimbursement of costs for a regular health check, reimbursement of work-related moving costs, necessary security installations and services and the costs for a tax consultant selected by adidas.

Pension benefits

Pension benefits serve to provide contributions for adequate private retirement pensions. Executive Board members appointed after January 1, 2021, are not granted benefits under a company pension scheme. Instead, they receive a so-called pension allowance in the form of an adequate lump-sum amount, which is directly paid out to the Executive Board members annually. The pension allowance equals a maximum amount of 50% of the individual fixed compensation.

The current members of the Executive Board have defined contribution pension commitments. Each year as part of the pension commitments, the virtual pension account of each Executive Board member is credited with an amount that equals a percentage determined by the Supervisory Board and is related to the Executive Board member’s annual fixed compensation. The appropriateness of the percentage is regularly assessed by the Supervisory Board. The percentage most recently determined by the Supervisory Board amounts to 50%. The pension assets on the virtual pension account at the beginning of the respective calendar year yield a fixed interest rate of 3% p.a., however for no longer than until the pension benefits first become due. Entitlements to the pension benefits become vested immediately. Entitlements to pension benefits comprise pensions to be received upon reaching the age of 65, or, on application, early retirement pensions to be received upon reaching the age of 62, or disability and survivors’ benefits.

VARIABLE PERFORMANCE-RELATED COMPONENTS

The variable performance-related compensation is designed to provide the right incentives for the Executive Board to act in the interest of the corporate strategy, the shareholders, and other stakeholders, as well as to ensure a successful, sustainable, and long-term corporate management and development. The level of the variable performance-related compensation is primarily determined by the economic development of adidas and takes into account the performance of the Executive Board members. In this respect, the Supervisory Board follows a consistent ‘Pay-for-Performance’ approach. In selecting the performance criteria, the Supervisory Board ensures that they are transparent, clearly measurable, and directly promote the implementation of the strategy, also in terms of sustainability. The variable performance-related compensation is therefore directly linked to the externally communicated operating, financial, and strategic short- and long-term targets. This brings the compensation of the Executive Board members directly in line with the interests of shareholders, employees, consumers, and other stakeholders.

The variable performance-related compensation consists of the Performance Bonus and the share-based LTIP Bonus.

Performance Bonus

As the annual variable performance-related component, the Performance Bonus serves as compensation for the Executive Board’s performance in the past financial year in line with the short-term development of the Company. It incentivizes operational success accompanied by profitable growth within the established strategic framework. At the beginning of the financial year, the Supervisory Board establishes the respective weighted performance criteria. In case of 100% target achievement, the target amount of the Performance Bonus corresponds to 25% of the target direct compensation of the respective Executive Board member.

Criteria, weighting, and cap

The amount of the Performance Bonus is determined based on the achievement of, generally, four weighted criteria. Two of these criteria are the same for all Executive Board members and are overall weighted at 60% (‘shared criteria’). In line with the strategic focus on sustainable growth and profitability, the Supervisory Board has generally established the following financial performance criteria for the two shared criteria:

• Currency-neutral sales growth (weighting: 30%)
• Increase in the operating margin (weighting: 30%)

Both criteria are directly linked to the annual guidance externally communicated and, at the same time, follow directly from the – also externally communicated – long-term growth targets of adidas.

The other two criteria are defined individually for the respective Executive Board member and are overall weighted at 40% (‘individual criteria’). These individual criteria allow for a further differentiation depending on the specific operating and strategic challenges of each individual Executive Board function. For the two individual targets, financial as well as non-financial performance criteria may be applied. These are directly related to the corporate strategy and its financial goals of sustainable growth, profitability, and cash flow generation, which are based on the strategic focus on credibility, consumer experience, and sustainability. Furthermore, these criteria are directly related to the defined success factors for the implementation of the strategy: the employees of the Company, a mindset of innovation across all dimensions of our business as well as using the speed and agility of Digital throughout the entire value chain.

Examples of possible individual criteria deriving thereof are:

• Sales growth in business segments/sales channels
• Product development and innovation
• Success of strategic projects
• Brand Heat
• Efficiency increase
• Consumer satisfaction
• Diversity, Equity, and Inclusion
• Sustainability
• Business development
• Gaining market share
• Attracting new members
• Cost management
• Cash-flow generation
• Employee satisfaction
• Digitalization
• Succession planning

The overall degree of target achievement (sum of all degrees of target achievement) for the Performance Bonus is capped at a maximum of 150% of the individual Performance Bonus target amount. All criteria are designed in such a way that individual target achievement may also be zero. If the overall degree of target achievement lies at or below 50%, the Executive Board member is not entitled to the Performance Bonus. Therefore, the Performance Bonus may be omitted entirely if targets are clearly not met.

Determination of target achievement and bonus amount

At the end of the financial year, the actual target achievement of each Executive Board member, which is based on a comparison of the predefined target values with the values achieved in the year under review, is assessed by the Supervisory Board (‘target/actual comparison’). If the target achievement lies between the predefined threshold values, the degree of target achievement is determined based on a sliding scale. Taking into account the predefined weightings, the Supervisory Board determines the factor by which the Performance Bonus target amount is multiplied by adding up these degrees of target achievement (‘overall degree of target achievement’). The result is the individual amount of the Performance Bonus to be paid (‘Performance Bonus Amount’). The payout of the Performance Bonus Amount is due following approval of the consolidated financial statements of the past financial year.

Determination of target achievement and bonus amount within the framework of performance bonus

Long-Term Incentive Plan 2021/2025 (‘LTIP 2021/2025’)

The LTIP 2021/2025 aims to link the long-term performance-related variable compensation of the Executive Board to the Company’s performance and thus to the interests of the shareholders. Therefore, the LTIP 2021/2025 is share-based. It consists of five annual tranches (2021 to 2025), each with a term of five years. Each of the five annual LTIP tranches consists of a performance year and a subsequent lock-up period of four years.

LTIP 2021/2025: annual LTIP tranches

In case of 100% target achievement, the LTIP target amount for the respective LTIP tranche corresponds to 45% of the target direct compensation of the respective Executive Board member. The amount of the LTIP Bonus is determined based on the achievement of two uniform criteria for all Executive Board members, which are directly linked to the long-term strategy of adidas.

Criteria, weighting, and cap

For the LTIP 2021/2025, the Supervisory Board has defined the following financial or ESG-related performance criteria linked to the strategic objectives for each of the five performance years (2021 to 2025):

• Financial criterion: Increase in net income from continuing operations compared to the previous year (weighting: 80%)
• ESG criterion: Share of sustainable articles offered (weighting: 20%)

On the one hand, this reflects the strategic target of sustainably increasing net income from continuing operations and thus creating the basis for an attractive return for our shareholders. On the other hand, the key strategic focus for adidas to further drive change in the field of sustainability and to move from stand-alone initiatives to a scaled and comprehensive sustainability program is integrated into the Executive Board compensation. The target values for the annual LTIP tranches follow directly from the externally published long-term net income growth targets of the Company and from the sustainability target for the share of sustainable articles offered.

Increase in net income from continuing operations compared to the previous year

The financial targets of the strategy until 2025 are determined based on the results for the 2021 financial year. In this connection, the aim is to increase net income from continuing operations by an average of 16% to 18% per annum until 2025. For the LTIP 2021/2025, this specifically means that for the 2021 performance year, a target was set based on the externally communicated annual guidance for the increase in net income from continuing operations compared to the previous year of € 831 million (100% target achievement). At the beginning of the 2022 financial year, based on the actual results for the 2021 financial year, the Supervisory Board set a target value corridor for the increase in net income from continuing operations for each of the performance years of the four-year period 2022 to 2025, in line with the planned growth target to increase net income from continuing operations by an average of 16% to 18% per annum until 2025. When determining the target corridor, an increase in net income from continuing operations by an average of 17% per annum (midpoint of the growth target of an average of 16% to 18% per annum until 2025) was taken as a basis. This corresponds to a total amount of € 1.3 billion over the four-year period and thus to an amount of € 325 million per year. In addition, a spread of ± € 100 million was set around the midpoint in order to be able to take into account the circumstances of the respective financial year. This results in a target corridor of +€ 225 million to +€ 425 million per year for the four-year period from 2022 to 2025.

For the period 2021 to 2025, the Supervisory Board has therefore set the following target value corridors for the increase in net income from continuing operations:

At the beginning of each financial year, the Supervisory Board sets a target value for a 100% target achievement within the framework of the predetermined target value corridors, taking into account the circumstances of the respective financial year. In this way, it can be ensured that the Executive Board is appropriately incentivized to achieve the ambitious financial target of increasing net income from continuing operations by 2025. SEE SECTION ‘OUTLOOK FOR 2022’

In case the target set by the Supervisory Board for increasing net income from continuing operations is not met in one of the performance years 2022 to 2025, both the lower and upper limit of the target value corridor will automatically increase by 50% of the amount of the shortfall of the specified target value proportionally over the term of the remaining, subsequent performance years of the LTIP 2021/2025. If the increase in net income from continuing operations in a performance year is above the set target value, both the lower and upper limit of the target value corridor will automatically decrease by 50% of the amount exceeding the set target value proportionally over the term of the remaining, subsequent performance years of the LTIP 2021/2025. This mechanism ensures that in each performance year the Executive Board is adequately incentivized to achieve the ambitious long-term 2025 net income target.

For illustration: If, for example, the increase in net income in the performance year 2022 is € 90 million below the set target for a 100% target achievement, the existing lower and upper limits of the target value corridors for the remaining three performance years will be increased by € 15 million each (50% of the € 90 million shortfall, proportionally allocated over three years). If the increase in net income in the performance year 2023, for example, exceeds the set target for a 100% target achievement by € 40 million, the existing lower and upper limits of the target value corridors for the remaining two performance years will be reduced by € 10 million each (50% of the € 40 million excess, proportionally allocated over two years).

Share of sustainable articles offered

As part of ‘Own the Game,’ we aim to move to a comprehensive sustainable offering at scale. Our ambition is that 90% of our articles will be sustainable by 2025. We define articles as sustainable when they show environmental benefits versus conventional articles due to the materials used, meaning that they are – to a significant degree – made with environmentally preferred materials. The majority of the environmentally preferred materials currently used are recycled materials and more sustainable cotton. Additionally, innovative materials like biobased synthetics and more sustainably grown natural materials are used in a small scale already and will become increasingly relevant in the future. To qualify as a sustainable article, environmentally preferred materials have to exceed a certain pre-defined percentage of the article weight. The applied criteria for environmentally preferred materials and the percentage of the article weight are defined based on standards reflecting latest developments in our industry, competitor benchmarks, and expert opinions.

When determining the target achievement of the share of sustainable articles offered, only articles for which the material composition could be verified are taken into account. This non-financial performance criterion is part of the combined non-financial statement, which is subject to an audit in accordance with ISAE 3000 by an external auditor. For the 2021 financial year, this audit was commissioned and carried out with limited assurance.

For the 2021 financial year, the Supervisory Board has set a target value of 8 percentage points (100% target achievement) for the increase of the share of sustainable articles offered. The target values for each of the performance years of the four-year period 2022 to 2025 were set by the Supervisory Board at the beginning of the 2022 financial year. From the 2022 financial year, an absolute percentage value will be set as the target value for 100% target achievement. Furthermore, the underlying definition of sustainable articles for the performance years 2022 to 2025 has been adjusted to reflect the latest developments in our industry, competitive benchmarks, and expert opinions. The percentages of the required proportion of environmentally preferred materials of the article weight have been increased significantly, which corresponds to our ambition to significantly expand our commitment to sustainability in the years to come. In this context, we have also decided to define the required proportion of environmentally preferred materials in footwear based on the total shoe weight.

For the period from 2021 to 2025, the Supervisory Board has therefore set the following target values for the share of sustainable articles in our offering:

The overall degree of target achievement (sum of all degrees of target achievement) for the LTIP Bonus is capped at a maximum of 150% of the individual LTIP Bonus target amount. Both criteria are designed in such a way that the degree of target achievement may also be zero. If the overall degree of target achievement lies at or below 50%, the Executive Board member is not entitled to the LTIP Bonus. Consequently, the Bonus for the annual LTIP tranche may be omitted entirely if targets are clearly not met.

Determination of target achievement and bonus amount

At the end of the performance year, the actual target achievement of each Executive Board member, which is based on a comparison of the predefined target values with the values achieved in the performance year, is assessed by the Supervisory Board (‘target/actual comparison’).

If the actual increase in net income from continuing operations compared to the previous year or the share of sustainable articles offered lies between the predefined threshold values, the degree of target achievement is determined based on a sliding scale. Taking into account the predefined weightings, the Supervisory Board determines the factor by which the LTIP target amount is multiplied by adding up these degrees of target achievement (‘overall degree of target achievement’). In this way, the bonus amount of the annual LTIP tranche (‘Grant Amount’) is determined, which is paid out to the Executive Board member for the respective annual LTIP tranche for the performance year following the approval of the consolidated financial statements of adidas. The Executive Board members have to invest the full Grant Amount after deducting applicable taxes and social security contributions (‘LTIP Payout Amount’) into the acquisition of adidas AG shares. The shares purchased are subject to a lock-up period. This lock-up period expires at the end of the fourth financial year following the performance year. The Executive Board members may only dispose of the shares after expiration of the lock-up period.

Determination of target achievement and bonus amount within the framework of LTIP bonus

Due to this mechanism, the compensation which the Executive Board members eventually receive from each of the LTIP 2021/2025 tranches is also directly dependent on the share price development during the respective four-year lock-up period and is thus dependent on the long-term performance of the Company. The Executive Board members are entitled to any dividends distributed in connection with these shares during the lock-up period.

MALUS AND CLAWBACK PROVISIONS

In order to ensure sustainable management and development of the Company, the terms and conditions of the Performance Bonus and of the LTIP 2021/2025 contain malus and clawback provisions which allow the Supervisory Board at its equitable discretion, under defined circumstances, to partially or completely reduce the variable compensation, or partially or completely reclaim variable compensation already paid. Such circumstances are material misstatements in the financial reports, serious compliance violations and violations of duty as well as breaches of the company-internal rules of conduct by the Executive Board member, which would lead to an unjustified bonus payment in the context of the Performance Bonus or the LTIP 2021/2025. Moreover, in the event of violations of duty by Executive Board members, claims for damages arise under stock corporation law.

SHARE OWNERSHIP GUIDELINES

In order to further align the interests of the Executive Board with those of the shareholders, Share Ownership Guidelines are in place which require the Executive Board members to build substantial positions in adidas AG shares during their appointment and after a four-years build-up phase. The target for the Chief Executive Officer is a total value of 300% and for the other Executive Board members a total value of 200% of the individually granted annual fixed compensation.

COMMITMENTS UPON COMMENCEMENT OR TERMINATION OF THE EXECUTIVE BOARD MANDATE

Commencement of Executive Board mandate

In exceptional cases, the Supervisory Board is entitled to make payments (in cash or in the form of an additional one-off commitment of a variable compensation, which can be subject to a lock-up period if shares are granted) to newly appointed Executive Board members in order to reimburse them for lost compensation from a previous employment or to cover the costs of relocating, whereby any such payments are limited to the actually incurred compensation losses or costs for relocation. Any such compensation payments granted are disclosed transparently and in detail in the annual Compensation Report.

Termination of Executive Board mandate

Unless otherwise agreed in the individual case, if the service contract ends upon the Executive Board member reaching the age of 65 or upon non-renewal of the service contract, the Executive Board member is entitled to receive an annual fixed compensation on a pro rata basis as well as a potential prorated Performance Bonus and a potential prorated LTIP Bonus.

In case of premature termination of tenure in the absence of good cause, the Executive Board service contracts cap potential severance payments at a maximum of twice the total annual compensation, not exceeding payment claims for the remaining period of the service contract (‘Severance Payment Cap’). The Executive Board member does not receive a severance payment if they terminate tenure prematurely at their own request, or if there is good cause for the Company to terminate the employment relationship.

Furthermore, in line with an earlier compensation system, the company has agreed that Executive Board member Roland Auschel will receive a follow-up bonus of 75% of the Performance Bonus granted to him for the last full financial year in the event of termination of his service contract. This follow-up bonus is payable in two tranches, twelve and 24 months following the end of the contract.

Commitments to Executive Board members upon premature termination of tenure due to a change of control are not agreed.

Post-contractual competition prohibition

In principle, Executive Board members are subject to a post-contractual competition prohibition of two years. As consideration, for the duration of the competition prohibition, the Executive Board members generally receive a monthly compensation amount totaling 50% of the monthly fixed compensation last received, subject to offsetting (e.g., of income from other occupations). Taking into account the time limits stipulated in the service contract, the company may waive the post-contractual competition prohibition for the former Executive Board member. If the departed Executive Board member receives pension payments from the Company (based on existing old commitments), this compensation is offset against any pension benefits owed by the Company during the period of the competition prohibition. The compensation for periods of competition prohibition possibly paid on a monthly basis to departing Executive Board members is offset against any severance payments potentially to be paid by adidas.

SIDELINE ACTIVITIES OF EXECUTIVE BOARD MEMBERS

Executive Board members may only take on sideline activities with or without remuneration, in particular supervisory board mandates in group-external companies, with the prior approval of the Supervisory Board. Group-internal mandates are deemed covered by the contractually agreed Executive Board compensation. The Supervisory Board decides whether compensation for group-external mandates is credited to the Executive Board compensation.

EXECUTIVE BOARD COMPENSATION 2021

ANNUAL TOTAL TARGET COMPENSATION

The following table shows the individual compensation components for each individual Executive Board member under the current compensation system with 100% target achievement of the performance-related compensation. It also includes the maximum and minimum achievable compensation.

2021 PERFORMANCE BONUS

In accordance with the current compensation system, the Supervisory Board has determined the following performance criteria for the 2021 financial year:

• currency-neutral sales growth,
• an increase in the operating margin, and
• two criteria relating to the respective Executive Board functions and individual performance of the Executive Board members.

The financial targets set for the Performance Bonus were based on the company guidance communicated at the beginning of the 2021 financial year and are therefore in line with the strategic focus on sustainable growth and profitability.

In the 2021 financial year, the individual criteria relating to the respective Executive Board functions focused on, in particular, the commercial success of key sales channels, the increase in market shares and members, Diversity, Equity, and Inclusion, cash flow generation, and operational efficiency. These were thus directly related to the strategy and its financial goals of sustainable growth, profitability, and cash flow generation, which are based on the strategic focus on credibility, consumer experience, and sustainability. Furthermore, these criteria were directly in line with the defined success factors for the implementation of the strategy: the employees of the Company, a mindset of innovation across all dimensions of our business, as well as using the speed and agility of digitalization throughout the entire value chain.

For the 2021 financial year, the following threshold values were defined for the determination of target achievement in respect of currency-neutral sales growth and increasing the operating margin:

The shared targets set for Executive Board members in the 2021 financial year were achieved as follows:

The individual targets set for Executive Board members in the 2021 financial year were achieved as follows:

Based on the targets actually achieved, this results in an overall degree of target achievement between 93% and 138% for the individual Executive Board members for the year under review (2020: 40%–75%). The Performance Bonus Amount for 2021 will be paid after approval of the consolidated financial statements in March 2022.

LTIP 2021/2025: 2021 LTIP TRANCHE

As part of the compensation system for Executive Board members, the Supervisory Board has defined the following performance criteria for each of the five performance years (2021 to 2025) of the LTIP 2021/2025:

• absolute increase in net income from continuing operations compared to respective previous year and
• share of sustainable articles offered.

The targets set for the 2021 LTIP tranche were based on the long-term growth targets announced at the beginning of the 2021 financial year as part of the new strategy, ‘Own the Game.’ On the one hand, this reflected the strategic target of sustainably increasing net income from continuing operations and thus creating the basis for an attractive return for our shareholders. On the other hand, the key strategic focus for adidas to further drive change in the field of sustainability and to move from stand-alone initiatives to a scaled and comprehensive sustainability program has been integrated into the Executive Board compensation.

For the 2021 financial year, the following threshold values were defined for the determination of target achievement of the increase in net income from continuing operations and the share of sustainable articles offered:

The strategic targets set for Executive Board members in the 2021 financial year were achieved as follows:

Based on the actual target achievements, this results in the maximum achievable degree of overall target achievement of 150% (2020: 0%) for each Executive Board member for the performance year 2021. The Executive Board members have to invest the full Grant Amount after deducting applicable taxes and social security contributions (‘LTIP Payout Amount’) into the acquisition of adidas AG shares. The LTIP bonus for the 2021 LTIP tranche will be paid out to Executive Board members following approval of the consolidated financial statements and invested into the acquisition of adidas AG shares on April 1, 2022. The shares purchased are subject to a lock-up period that ends on December 31, 2025. The Executive Board members may only dispose of the shares after expiration of the lock-up period.

As at December 31, 2021, the total number of adidas AG shares acquired since 2018 in the context of the variable performance-related compensation and that are subject to a lock-up period amounts to 43,243 shares (2020: 40,371 shares). The numbers of adidas AG shares acquired by the respective Executive Board members are shown in the following table.

MALUS AND CLAWBACK PROVISIONS

The Supervisory Board did not make use of the available malus and clawback provisions in the 2021 financial year.

SHARE OWNERSHIP GUIDELINES: SHARE OWNERSHIP IN 2021

The share ownership of the Executive Board members incumbent as at December 31, 2021, in relation to their respective annual fixed compensation is disclosed individually in the following:

TOTAL ANNUAL COMPENSATION IN 2021: COMPENSATION GRANTED AND DUE

The following table shows the compensation granted and due in the 2021 financial year to individual Executive Board members incumbent as at December 31, 2021, for which the underlying service has been fully rendered by the balance sheet date on December 31, 2021, or on December 31, 2020. The variable performance-related compensation components for the year under review are payable only following approval of the consolidated financial statements of the past financial year.

Furthermore, in the interest of consistent and transparent reporting, the service costs for the defined contribution pension commitments granted to individual Executive Board members appointed before January 1, 2021, are shown in the following; however, this does not represent an actual allocation to the Executive Board members and does not qualify as compensation granted and due as specified in § 162 AktG.

The total annual compensation of the Executive Board for the 2021 financial year amounts to € 31.513 million. This represents an increase of approximately 177% on the previous year (2020: € 11.376 million). Of this total annual compensation, € 6.530 million was attributable to one-year performance-related compensation (2020: € 0) and € 14.183 million to multi-year performance-related compensation (2020: € 1.482 million). No further one-year or multi-year performance-related compensation was paid to the Executive Board members. The increase in total compensation compared to the previous year is due to the Executive Board’s decision in the 2020 financial year to waive the Performance Bonus and LTIP bonus for the 2020 financial year as a liquidity management measure in response to the coronavirus pandemic.

MAXIMUM COMPENSATION

In the year under review, the company adhered to the maximum compensation specified in the compensation system for Executive Board members (€ 11,500,000 for the Chief Executive Officer and € 5,150,000 for each ordinary Executive Board member per financial year). This adherence to the maximum compensation is shown in the table above.

PENSION BENEFITS

The service costs and defined benefit obligation for pension commitments that were granted to individual Executive Board members appointed before January 1, 2021, are shown in the following.

COMMITMENTS UPON TERMINATION OF THE EXECUTIVE BOARD MANDATE

There were no intra-year changes to the Executive Board during the year under review. The benefits granted to Executive Board members upon termination of tenure are explained in detail in the compensation system. SEE SECTION ‘COMMITMENTS UPON COMMENCEMENT OR TERMINATION OF THE EXECUTIVE BOARD MANDATE’

PAYMENTS TO FORMER MEMBERS OF THE EXECUTIVE BOARD

The following table shows the compensation granted and due in the 2021 financial year to former Executive Board members.

MISCELLANEOUS

The Executive Board members do not receive any additional compensation for intra-group mandates. The Executive Board members have not received any loans or advance payments from adidas AG. Furthermore, no Executive Board member received any payments or promises of payments from third parties with regard to their work at adidas.