28. Related Companies and Persons

28.1 Related Companies

Related entities as defined in IAS 24 (Related Party Disclosures) are those legal entities that are able to exert at least significant influence on Covestro AG and its subsidiaries or over which Covestro AG or its subsidiaries exercise control or have at least a significant influence. They include nonconsolidated subsidiaries, joint ventures, associated companies and post-employment benefit plans.

The goods and services provided by associated companies mainly result from the ongoing operating business with PO JV, LP, Wilmington (United States). Covestro benefits from fixed long-term supply quotas/volumes of propylene oxide (PO) from this company’s production. Further details on these business relationships are given in note 15.

Receivables from and payables to related parties mainly comprise leasing and financing matters, trade in goods and services and other transactions. In fiscal 2018, no impairment losses were recorded on receivables from related parties (previous year: €1 million).

Transactions with Bayer AG and its subsidiaries up to May 31, 2018

Until May 31, 2018, Bayer AG and its subsidiaries were classified as related companies. Effective May 31, 2018, when Johannes Dietsch, who is a member of Covestro’s Supervisory Board, left the Board of Management of Bayer AG, Bayer AG no longer has significant influence on Covestro AG.

Sales with Bayer Group companies resulted from the sale of products, goods purchased for resale and other typical business activities.

The goods and services received from Bayer Group companies mainly comprised operational goods and service transactions, leasing and services performed for Covestro by the Bayer Group through its service company Currenta GmbH & Co. OHG, Leverkusen (Germany), (Currenta) and its subsidiaries.

The services provided by the service companies are primarily services connected with the Chempark sites operated by Currenta, which are used jointly by Covestro and the Bayer Group. The services obtained from Currenta mainly comprised energy supplies, maintenance services, environmental services, and logistics and infrastructure. The latter included in particular basic site infrastructure at the Chempark sites (e.g. electricity networks, pipeline systems, site railway networks, harbor installations, wastewater treatment plants, and security services).

Covestro also used some insurance services provided by the wholly owned Bayer subsidiary Pallas Versicherung AG, Leverkusen (Germany).

The services provided and received also include leasing agreements concluded with the Bayer Group in which Covestro figured as both the lessor and the lessee.

28.2 Related Persons

Related persons as defined in IAS 24 are those natural persons who, on account of their function in the Covestro Group, are responsible for Covestro’s global business operations. These persons include the corporate officers of Covestro AG who are the members of the Board of Management and Supervisory Board.

Compensation of the corporate officers

Total compensation of €15,790 thousand (previous year: €16,962 thousand) was paid to the corporate officers in fiscal 2018, including the compensation of the Supervisory Board amounting to €1,742 thousand (previous year: €1,756 thousand).

This compensation is shown below:

Aggregate compensation (German Commercial Code) amounted to €14,337 thousand and is presented in section 25 of the combined management report. The fair value of the long-term stock-based compensation (Prisma) granted to the Board of Management in fiscal year 2018 was €3,560 thousand (previous year: €3,193 thousand).

Provisions of €12,011 thousand (previous year: €14,088 thousand) were recognized for the short-term variable cash compensation and long-term stock-based cash compensation for the members of the Board of Management serving during the 2018 reporting period. Members of the Board of Management who left the company during the fiscal year accounted for €4,523 thousand of this amount. At the end of the year, the present value of the defined benefit pension obligations for the current members of the Board of Management was €6,825 thousand (previous year: €10,322 thousand). The present value of the defined benefit pension obligations for members of the Board of Management who stepped down during the reporting period was €6,188 thousand (previous year: €647 thousand). Provisions of €1,513 thousand were recognized for long-term stock-based cash compensation for former members of the Board of Management. The present value of the defined benefit pension obligations for former members of the Board of Management was €668 thousand.

Since 2016, the members of the Board of Management have been entitled to participate in the Prisma long-term stock-based compensation program, as long as they are employed by the Covestro Group, and acquire for their own account and hold an individually defined number of Covestro shares as specified by the guidelines.

The compensation of the Supervisory Board is exclusively non-performance-related. In addition to their compensation as members of the Supervisory Board, those employee representatives who are employees of Covestro Group companies receive compensation unrelated to their service on the Supervisory Board. The total amount of such compensation was €925 thousand (previous year: €915 thousand). Pension obligations for employee representatives on the Supervisory Board amounted to €2,672 thousand (previous year: €2,683 thousand).

There were no advances or loans to members of the Board of Management or the Supervisory Board outstanding as of December 31, 2018, or at any time during 2018 or the previous year.