SAP awards hefty option boost to executives, plans 5 percent dividend rise

SAP reported strong results for 2015, which were driven by license renewals of its classic packaged software. It also raised its outlook for 2017 while leaving its 2020 targets unchanged.

Chief Executive Bill McDermott received compensation for 2015 including salary, benefits and short- and long-term incentives of 9.28 million euros ($10.40 million), up nearly 15 percent over 2014, according to SAP's annual report published on Tuesday.

McDermott also received restricted stock options under a three-year plan that had a theoretical value of 8.32 million euros at the end of last year but which will fluctuate in price before he is allowed to realize them later in the decade.

SAP executive compensation, while high by German corporate standards, remains modest compared with U.S. software peers. Silicon Valley rival Oracle Corp paid $53 million each in total compensation to co-CEOs Safra Catz and Mark Hurd during its fiscal year 2015, according to filings.

The option awards were based on McDermott meeting 112.96 percent of the company's key performance indicators in 2015. By contrast, the CEO met 77.9 percent of his targets in 2014 and 93 percent in 2013, according to company filings.

Last Thursday, SAP extended the contracts of its top executive team until 2021, according to an internal memo seen by Reuters, a move that dispels speculation about the future tenure of McDermott.

The board of directors at Europe's largest software maker also recommended shareholders approve a 1.15 euro ($1.29) dividend for 2015 at its annual meeting in May, representing a payout ratio of 45 percent. SAP said it planned to maintain a dividend totaling more 35 percent of profit after tax in the future.

Annual compensation for SAP's top four executives under McDermott - Chief Finance Officer Luka Mucic, sales chief Robert Enslin, product chief Bernd Leukert and customer service head Gerhard Oswald - ranged from 3.85 million to 3.94 million euros in 2015, according to the annual report.

Compensation for Mucic, Enslin and Leukert roughly doubled over 2014, but the increases largely reflected the month when they joined the supervisory board in that year.

McDermott lost his sight in one eye after falling down a flight of stairs during a holiday last July, leading to speculation in some German media over whether he was fit to continue as chief executive and would be replaced.

SAP shares traded slightly lower at 70.33 euros in Frankfurt at 1130 GMT.

(Editing by Christoph Steitz and Susan Thomas)