The Remuneration Report contains information on the principles, programmes and procedures for determining the remuneration paid to the CPH Board of Directors and Group Executive Management and their amounts in 2017.
This report is divided into two sections. Section 1 is not subject to the auditing required under Article 13 of Switzerland’s “VegüV” ordinance, while Section 2 is.
1. Remuneration and general information
The fundamental aim of the CPH Group is to provide remuneration that is in line with market levels. CPH regards such remuneration as a combination of a fixed and a variable salary component. The amount of each individual’s overall remuneration and the components thereof are determined by regularly reappraising the current classification of each function, benchmarking the remunerations awarded and comparing these to market rates (see also the details for the Board of Directors and Group Executive Management). Any modifications proposed to the remuneration for the Group CEO or further members of Group Executive Management are submitted for approval to the full Board of Directors by its Personnel & Compensation Committee, with due reference to the market comparisons conducted.
Every meeting of the Personnel & Compensation Committee is preced- ed by an agenda that is communicated to each Board member. The Committee also informs the other Board members of the topics it has discussed and the background to any proposals or recommendations submitted at the next Board meeting. A committee member will voluntarily withdraw from any meeting at which any issues or remuneration are to be discussed regarding themselves or related persons.
The Personnel & Compensation Committee generally meets three times (and at least twice) a year. Three such meetings were held in 2017.
The members of the Personnel & Compensation Committee are elect- ed individually by the Ordinary General Meeting to serve for a one-year term. For further details of the Committee’s current composition and prime duties and responsibilities, please see the Corporate Governance section.
Individual performance has a direct influence on the remuneration paid to all CPH Group personnel, including management members. The assessment thereof is based on the degree to which broader and individual targets are achieved, and such achievement is remunerated via the variable salary compensation component. For each function, a target bonus is defined that will be paid if the targets concerned are achieved in full. The actual bonus to be paid will then be determined on the basis of the degrees to which such targets are achieved, with a maximum annual bonus payable amounting to 150% of the target bonus set. The bonus gradations between the lower and upper limits of 0% and 150% may either be linear or consist of a series of steps: the details here are determined as part of the annual target-setting process. For 2017 linear gradations were adopted for all the personnel concerned. CPH does not award any discretionary bonus payments.
While the Articles of Incorporation of CPH Chemie + Papier Holding AG permit long-term incentives (particularly in the form of employee share ownership), the CPH Group currently has no such remuneration components. There are no management share ownership or share option plans for Board or management members. There are also no contractual agreements regarding severance payments.
The Group CEO has a contractual notice period of 12 months, while the further members of Group Executive Management have a notice period of six months. CPH maintains occupational pension arrange- ments for all its employees. There are no additional insurance arrange- ments for Group Executive Management members. The members of the Board of Directors are not insured under any CPH occupational pension scheme. The CPH remuneration system remained unchanged in 2017 from the previous year.
The structure and the amounts of the remuneration paid for certain functions are regularly reappraised using external benchmarks. The remuneration paid to the members of Group Executive Management and the three Divisional Managements was analyzed by an external company in 2016. Its findings and conclusions were then discussed by the Personnel & Compensation Committee, and any adjustments deemed necessary were adopted from 1 January 2017.
The proposals on the maximum aggregate remuneration for the Board of Directors and Group Executive Management are prepared by the Personnel & Compensation Committee, appraised by the full Board and submitted to the General Meeting for approval. Should the proposal be rejected, and should the Board not submit a new proposal (or have this rejected too), an Extraordinary General Meeting should be convened within three months, or the Board may submit a further such proposal for retrospective approval at the next Ordinary General Meeting.
Board of Directors
The remuneration paid to members of the Board of Directors consists of a fixed monetary amount. Members’ work on either of the Board’s two technical committees is additionally remunerated via meeting attendance fees. Board members are further awarded a flat daily allowance for any work beyond their normal meeting activities.
The remuneration paid to Board members is determined on the basis of comparisons with publicly available data for comparable Swiss industrial companies whose shares are also listed on the SIX Swiss Exchange. The remuneration rates concerned are proposed to the full Board by its Personnel & Compensation Committee.
In accordance with Switzerland’s “Veg V” Ordinance against Excessive Compensation in Stock Exchange Listed Companies and the corre- spondingly-amended Articles of Incorporation of CPH Chemie + Papier Holding AG, the maximum aggregate amount payable to the Board of Directors in the period between two Ordinary General Meetings is subject to the approval of the first such Meeting. This provision entered into effect from the Ordinary General Meeting for the 2015 business year.
For specific remuneration payments, please see Section 2 below.
Group Executive Management
The remuneration paid to the members of CPH’s Group Executive Management consists of a fixed and a variable component, both fully paid in monetary form. The target bonus for Group Executive Management members amounts to between around 20% and 67% of their basic salary. The actual variable remuneration paid depends on the degrees to which group targets and individual divisional or functional targets are achieved. The maximum variable remuneration amounts to 100% of the fixed basic salary for the Group CEO and 45% thereof for the further Group Executive Management members.
The assessment of the performance of Group Executive Management for variable-remuneration purposes is based on a specific target-setting process. These targets are set in five areas: financial results, customers & market, innovation, processes and leadership & personnel. The financial results targets are the same for all Group Executive Management members, while individual divisional and/or functional targets are set in the four further areas.
The achievement of the financial results targets accounts for 60% of the variable remuneration, with the remaining 40% based on the achievement of the targets set in the other four areas. EBIT, operating cash flow and net working capital targets were set as the financial results targets for 2017. The Heads of Divisions’ performance in finan- cial results terms is based two-thirds on the results of their division and one-third on Group results. The corresponding performances of the Group CEO and the CFO are based solely on the Group results achieved.
The targets for all target areas are prescribed by the Board of Directors for all Group Executive Management members (with the financial results targets derived directly from agreed budget parameters). The Group CEO and the further members of Group Executive Management may also make target proposals. The latter have their achievement of their targets assessed by the Group CEO, who submits appropriate recommendations to the Personnel & Compensation Committee. The Group CEO’s target achievements are assessed by the Chairman of the Board. All such assessments are discussed by the Personnel & Compensation Committee, which then submits a report to the full Board on the degrees to which each member of Group Executive Management has achieved the targets set and recommendations on the individual bonuses to be paid. The final decision on such bonuses is then taken by the Board in toto (and, since the 2016 business year, with due regard to the maxima specified by the Ordinary General Meeting).
With the exception of one company car, no fringe benefits are granted to Group Executive Management members.
The Group CEO is entitled to make proposals on the remuneration to be paid to Group Executive Management members. Up until the 2015 business year, the final amount of fixed and variable remuneration to be awarded to Group Executive Management in its entirety was set annually by the Board of Directors.
With effect from the Ordinary General Meeting for the 2014 business year, and in accordance with Switzerland’s new “VegüV” ordinance and the correspondingly-amended Articles of Incorporation of CPH Chemie + Papier Holding AG, the maximum aggregate fixed and variable remuneration payable to Group Executive Management is now approved by each Ordinary General Meeting for the following business year. This was first done at the Ordinary General Meeting in 2015, for the 2016 business year.
Any new members of Group Executive Management who are appointed and assume their duties after the Ordinary General Meeting has approved the maximum aggregate Group Executive Management remuneration for the year concerned may − under Article 22 of the CPH Chemie + Papier Holding AG Articles of Incorporation − be paid an additional amount totalling (for all such new members) no more than 40% of this maximum aggregate amount.
The remuneration paid in 2017 to the members of the Board of Direc- tors, the Group CEO (who received the highest remuneration of any Group Executive Management member) and the further members of Group Executive Management is shown in the tables in Section 2.
2. Remuneration paid to members of the Board of Directors and Group Executive Management
This remuneration includes salaries, bonuses, credits, social security payments and occupational pension scheme contributions.
Remuneration paid to members of the Board of Directors
A maximum aggregate remuneration of CHF 930 000 was set for the period between the 2017 and 2018 Ordinary General Meetings by the 2017 Meeting.
Notes on the remuneration paid to members of the Board
The amounts shown are the remuneration paid for the year concerned, regardless of when such payment was made. All such remuneration was in monetary form. Board members are not subject to any share ownership or share option plans. The remuneration is shown in gross form, including employees’ social security contributions. The social security contributions shown separately include those of the employer.
No remuneration was paid to any former Board members. No loans were made to any current or former Board members, and no such loans are outstanding.
No remuneration was paid and no loans were made to any parties related to any Board members, and no such loans are outstanding. No transactions were conducted on non-market terms with any natural persons or legal entities related to any Board members.
Remuneration paid to members of Group Executive Management
A maximum aggregate remuneration of CHF 3 350 000 was set for the 2017 financial year by the 2016 Ordinary General Meeting.
Notes on the remuneration paid to members of Group Executive Management
The variable remuneration shown for 2017 corresponds to the provi- sions made (on an accrual basis). The variable remuneration shown for 2016 has been adjusted to reflect the payments actually made. This is not new remuneration, but the same remuneration as was shown in the 2016 Annual Report. That remuneration could only be shown on the basis of the provisions made (on an accrual basis), however, whereas the above table shows the final amounts actually paid for 2016. All such remuneration, both fixed and variable, is in monetary form. Group Executive Management members are not subject to any share ownership or share option plans. The remuneration is shown in gross form, including employees’ company pension scheme and social security contributions. The company pension scheme and social security contributions shown separately include those of the employer. “Further compensation” relates to the private use of the company car and any long-service awards.
No remuneration was paid to any former Group Executive Management members. No loans were made to any current or former Group Executive Management members, and no such loans are outstanding.
No remuneration was paid and no loans were made to any parties related to any Group Executive Management members, and no such loans are outstanding. No transactions were conducted on non-market terms with any natural persons or legal entities related to any Group Executive Management members.