3. Board of Directors

3.1/3.2 Members of the Board of Directors

During 2014, the Board of Directors was composed of five members.

Albert M. Baehny (1952)

Executive Chairman of the Board of Directors since 2011
Swiss citizen

Albert M. Baehny graduated with a degree in biology from the University of Fribourg (CH). In 1979, he started his career in the research department of Serono-Hypolab. His further career comprised various marketing, sales, strategic planning and global management positions with Dow Chemicals Europe (1981–1993), Ciba-Geigy/Ciba SC (1994–2000), Vantico (2000–2001) and Wacker Chemie (2001–2002). For more than 20 years, Albert M. Baehny gathered relevant knowledge and expertise with global business responsibility. Before joining Geberit, he was Senior Vice President of Wacker Specialties. At Geberit he was Head of Group Division Marketing and Sales Europe from 2003–2004. From 2005 until the end of 2014, Albert M. Baehny was Chief Executive Officer (CEO) of the Geberit Group. He has been Chairman of the Board of Directors since 2011.

Robert F. Spoerry (1955)

Vice Chairman of the Board of Directors since 2011, non-executive, independent member of the Board of Directors since 2009, Lead Director from 2011 until the end of 2014
Swiss citizen
Chairman of the Board of Directors Mettler-Toledo International Inc., Greifensee (CH); Chairman of the Board of Directors Sonova Holding AG, Stäfa (CH); member of the Board of Directors Conzzeta AG, Zurich (CH)

Robert F. Spoerry holds a degree in mechanical engineering from the Swiss Federal Institute of Technology (ETH) in Zurich (CH) and an MBA from the University of Chicago (US). He has been with Mettler-Toledo since 1983 and was its CEO from 1993–2007. He oversaw the separation from Ciba-Geigy in 1996 and the initial public offering of Mettler-Toledo on the New York Stock Exchange (NYSE) in 1997. In 1998, he became Chairman of the Board of Directors.

Robert F. Spoerry has not been a member of any Management Board of a Geberit Group company in the past three years. Apart from his Board of Directors' mandate, he does not have any significant business relations with the Geberit Group.

Felix R. Ehrat (1957)

Non-executive, independent member of the Board of Directors since 2013
Swiss citizen
Group General Counsel and member of the Executive Committee Novartis AG, Basel (CH); Chairman of the Board of Directors Globalance Bank AG, Zurich (CH); member of the Board of Directors Hyos Invest Holding AG, Zurich (CH)

Felix R. Ehrat received his doctorate of law from the University of Zurich (CH) in 1990, where he previously also received his law degree in 1982. In 1986, he completed an LL.M. at the McGeorge School of Law in the USA. In 1985, he was admitted to the Zurich Bar Association. He has been Group General Counsel of Novartis since October 2011 and a member of the Executive Committee of the Novartis Group since January 1, 2012. Felix R. Ehrat is a leading practitioner of corporate, banking and mergers and acquisitions law, as well as an expert in corporate governance and arbitration. He started his career as an Associate with Bär & Karrer in Zurich (CH) in 1987, became Partner in 1992 and advanced to Senior Partner (2003–2011) and Executive Chairman of the Board of Directors (2007–2011) of the firm. Felix R. Ehrat is Chairman of the Board of Directors of Globalance Bank AG, Zurich (CH) and a member of the Board of Directors of Hyos Invest Holding AG, Zurich (CH). He is also a member of the Executive Boards of Economiesuisse and Swiss Holdings and a member of the Board of Trustees of Avenir Suisse.

Felix R. Ehrat has not been a member of any Management Board of a Geberit Group company in the past three years. Apart from his Board of Directors' mandate, he does not have any significant business relations with the Geberit Group.

Hartmut Reuter (1957)

Non-executive, independent member of the Board of Directors since 2008
German citizen
Member of the Shareholders Committee and Supervisory Board Vaillant GmbH, Remscheid (DE); Chairman of the Advisory Board GBT-Bücolit GmbH, Marl (DE); Member of the Board of Directors Wilkhahn GmbH + Co KG, Bad Münder (DE)

After graduating in industrial engineering from Technical University Darmstadt (DE), Hartmut Reuter joined the Bosch Group in Stuttgart (DE) in 1981. During more than 15 years with Bosch, he occupied management positions in various industrial business units, until finally becoming Director in the planning and controlling division at Bosch headquarters. From 1997–2009, Hartmut Reuter was member of the Group Executive Board of the Rieter Group in Winterthur (CH); for the last seven of those years he was CEO of the company. Since then, he has worked as a freelance management consultant and has held positions in various supervisory bodies.

Hartmut Reuter has not been a member of any Management Board of a Geberit Group company in the past three years. Apart from his Board of Directors' mandate, he does not have any significant business relations with the Geberit Group.

Jørgen Tang-Jensen (1956)

Non-executive, independent member of the Board of Directors since 2012
Danish citizen
Member of the Board of Directors Coloplast A/S (DK); member of the Confederation of Danish Industry Business Political Committee

Jørgen Tang-Jensen holds an MSc in Economics & Business Administration from the Business School in Aarhus (DK). He has also completed a number of management further training courses at the IMD in Lausanne (CH) and at Stanford University (US). Jørgen Tang-Jensen has been CEO of the Danish building materials manufacturer VELUX A/S since 2001. The VELUX Group has 10,000 employees at its sales companies in about 40 countries and its manufacturing companies in 11 countries. VELUX is one of the strongest brands in the global building materials sector. After completing his studies, Jørgen Tang-Jensen joined the VELUX Group in 1981 and worked in various executive positions in the main VELUX sales and production companies until being appointed CEO. As a managing director, he was responsible for the respective national companies in Denmark from 1989–1991, France from 1991–1992, the United States in 1996 and Germany from 1999–2000.

Jørgen Tang-Jensen has not been a member of any Management Board of a Geberit Group company in the past three years. Apart from his Board of Directors' mandate, he does not have any significant business relations with the Geberit Group.

Jeff Song (1946)

Non-executive, independent member of the Board of Directors since 2012 (until April 3, 2014)
US citizen

Jeff Song earned a Master’s degree in mechanical engineering at Jiaotong University in Shanghai (CN) and at the University of Toronto (CA). In 1988 he received his Ph.D. at the University of Utah (US). He was responsible for the China business of Ingersoll Rand from 2004 to January 2014 and reported directly to the CEO and Chairman of the Group. He also headed the management body of the Ingersoll Rand Division Heads of the Asia/Pacific region. From 1988–2004, Jeff Song was employed at Honeywell. In the Honeywell Group he held different positions as a de­vel­op­ment engineer, marketing and sales director as well as managing director, first in the USA and later in China.

Jeff Song has not been a member of any Management Board of a Geberit Group company in the past three years. Apart from his Board of Directors' mandate, he does not have any significant business relations with the Geberit Group.

3.3 Regulations in the Articles of Incorporation concerning the number of permissible activities in accordance with Art. 12 Para. 1 Clause 1 OaEC

Members of the Board of Directors may hold up to five mandates in profit-seeking legal entities and up to five mandates in non-profit-seeking legal entities or charitable legal entities outside the Geberit Group.

Mandates of a member of the board of directors or the group executive board in legal entities which are controlled by the Company or which control the Company as well as mandates held by such member in his/her capacity as member of the board of directors of the Company, or held by order and on behalf of the Company or legal entities controlled by it shall not count as mandates in legal entities outside the Geberit Group.

Mandates of a member of the board of directors of the Company in legal entities outside the Geberit Group which are under common control as well as mandates which are held by such member in his/her capacity as a member of the supreme governing body or of the group management of a legal entity outside the Geberit Group or held by order and on behalf of such legal entity or legal entities controlled by it shall be deemed one mandate outside the Geberit Group.

Mandates held by a member of the board of directors in his/her main activity as a member of the group management of a legal entity outside the Geberit Group or held by order and on behalf of such legal entity or legal entities controlled by it shall not count as mandates within the meaning of this provision.

3.4 Elections and terms of office

Since January 1, 2014, pursuant to Art. 3 of the Ordinance Against Excessive Compensation for Listed Companies (OaEC), the term of office for a member of the Board of Directors ends at the closing of the following ordinary General Meeting. Members of the Board of Directors are elected on an individual basis. Re-election is possible.

Also since January 1, 2014, the Chairman of the Board of Directors is elected by the General Meeting. Their term of office also ends at the closing of the following ordinary General Meeting. Re-election is possible. If the position of Chairman of the Board of Directors is vacant, the Board of Directors is to appoint a new Chairman of the Board of Directors from among its members for the remaining term of office.

Since January 1, 2014, members of the Nomination and Compensation Committee are also elected annually and on an individual basis at the General Meeting. Only members of the Board of Directors are eligible. Their term of office ends at the closing of the following ordinary General Meeting. Re-election is possible.

The members of the Board of Directors, Chairman of the Board of Directors and members of the Committees retire from their positions at the next ordinary General Meeting following their 70th birthday.

Jeff Song stepped down from the Board of Directors for health reasons at the General Meeting on April 3, 2014.

At the General Meeting 2015, the Chairman of the Board of Directors, the Vice Chairman and the remaining members of the Board of Directors and the members of the Nomination and Compensation Committee are standing for re-election for a further year.

The Geberit AG Board of Directors will nominate  Thomas Hübner as a new member of the Board of Directors at the ordinary General Meeting on April 1, 2015. The nomination will be made within the context of succession planning for Jeff Song.

3.5 Internal organizational structure

The organization of the Board of Directors is governed by law, the Company’s  Articles of Incorporation and the  “Organization Regulations of the Board of Directors of Geberit AG” (see also  “Definition of areas of responsibility”).

Upon the entry into force of the OaEC on January 1, 2014, the Chairman of the Board of Directors and the members of the Nomination and Compensation Committee are now each to be elected annually and on an individual basis by the General Meeting. After each ordinary General Meeting, the Board of Directors elects the Vice Chairman from among its members, as well as the Chairman of the Nomination and Compensation Committee and the Chairman and the members of the Audit Committee.

As part of the reorganization in the Board of Directors – with Albert M. Baehny as Chairman of the Board of Directors while at the same time remaining in office as CEO – the function of Lead Director was created. The Lead Director is invested with additional authorities so that – despite the positions of Chairman of the Board of Directors and CEO being combined – exemplary corporate governance is guaranteed. Following the resignation of Albert M. Baehny as CEO with effect from the end of 2014, the function of Lead Director will no longer be needed and is therefore abolished as of December 31, 2014.

The Board of Directors meets whenever business so requires, usually six times a year for one day each (2014: 12 meetings). Meetings shall be chaired by the Chairman or, in the event of his incapacity, by the Vice Chairman. The Board of Directors shall appoint a Secretary, who need not be a member of the Board of Directors. The Chairman of the Board of Directors may invite members of the Group Executive Board to attend meetings of the Board of Directors.

The Board of Directors shall be quorate if a majority of its members are present. Attendance can also be effected via telephone or electronic media. Resolutions are passed with the majority of votes cast. In the event of a tie, the Chairman shall have the casting vote.

The regular meetings of the Board of Directors and committees are scheduled early, so that as a rule all members participate in person. The participation rate in 2014 was 96%.

The Board of Directors has formed two committees composed exclusively of non-executive and independent Board members:

Nomination and Compensation Committee (NCC; formerly Personnel Committee)

The compensation and nomination tasks and responsibilities are combined in this Committee.

The Nomination and Compensation Committee consists of three or more members of the Board of Directors. The members of the Nomination and Compensation Committee are elected individually and annually by the General Meeting. The Chairman of the Nomination and Compensation Committee is selected by the Board of Directors. If the Nomination and Compensation Committee is not complete, the Board of Directors is to appoint members to fill the corresponding position(s) for the remaining term of office. The Nomination and Compensation Committee shall be quorate if a majority of its members are present. Resolutions are passed with the majority of votes cast. In the event of a tie, the Chairman shall have the casting vote.

The members of the Nomination and Compensation Committee as of December 31, 2014, are Robert F. Spoerry (Chairman), Hartmut Reuter and Jørgen Tang-Jensen. The committee meets at least three times a year for a half day each (2014: four meetings).

This corresponds to a participation rate of 100%.

The Nomination and Compensation Committee supports the Board of Directors in fulfilling its duties specified by law and the Articles of Incorporation in the area of the compensation and personnel policy of the Geberit Group. The powers and duties of the Nomination and Compensation Committee are based on the following principles:

1. Preparation and periodical review of the Geberit Group’s compensation policy and principles and personnel policy, performance criteria related to compensation and periodical review of their implementation, as well as submission of the respective proposals and recommendations to the Board of Directors.
2. Preparation of all relevant decisions of the Board of Directors in relation to the nomination and compensation of the members of the Board of Directors and of the Group Executive Board, as well as submission of the respective proposals and recommendations to the Board of Directors.

The overall responsibility for the duties and competencies assigned to the Nomination and Compensation Committee remains with the Board of Directors.

The Board of Directors may delegate further powers and duties to the Nomination and Compensation Committee in respect of nomination, compensation and related matters.

The organization, detailed responsibilities, functioning and reporting of the Nomination and Compensation Committee are stipulated in the  Organization Regulations of the Nomination and Compensation Committee (NCC) of the Board of Directors of Geberit AG.

Audit Committee (AC)

The Audit Committee consists of three independent, non-executive members of the Board of Directors. They are appointed annually by the Board of Directors. The Board of Directors appoints one of the members of the Audit Committee as Chairman. The Audit Committee shall be quorate if a majority of its members are present. Resolutions are passed with the majority of votes cast. The CEO and CFO as well as the internal and external auditors attend the meetings if necessary. Furthermore, the committee is entitled to hold meetings exclusively with representatives of the external as well as the internal auditors. The Audit Committee has direct access to the internal auditors and can obtain all the information it requires within the Geberit Group and consult the responsible employees.

As of December 31, 2014, the Audit Committee is composed of Hartmut Reuter (Chairman), Felix R. Ehrat and Robert F. Spoerry. It meets at least twice a year for a half day each (2014: two meetings).

This corresponds to a participation rate of 100%.

The Audit Committee supports the Board of Directors in fulfilling its duties specified by law, in particular in the areas of financial control (supervision of the internal and external auditors and monitoring of financial reporting) and ultimate supervision of the persons entrusted with the management (internal control system). The Audit Committee determines the scope and planning of the internal auditors and coordinates them with those of the external auditors. For every meeting, the internal and external auditors provide a comprehensive report on all audits carried out and the measures to be implemented. The Audit Committee monitors the implementation of the conclusions of the audit. It also assesses the functionality of the internal control system, including risk management (refer to  “Information and control instruments vis-à-vis the Group Executive Board”). The Audit Committee supports the Board of Directors with corporate governance issues, monitors the relevant corporate governance aspects and develops them further. The overall responsibility for the duties and competencies assigned to the Audit Committee remains with the Board of Directors.

The organization, detailed responsibilities, functioning and reporting of the Audit Committee are set out in the  Organization Regulations of the Audit Committee (AC) of the Board of Directors of Geberit AG.

3.6 Definition of areas of responsibility

Pursuant to Swiss Corporate Law and the Articles of Incorporation, the Board of Directors has the following non-transferable and irrevocable responsibilities:

• The ultimate management of the Company and the giving of the necessary directives
• The establishment of the organization
• The structuring of the accounting system and the financial controls as well as the financial planning
• The appointment and removal of the persons entrusted with the management and the representation
• The ultimate supervision of the persons entrusted with the management; in particular, in view of compliance with the law, Articles of Incorporation, regulations and directives
• The preparation of the annual report and of the compensation report (for the first time for the business year 2014), as well as the preparation of the General Meeting and the implementation of its resolutions
• The notification of the judge in case of overindebtedness

The Board of Directors determines the strategic objectives and the general resources for achieving these, and decides on major business transactions. Further areas of responsibility of the Board of Directors are set out in the Organization Regulations of the Board of Directors and the Supplement to the Organization Regulations.

To the extent legally permissible and in accordance with its Organization Regulations, the Board of Directors has assigned the operational management to the Chief Executive Officer (CEO). The individual duties assigned to the Chief Executive Officer (CEO) are governed in particular by the Supplement to the Organization Regulations. The Chief Executive Officer (CEO) is authorized to further delegate powers to individual members of the Group Executive Board and/or to other executives of the Geberit Group.

As of the end of 2014, the Group Executive Board is composed of the Chief Executive Officer and three other members. The members of the Group Executive Board are appointed by the Board of Directors based on the proposal of the Nomination and Compensation Committee.

The Articles of Incorporation and/or the Organization Regulations of the Board of Directors regulate the duties and powers of the Board of Directors as a governing body, the Chairman, the Vice Chairman and Lead Director (Lead Director until December 31, 2014) and the committees. The Organization Regulations also define the rights and duties of the Group Executive Board, which are set forth in more detail in the Internal Regulations for the Group Executive Board. The Supplement to the Organization Regulations contains a detailed list of the decision-making powers and Group management duties.

The Organization Regulations of the  Board of Directors, the  Nomination and Compensation Committee and the  Audit Committee can be viewed at  www.geberit.com/infocenter.

3.7 Information and control instruments vis-à-vis the Group Executive Board

At every meeting, the members of the Group Executive Board inform the Board of Directors of current business developments and major business transactions of the Group or Group companies, as the case may be. Between meetings, the Board of Directors is comprehensively informed in writing about current business developments and the company’s financial situation on a monthly basis. Essentially, this report contains key statements on the Group and on the market development, information and key figures on the Group sales and profit development (in January, April, July and October, it contains statements only on sales development and not on profit development), statements about the course of business in the individual product lines and countries as well as an analysis on the share price development. The more extensive quarterly report additionally contains the expectations of the operational management on the development of results until the end of the financial year, information on the development of the workforce and on the investments made, the composition of the shareholders as well as market expectations in regard to the business development. In the past year, the Board of Directors held 12 meetings.

Furthermore, the Vice Chairman and Lead Director of the Board of Directors (Lead Director until December 31, 2014) and the Chief Executive Officer were in contact at regular intervals with respect to all major issues of corporate policy. Each member of the Board of Directors may individually demand information with respect to all matters of the Group or Group companies, as the case may be.

Based on the Organization Regulations of the Board of Directors, the Audit Committee has implemented a comprehensive system for monitoring and controlling the risks linked to the business activities. This process includes the risk identification, analysis, control and reporting. Operationally, the Group Executive Board is responsible for control of risk management. In addition, responsible persons are designated in the company for significant individual risks. These responsible parties decide on specific actions for risk mitigation and monitor their implementation. Every other year, the Internal Audit department issues a risk report for the attention of the Board of Directors. Significant risks are also constantly discussed in the meetings of the Group Executive Board and Board of Directors, which take place on a regular basis. For information on the management of financial risks, refer to  Notes to the Consolidated Financial Statements, 4. “Risk assessment and management”. In addition, the Internal Audit department reports to the Audit Committee at every meeting on completed audits and on the status of the implementation of findings and optimization proposals of previous audits.