6. Group Executive Board: remuneration and share/option ownership in 2017
This section is audited by the external auditor.
6.1 Performance in 2017
Consolidated net sales in 2017 increased by 3.5% to CHF 2,908.3 million. Total growth comprised organic growth in local currencies of 3.5%, a foreign currency effect of +1.2% and a divestment effect of -1.2%. As in previous years, one-off costs related to the Sanitec acquisition and integration had an impact on the results. Operating profit (EBIT) adjusted for these effects increased by 2.9% to CHF 706.1 million and the correspondingly adjusted EBIT margin came to 24.3%. Increased sales volumes and a positive product mix effect had a positive impact on the operating results, as did synergies from the Sanitec integration. In particular higher raw material prices, increased personnel expenses and depreciation had a negative impact. Adjusted net income rose by 3.5% to CHF 604.2 million, with an adjusted return on net sales of 20.8%. Adjusted earnings per share improved by 3.7% to CHF 16.43. The average Return on Invested Capital (ROIC) was 22.4% (prior year 21.5%).
To determine the variable cash remuneration (STI) of the members of the Group Executive Board, the following Key Performance Indicators (KPI) are used: sales performance, EBIT and EPS compared with the previous year as well as ROIC. The achievement of qualitative individual targets is also taken into consideration. The degree of achievement varies by KPI, and the weighted average of all elements used to calculate the variable cash remuneration slightly exceeded the targets.
6.2 Remuneration awarded in 2017
The remuneration of the Group Executive Board amounted to TCHF 9,608 in 2017 (previous year TCHF 9,126). The remuneration of the CEO amounted to TCHF 2,401 in 2017 (previous year TCHF 2,287). The higher total remuneration in 2017 for the Group Executive Board compared to the previous year is the result of various factors:
Increasing effects:
- Expansion of Group Executive Board by one member (as of 1 September 2016)
- Selected base salary increases to align remuneration to the market
- Selected higher option grants (LTI) to align remuneration to the market or due to promotion to Group Executive Board
- Increase of MSPP options as a larger amount of variable remuneration was drawn in shares
- One-off employer contribution to company pension funds due to reduction of pension conversion rate
Reducing effect:
- Target achievement in the STI programme lower than in the previous year
At the 2016 General Meeting, the shareholders approved a maximum aggregate compensation amount of TCHF 9,950 for the Group Executive Board for the year 2017. The compensation paid for that period amounts to TCHF 9,608 and is therefore within the approved amount.
Further information on the remuneration awarded to the Group Executive Board for the business year 2017, compared with the maximum potential amount of remuneration, is provided with the invitation to the Ordinary General Meeting 2018.
The following table shows details of remuneration for 2017 and 2016:
| 2017 | 2016 | ||||
|---|---|---|---|---|---|
| C. Buhl CEO |
Total | C. Buhl CEO |
Total | ||
| CHF | CHF | CHF | CHF | ||
| Salary | |||||
| - Fixed salary | 861,809 | 3,449,744 | 791,804 | 3,145,644 | |
| - Variable salary1 | 516,250 | 2,013,879 | 709,550 | 2,776,122 | |
| thereof in shares in 20172 | 707,983 | 2,099,536 | |||
| Shares/options | |||||
| - Call options MSOP 2017/20163 | 749,955 | 2,475,927 | 574,986 | 2,123,866 | |
| - Call options MSPP 2017/20164 | 56,385 | 167,211 | 29,705 | 81,824 | |
| Non-cash benefits | |||||
| - Private share of company vehicle5 | 7,056 | 48,978 | 7,056 | 45,040 | |
| Expenditure on pensions | |||||
| - Pension plans and social insurance | 206,8546 | 1,433,4896 | 171,254 | 937,049 | |
| - Contribution health/accident insurance | 2,497 | 18,319 | 2,454 | 16,382 | |
| Total7 | 2,400,806 | 9,607,547 | 2,286,809 | 9,125,927 | |
|
1 The amounts to be paid (current
year), respectively the amounts effectively paid (previous year) are shown. The payment of the variable
salary occurs in the following year. Members of the Group Executive Board are free to choose between a
payment in shares or in cash.
2 Registered shares of the company with a par value of CHF 0.10 each, 3-year blocking
period, valued at fair market value at grant date of CHF 435.95 (PY CHF 361.75).
3 Call options on registered shares of the company with a par value of CHF 0.10 each,
issued
within the scope of the Management Share Option Programme (MSOP); 1 option entitles to purchase 1
registered
share at an exercise price of CHF 435.95 (previous year CHF 361.75); definitive acquisition of the
option (“vesting”) dependent on various conditions, 3-5-year blocking period (3 tranches at 33%). Market
value of CHF 39.87 (previous year CHF 31.42) determined using the binomial method.
4 Call options on registered shares of the company with a par value of CHF 0.10 each,
issued
within the scope of the Management Share Participation Programme (MSPP); 1
option entitles to purchase 1 registered share at an exercise price of CHF 435.95 (previous year CHF 361.75);
definitive acquisition of the option (“vesting”) dependent on various conditions, 1-4-year blocking
period
(4 tranches at 25%), market value of CHF 34.72 (previous year CHF 26.81) determined using the
binomial
method.
5 Valuation in accordance with the guidelines of the Swiss Federal Tax Administration FTA (0.8%
of the purchase cost per month).
6 Including one-off compensation in pension provision due to pension scheme modifications
(reduction of pension conversion rate).
7 Immaterial payments (below CHF 500) are not included in the total. Overall, these payments
do not exceed CHF 2,000 per member of the Group Executive Board.
|
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The parameters taken into consideration in the option valuation model are set out in Note 17 Participation plans of the consolidated financial statements.
6.3 Shareholdings of Group Executive Board
As of the end of 2017 and 2016, the Group Executive Board held the following shares in the company:
| Maturity | Average exercise price in CHF | C. Buhl CEO |
R. Iff CFO |
M. Reinhard | E. Renfordt-Sasse | K. Spachmann | R. van Triest | M. Baumüller | Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | ||||||||||
| Shareholdings Group Executive Board | ||||||||||
| Shares | 6,212 | 32,840 | 2,500 | 2,452 | 12,407 | 200 | 2,850 | 59,461 | ||
| Percentage voting rights shares | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | 0.16% | ||
| Call options* | ||||||||||
| End of vesting period: | ||||||||||
| Vested | 2018–2023 | 306.01 | 7,474 | 9,172 | 3,783 | 4,779 | 3,236 | 10 | 2,922 | 31,376 |
| 2018 | 2021–2024 | 357.20 | 5,745 | 7,091 | 7,261 | 2,631 | 6,140 | 50 | 784 | 29,702 |
| 2019 | 2022–2026 | 382.28 | 11,302 | 7,484 | 7,989 | 4,074 | 6,647 | 2,596 | 697 | 40,789 |
| 2020 | 2023–2027 | 398.85 | 13,053 | 7,427 | 7,895 | 3,664 | 6,632 | 4,602 | 1,926 | 45,199 |
| 2021 | 2024–2027 | 398.85 | 12,776 | 7,299 | 7,770 | 3,567 | 6,554 | 4,592 | 1,878 | 44,436 |
| 2022 | 2027 | 435.95 | 6,270 | 3,176 | 3,314 | 1,504 | 2,926 | 2,006 | 1,504 | 20,700 |
| Total options | 56,620 | 41,649 | 38,012 | 20,219 | 32,135 | 13,856 | 9,711 | 212,202 | ||
| Percentage potential share of voting rights options | 0.15% | 0.11% | 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | 0.57% | ||
* Purchase ratio 1 share for 1 option |
||||||||||
| Maturity | Average exercise price in CHF | C. Buhl CEO |
R. Iff CFO |
M. Reinhard | E. Renfordt-Sasse | K. Spachmann | R. van Triest | M. Baumüller | Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | ||||||||||
| Shareholdings Group Executive Board | ||||||||||
| Shares | 4,588 | 31,812 | 2,500 | 2,336 | 8,691 | 40 | 1,343 | 51,310 | ||
| Percentage voting rights shares | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | 0.14% | ||
| Call options* | ||||||||||
| End of vesting period: | ||||||||||
| Vested | 2017–2022 | 242.80 | 1,633 | 0 | 0 | 1,990 | 7,314 | 0 | 3,046 | 13,983 |
| 2017 | 2020–2023 | 306.01 | 5,841 | 9,172 | 9,308 | 2,789 | 8,013 | 10 | 995 | 36,128 |
| 2018 | 2021–2023 | 330.95 | 5,339 | 6,834 | 7,011 | 2,477 | 6,140 | 10 | 687 | 28,498 |
| 2019 | 2022–2026 | 355.45 | 10,896 | 7,227 | 7,739 | 3,920 | 6,647 | 2,556 | 600 | 39,585 |
| 2020 | 2023–2026 | 361.75 | 6,377 | 3,994 | 4,331 | 2,006 | 3,706 | 2,556 | 325 | 23,295 |
| 2021 | 2026 | 361.75 | 6,100 | 3,866 | 4,206 | 1,909 | 3,628 | 2,546 | 277 | 22,532 |
| Total options | 36,186 | 31,093 | 32,595 | 15,091 | 35,448 | 7,678 | 5,930 | 164,021 | ||
| Percentage potential share of voting rights options | 0.1% | < 0.1% | < 0.1% | < 0.1% | 0.1% | < 0.1% | < 0.1% | 0.44% | ||
* Purchase ratio 1 share for 1 option |
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As of 31 December 2017, there were no outstanding loans or credits between the company and the members of the Group Executive Board, closely related parties or former members of the Group Executive Board.