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.

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

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.