7. Group Executive Board: remuneration and share/option ownership in 2018
This section is audited by the external auditor.
7.1 Performance in 2018
Consolidated sales in 2018 increased by 5.9% to CHF 3,081 million. Total growth comprised organic growth in local currencies of 3.1% and a foreign currency effect of +2.8%. As in previous years, one-off costs related to the Sanitec acquisition and integration had an impact on results, although to a significantly lower extent and for the last time in this reporting year. Operating profit (EBIT) adjusted for these effects increased by 5.4% to CHF 744 million and the adjusted EBIT margin came to 24.2%. The increased year-on-year operating results were above all attributable to higher sales volumes, price increases, positive effects of the closure of two plants in France in the previous year as well as to continuous efficiency improvements, while higher raw material prices as well as tariff-related increases in personnel expenses had a negative impact. Adjusted earnings per share improved by 4.7% to CHF 17.21. The adjusted return on invested capital (ROIC) rose to 22.6% (previous year 22.4%).
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.
7.2 Remuneration awarded in 2018
The remuneration of the Group Executive Board amounted to TCHF 8,727 in 2018 (previous year TCHF 9,608). The remuneration of the CEO amounted to TCHF 2,503 in 2018 (previous year TCHF 2,401). The lower total remuneration in 2018 for the Group Executive Board compared to the previous year is the result of two main factors:
- no one-off employer contributions to the company pension funds in 2018
- the lower remuneration of the new Group Executive Board member compared to his predecessor which affects the STI and LTI figures
At the 2017 General Meeting, the shareholders approved a maximum aggregate amount of TCHF 11,300 for the remuneration of the Group Executive Board for the year 2018. The compensation paid for that period amounts to TCHF 8,727 and is therefore within the approved amount.
Further information on the remuneration awarded to the Group Executive Board for the business year 2018, compared with the maximum potential amount of remuneration, is provided with the invitation to the ordinary General Meeting 2019.
The following table shows details of remuneration for 2018 and 2017:
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| C. Buhl CEO |
Total | C. Buhl CEO |
Total | ||
| CHF | CHF | CHF | CHF | ||
| Salary | |||||
| - Fixed salary | 931,801 | 3,342,650 | 861,809 | 3,449,744 | |
| - Variable salary1 | 541,350 | 1,947,550 | 516,250 | 2,013,879 | |
| thereof in shares in 20182 | 515,182 | 1,296,600 | |||
| Shares/options | |||||
| - Call options MSOP 2018/20173 | 809,885 | 2,357,518 | 749,955 | 2,475,927 | |
| - Call options MSPP 2018/20174 | 43,639 | 109,830 | 56,385 | 167,211 | |
| Non-cash benefits | |||||
| - Private share of company vehicle5 | 7,056 | 46,380 | 7,056 | 48,978 | |
| Expenditure on pensions | |||||
| - Pension plans and social insurance | 166,482 | 905,247 | 206,8546 | 1,433,4896 | |
| - Contribution health/accident insurance | 2,476 | 18,172 | 2,497 | 18,319 | |
| Total7 | 2,502,689 | 8,727,347 | 2,400,806 | 9,607,547 | |
1 The amounts to be paid (current year), and the amounts effectively paid (previous year) respectively, and 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 432.20 (PY CHF 435.95).
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 432.20 (previous year CHF 435.95); definitive acquisition of the option (“vesting”) dependent on various conditions, 3-5-year blocking period (3 tranches at 33%). Market value of CHF 39.29 (previous year CHF 39.87) 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 432.20 (previous year CHF 435.95); definitive acquisition of the option (“vesting”) dependent on various conditions, 1-4-year blocking period (4 tranches at 25%), market value of CHF 36.61 (previous year CHF 34.72) 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.
7.3 Shareholdings of Group Executive Board
As of the end of 2018 and 2017, the Group Executive Board held the following shares in the company:
| Maturity | Average exercise price in CHF | C. Buhl CEO |
R. Iff CFO |
M. Baumüller | E. Renfordt-Sasse | K. Spachmann | R. van Triest | M. Ziegler | Total | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | ||||||||||
| Shareholdings Group Executive Board | ||||||||||
| Shares | 7,404 | 31,564 | 3,078 | 1,546 | 12,500 | 300 | 2,416 | 58,808 | ||
| 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 | 2020–2024 | 332.00 | 13,219 | 8,836 | 3,706 | 6,166 | 807 | 60 | 2,857 | 35,651 |
| 2019 | 2022–2026 | 394.76 | 11,600 | 7,665 | 754 | 4,074 | 6,766 | 2,621 | 980 | 34,460 |
| 2020 | 2023–2027 | 409.97 | 13,351 | 7,608 | 1,983 | 3,664 | 6,751 | 4,627 | 921 | 38,905 |
| 2021 | 2024–2028 | 409.97 | 19,945 | 10,746 | 3,462 | 5,161 | 9,684 | 6,653 | 2,548 | 58,199 |
| 2022 | 2025–2028 | 434.08 | 13,439 | 6,623 | 3,088 | 3,098 | 6,056 | 4,067 | 2,071 | 38,442 |
| 2023 | 2028 | 432.20 | 6,871 | 3,266 | 1,527 | 1,594 | 3,011 | 2,036 | 1,696 | 20,001 |
| Total options | 78,425 | 44,744 | 14,520 | 23,757 | 33,075 | 20,064 | 11,073 | 225,658 | ||
| Percentage potential share of voting rights options | 0.21% | 0.12% | <0.1% | <0.1% | <0.1% | <0.1% | <0.1% | 0.61% | ||
* Purchase ratio 1 share for 1 option |
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| 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 | 2020–2023 | 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 |
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As of 31 December 2018, 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.