2. Foreword by the Chairman of the Nomination & Compensation Committee

Dear shareholders,

On behalf of the Nomination and Compensation Committee (NCC), I am pleased to present the 2019 Remuneration Report.

Following the election of the members of the Nomination and Compensation Committee during the General Meeting for 2019, Thomas M. Hübner was welcomed as a new member of the Committee. Unfortunately, we unexpectedly had to bid farewell to our esteemed colleague in October of this year after his valuable contributions. We will greatly miss him as a valued member of the Board of Directors.

The construction sector varied from country to country in 2019. In the year-on-year comparison, the market environment was characterised by lower growth. Nevertheless, we can look back on a very good financial year. Thanks to convincing currency-adjusted net sales growth and further improved, high profitability, we succeeded in further consolidating our position as leading supplier of sanitary products in Europe and increasing it outside Europe. The increase in the operating cashflow margin compared with the previous year was above all driven by lower raw material prices, higher sales volumes, an improved product mix and price increases as well as to enhancements in efficiency and high cost discipline. In addition, a change to the IFRS accounting standard had a positive impact on the EBITDA development. Strong tariff-related increases in personnel expenses and one-off costs in connection with brand harmonisation had a negative effect. As a result of the strategy of striving for natural currency hedging, the currency development did not have any negative impact on the operating margin. The Remuneration Report summarises how these results impacted the variable remuneration made to the members of the Group Executive Board under the different remuneration components.

During the reporting year, the NCC performed a thorough external review of the market conformance and competitiveness of the remuneration paid to the Board of Directors. The remuneration system and the amount of remuneration for Geberit's Board of Directors conform to standard market practice and the Board of Directors confirmed that no changes were necessary.

The changes to the remuneration programmes for the Group Executive Board that had been adopted by the Board of Directors in the previous year were duly implemented in the year under review. The programmes were primarily harmonised and the entire system simplified, although the value of the programmes is roughly the same:

• All options granted under the long-term incentive plan (MSOP) and under the management share purchase plan (MSPP) are subject to three-year cliff vesting and a maturity of nine years from 2019. The main purpose of these changes is to simplify and harmonise the remuneration system for the Group Executive Board.
• The long-term share ownership plan is subject to new clawback and malus provisions of the type already applicable to the short-term incentive programme including MSPP.

Otherwise, the NCC performed its regular activities throughout the year such as the performance goal setting at the beginning of the year and the performance assessment at year end, the determination of the compensation of the members of the Board of Directors and of the Group Executive Board, as well as the preparation of the Remuneration Report and of the say-on-pay vote for the General Meeting. You will find further information on our activities and on Geberit's compensation system and governance on the following pages.

At the 2020 General Meeting, we will request your approval of the total remuneration amount to be awarded to the Board of Directors for the period until the following General Meeting, and the maximum aggregate remuneration awarded to the Group Executive Board for the 2021 business year. Additionally, you will have the opportunity to express your opinion on this Remuneration Report in a consultative vote. You will see in the report that the remuneration awarded to the Board of Directors for the compensation period ending with the 2020 General Meeting and the remuneration awarded to the Group Executive Board in 2019 are within the limits approved at the 2019 General Meeting and 2018 General Meeting respectively.

Looking ahead, we will continue to assess and review our compensation programmes to ensure that they are still fulfilling their purpose in the evolving context in which the company operates. We will pursue an open and regular dialogue with our shareholders as we continue to enhance the compensation system. In our view, this report contains all relevant information. We are confident that our remuneration system rewards performance in a balanced and sustainable manner and aligns well with shareholders’ interests.

Yours sincerely,

Hartmut Reuter
Chairman of the Nomination & Compensation Committee