7. Group Executive Board: remuneration and share/option ownership in 2019
This section is audited by the external auditor.
7.1 Performance in 2019
Consolidated net sales in 2019 increased by 0.1% to CHF 3,083 million. This total growth comprised growth in local currencies of +3.4% and a negative foreign currency effect of -3.3%. The results in 2019 were no longer impacted by one-off costs related to the Sanitec acquisition, which is why adjusted figures will no longer be shown as of the reporting year. The result comparisons relate to adjusted prior year figures. Operating cashflow (EBITDA) increased by 4.2% to CHF 904 million; the EBITDA margin reached 29.3%. The increase in the EBITDA margin compared with the previous year was above all driven by lower raw material prices, higher net 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. Earnings per share were up by 4.4% to CHF 17.97 (previous year CHF 17.21). The return on invested capital (ROIC) rose to 23.1% (previous year 22.6%).
The variable cash remuneration (STI) of the Group Executive Board is determined on the basis of the following key performance indicators, which all have the same weighting: sales performance and EPS compared with the previous year as well as EBITDA margin and 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 clearly exceeded the targets.
7.2 Remuneration awarded in 2019
The remuneration of the Group Executive Board amounted to TCHF 10,278 in 2019 (previous year TCHF 8,727). The remuneration of the CEO amounted to TCHF 3,058 in the same period (previous year TCHF 2,503). The total remuneration of the Group Executive Board in 2019 was higher than in the previous year due to the very good results in variable remuneration and higher social security contribution due to exercise of call options by members of the Group Executive Board.
The CEO's variable compensation represented 89.6% of his fixed salary. For the other members of the Executive Committee, the variable compensation represented between 87.8% and 92.3% of their individual fixed salary.
At the 2018 General Meeting, the shareholders approved a maximum aggregate amount of TCHF 11,500 for the remuneration of the Group Executive Board for the year 2019. The compensation awarded for that period amounts to TCHF 10,278 and is therefore within the approved amount.
Further information on the remuneration awarded to the Group Executive Board for the business year 2019, compared with the maximum potential amount of remuneration, is provided with the invitation to the ordinary General Meeting 2020.
The following table shows details of remuneration for 2019 and 2018:
| 2019 | 2018 | ||||
| C.Buhl CEO |
Total | C.Buhl CEO |
Total | ||
| CHF | CHF | CHF | CHF | ||
| Salary | |||||
| - Fixed salary | 966,810 | 3,412,642 | 931,801 | 3,342,650 | |
| - Variable salary1 | 866,600 | 3,032,650 | 541,350 | 1,947,550 | |
| thereof in shares in 2019 2 | 540,978 | 1,232,454 | |||
| Shares/options | |||||
| - Call options MSOP 2019/20183 | 840,399 | 2,488,670 | 809,885 | 2,357,518 | |
| - Call options MSPP 2019/20184 | 52,415 | 119,412 | 43,639 | 109,830 | |
| Non-cash benefits | |||||
| - Private share of company vehicle5 | 7,056 | 45,646 | 7,056 | 46,380 | |
| Expenditure on pensions | |||||
| - Pension plans | 90,262 | 524,743 | 88,390 | 497,124 | |
| - Social insurance | 232,583 | 637,875 | 78,092 | 408,123 | |
| - Contribution health/accident insurance | 2,187 | 16,149 | 2,476 | 18,172 | |
| Total6 | 3,058,312 | 10,277,787 | 2,502,689 | 8,727,347 | |
1 The amounts to be paid (current year), and the amounts effectively paid (previous year) respectively 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 406.75 (PY CHF 432.20).
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 Stock Option Programme (MSOP); 1 option entitles to purchase 1 registered share at an exercise price of CHF 406.75 (PY CHF 432.20); definitive acquisition of the option (“vesting”) dependent on various conditions, 3-year vesting period (1 tranche at 100%); the total value of the call options is evaluated as of the grant date and afterwards measured according to the expected achievement of objectives. Market value of CHF 39.39 determined using the binomial method (PY 3-5-year vesting period (3 tranches at 33%) CHF 39.29).
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 406.75 (PY CHF 432.20); definitive acquisition of the option (“vesting”) dependent on various conditions, 3-year vesting period (1 tranche at 100%); the total value of the call options is evaluated as of the grant date and afterwards measured according to the expected achievement of objectives. Market value of CHF 39.39 determined using the binomial method (PY 1-4-year vesting period (4 tranches at 25%) CHF 36.61).
5 Valuation in accordance with the guidelines of the Swiss Federal Tax Administration FTA (0.8% of the purchase cost per month).
6 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 2019 and 2018, 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 | |
| 2019 | ||||||||||
| Shareholdings Group Executive Board |
||||||||||
| Shares | 12,772 | 28,316 | 3,408 | 646 | 12,000 | 400 | 2,908 | 60,450 | ||
| Percentage voting rights shares | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | < 0.1% | 0.16% | ||
| Call options1 | ||||||||||
| End of vesting period: | ||||||||||
| Vested | 2021–2026 | 372.20 | 8,041 | 695 | 3,228 | 10,240 | 119 | 1,431 | 2,316 | 26,070 |
| 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 | 424.97 | 47,421 | 22,641 | 11,294 | 10,714 | 19,765 | 14,498 | 11,377 | 137,710 |
| 2023 | 2028 | 432.20 | 6,871 | 3,266 | 1,527 | 1,594 | 3,011 | 2,036 | 1,696 | 20,001 |
| Total options | 95,629 | 44,956 | 21,494 | 31,373 | 39,330 | 29,245 | 18,858 | 280,885 | ||
| Percentage potential share of voting rights options | 0.26% | 0.12% | < 0.1% | < 0.1% | 0.11% | < 0.1% | < 0.1% | 0.76% | ||
| 1 Purchase ratio 1 share for 1/1.5 options. The unvested options are subject to a performance-based vesting condition. | ||||||||||
| 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 options1 | ||||||||||
| 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% | ||
1 Purchase ratio 1 share for 1 option. The unvested options are subject to a performance-based vesting condition. |
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As of 31 December 2019, 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.
