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.

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.

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.

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