Compensation of the Board of Directors and the Executive Committee
Compensation of the Board of Directors
In 2017, the Board of Directors received a total compensation of CHF 2’694’962 (previous year: CHF 2’722’620). Of this total, CHF 1’271’869 was in the form of cash fees (previous year: CHF 1’254’035); CHF 1’155’000 was in RSU (previous year: CHF 1’092’500); CHF 268’093 was in the form of social security contributions (previous year: CHF 265’417), and CHF 0 was in the form of other payments (previous year: CHF 110’668).
This is a decrease of 1% from the previous year. On one side, two members of the Board were paid for the full year in 2017 (pro rata in 2016), on the other side, there was no special cash payment in 2017 (special cash payment related to extra-ordinary dividend in 2016). Those two effects nearly neutralize each other and led to a slight decrease of the overall Board compensation by 1%. The structure and level of the Board compensation remained unchanged compared with the previous year.
The portion of compensation delivered in RSU amounts to 56% of the cash compensation for the Chairman, and to between 87% and 125% for the other members of the Board of Directors. The RSU are subject to a staged three-year vesting period.
Compensation of the Board of Directors (audited)
|
|
2017 |
2016 |
||||||||
|
thousands of CHF |
Cash Fees 6) |
Restricted share unit (RSU) plan 7) |
Social security contri-butions 8) |
Other |
Total |
Cash Fees 6) |
Restricted share unit (RSU) plan 7) |
Social security contri-butions 8) |
Other 9) |
Total |
|
Board of Directors |
1’272 |
1’155 |
268 |
0 |
2’695 |
1’254 |
1’093 |
265 |
111 |
2’723 |
|
Peter Löscher, Chairman 1) |
446 |
250 |
69 |
0 |
765 |
452 |
250 |
72 |
32 |
807 |
|
Matthias Bichsel, Vice Chairman |
133 |
155 |
33 |
0 |
322 |
138 |
155 |
35 |
19 |
347 |
|
Thomas Glanzmann 2) |
144 |
125 |
30 |
0 |
299 |
149 |
125 |
31 |
16 |
322 |
|
Jill Lee 3) |
144 |
125 |
30 |
0 |
299 |
145 |
125 |
31 |
16 |
317 |
|
Marco Musetti |
102 |
125 |
27 |
0 |
253 |
114 |
125 |
29 |
16 |
284 |
|
Gerhard Roiss |
100 |
125 |
25 |
0 |
250 |
104 |
125 |
28 |
11 |
268 |
|
Axel C. Heitmann 4) |
102 |
125 |
27 |
0 |
253 |
76 |
94 |
20 |
0 |
189 |
|
Mikhail Lifshitz 5) |
102 |
125 |
27 |
0 |
253 |
76 |
94 |
20 |
0 |
189 |
1) Chairman of the Board of Directors and Chairman of the Strategy Committee.
2) Chairman of the Nomination and Remuneration Committee. Chairman of the Audit Committee since December 11, 2017.
3) Chairwoman of the Audit Committee until Deceber 11, 2017.
4) Member of the Board of Directors since April 7, 2016.
5) Member of the Board of Directors since April 7, 2016.
6) Disclosed gross.
7) RSU awards granted in 2017 had a fair value of CHF 105.09 at grant date. The amount represents the full fair value of grants made in 2017.
8) The amount includes mandatory social security contributions on the cash fees and estimated contributions on the RSU (based on their fair value at grant) and includes both the employer and employee contributions paid by the company on behalf of the Board members. As of 2016, RSU are provided net of social security as well.
9) Special cash payment of CHF 14.60 per RSU in order to compensate for the fact that RSU granted in 2014 and 2015 did not entitle Board members to the extraordinary dividend payment distributed to shareholders in 2016.
At the 2017 and 2016 AGM respectively, shareholders approved a maximum aggregate compensation amount of CHF 2’897’000 for the Board of Directors for the period of office from the 2017 AGM until the 2018 AGM and of CHF 2’802’000 for the period of office from the 2016 AGM until the 2017 AGM. The table below shows the reconciliation between the compensation that is/will be paid out for the two periods of office and the maximum aggregate compensation amounts approved by the shareholders.
Reconciliation between the reported Board compensation and the amount approved by the shareholders at the Annual General Meeting
|
|
Compensation earned during financial year as reported (A) |
Minus compensation earned from Jan to AGM of financial year (B) |
Plus compensation accrued from Jan to AGM of year following financial year (C) |
Total compensation earned for the period from AGM to AGM (A–B+C) |
Amount approved by shareholders at respective AGM |
Ratio between compensation earned for the period from AGM to AGM versus amount approved by shareholders |
|
AGM 2017–AGM 2018 |
2017 |
Jan 1, 2017 to 2017 AGM |
Jan 1, 2018 to 2018 AGM |
2017 AGM to 2018 AGM |
2017 AGM |
2017 AGM |
|
Board (total) |
2’694’962 |
390’292 |
388’062 |
2’692’732 |
2’897’000 |
92.9% |
|
AGM 2016–AGM 2017 |
2016 |
Jan 1, 2016 to 2016 AGM |
Jan 1, 2017 to 2017 AGM |
2016 AGM to 2017 AGM |
2016 AGM |
2016 AGM |
|
Board (total) |
2’722’620 |
320’292 |
362’854 |
2’765’182 |
2’802’000 |
98.7% |
As of December 31, 2016, and 2017, there were no outstanding loans or credits granted to the members of the Board of Directors, former members of the Board of Directors or related parties (audited).
In 2016 and 2017, no compensation was granted to former members of the Board of Directors or related parties (audited).
Compensation of the Executive Committee
Performance in 2017
In 2017, Sulzer again made good progress towards its transformation goals. Financial targets were exceeded despite an unsupportive energy market environment. We grew through acquisitions but also organically in all divisions. The financial component of the bonus ranged from 100% to 134% of targeted payout (on average 124%) and significant progress on our transformation path led to a high level of achievement of individual objectives. This translated into an overall bonus payout factor ranging from 100% to 139% (on average 125%) for the members of the Executive Committee.
In 2017, the performance-based grant awarded under the PSP 2014 has vested. The PSP 2014 was based on the relative TSR performance and on cumulative EBIT, both calculated over the performance period from January 1, 2014, until December 31, 2016. The overall vesting amounted to 129%.
The PSP 2015 vested on December 31, 2017. However, the final payout calculation will be made based on the volume-weighted average share price of the three months following vesting date (January to March 2018) and is therefore not known at the time of publication of this report. The vesting level of the PSP 2015 will be disclosed in the 2018 Compensation Report. For the 2015 PSP awards, the peer group had to be updated, with the newly merged TechnipFMC (former peer group company Technip) being replaced by Xylem, chosen out of a proposal of three companies from the predefined successor list of companies.
Compensation awarded to the Executive Committee in 2017
In 2017, the Executive Committee received a total compensation of CHF 13’956’248 (previous year: CHF 19’476’608). Of this total, CHF 8’109’048 was in cash (previous year: CHF 8’306’400); CHF 3’785’036 was in PSUs (previous year: CHF 6’529’346); CHF 1’783’861 was in pension and social security contributions (previous year: CHF 2’517’275), and CHF 278’302 was in other payments (previous year: CHF 1’523’497).
This is an overall decrease of 40% from the previous year. The main reason for this decrease is the new composition of the EC in 2017: in the previous year, there were several overlaps between leaving EC members who still received their compensation during the contractual notice period, and newly appointed EC members. These overlaps resulted in a higher compensation figure in 2016.
Otherwise, the following explanatory comments can be provided:
- On a like-for-like basis (EC members employed in both years 2017 and 2016), the base salaries of the EC members increased by 3% on average;
- Other payments have substantially decreased compared with the previous year. This is due to the fact that unlike in the previous year, there was no replacement payment to new EC members and no special cash payment (in 2016, a special cash payment related to the extraordinary dividend was paid out);
- On a like-for-like basis, the cash bonus payment increased by 10% due to a higher payout percentage (refer to the comments above on performance achieved in 2017);
-
On a like-for-like basis, the grant value of long-term incentives (LTI) remained unchanged compared with the previous year.
Compensation of the Executive Committee (audited)
|
|
2017 |
||||||
|
thousands of CHF |
Base salary |
Bonus 2) |
Other 3) |
Restricted share unit (RSU) plan |
Performance share plan (PSP) 5) |
Pension and social security contributions 6) |
Total |
|
Highest single compensation, Greg Poux-Guillaume, CEO |
1’009 |
1’259 |
147 |
– |
1’531 |
420 |
4’367 |
|
Total Executive Committee 1) |
4’367 |
3’742 |
278 |
– |
3’785 |
1’784 |
13’956 |
|
|
2016 |
||||||
|
thousands of CHF |
Base salary |
Bonus 2) |
Other 7) |
Restricted share unit (RSU) plan 4) |
Performance share plan (PSP) 5) |
Pension and social security contributions 6) |
Total |
|
Highest single compensation, Greg Poux-Guillaume, CEO |
950 |
1’005 |
747 |
0 |
2’201 |
510 |
5’413 |
|
Total Executive Committee 1) |
4’727 |
3’579 |
1’523 |
600 |
6’529 |
2’517 |
19’477 |
1) Members of the Executive Committee: Greg Poux-Guillaume, CEO since December 1, 2015; Klaus Stahlmann, CEO until August 10, 2015. The total Executive Committee compensation 2016 includes the compensation of Klaus Stahlmann during the 12-month notice period that ended in August 2016; Thomas Dittrich, CFO; Fabrice Billard, Chief Strategy Officer until July 2016; César Montenegro, Division President Pumps Equipment until December 2017; Peter Alexander, Division President Rotating Equipment Services until August 2016; Daniel Bischofberger, Division President Rotating Equipment Services since September 2016; Oliver Bailer, Division President Chemtech until June 2016; Torsten Wintergerste, Division President Chemtech since June 2016; Armand Sohet, Chief Human Resources Officer since March 2016; Frédéric Lalanne, Chief Commercial and Marketing Officer since June 2016.
2) Expected bonus for the performance years 2017 and 2016 respectively, that is paid out in the following year (accrual principle). Includes pro rata short-term incentive (STI) payments for EC members whose employment contracts started or were terminated during the year.
3) Other consists of housing allowances, schooling allowances, private use of company car, tax services, holiday compensation, and child allowances.
4) Replacement awards to compensate for forfeited remuneration at the previous employer as a result of joining Sulzer. The amount represents the full fair value at grant.
5) Represents the full fair value of the PSU granted under the PSP 2017 and PSP 2016, respectively. Based on the three-year business plan that has been approved by the Board of Directors in 2017, the underlying targets for the PSP 2016 have been recalibrated. This change had no impact on the fair value at the date of modification.
6) Includes the employer contribution to social security (including the expected employer contributions on equity awards), based on the fair value of all grants made in 2017 and 2016, respectively (RSU and PSP).
7) Other consists of housing allowances, schooling allowances, private use of company car, tax services, holiday compensation, and child allowances. Also includes a special cash payment of CHF 98’730 in 2016 for a new EC member as compensation for forfeited incentives at the previous employer as a result of joining Sulzer and a special cash payment of CHF 14.60 per RSU in order to compensate for the fact that RSU granted in 2014 and 2015 did not entitle Executive Committee members to the extraordinary dividend payment distributed to shareholders in 2016.
For the entire Executive Committee, the variable component (without replacement award) represented 117% of the fixed component (base salary, other, pension and social security contributions). The relationship between the fixed and the variable components of compensation reflects Sulzer’s high-performance orientation. Further, it represents the company’s strong emphasis on aligning the interests of the Executive Committee and the shareholders to create long-term shareholder value and profitable growth.
Executive Committee
The total compensation of CHF 13’956’248 awarded to the members of the Executive Committee for the 2017 financial year is within the maximum aggregate compensation amount of CHF 20’810’000 that was approved by the shareholders at the 2016 AGM.
No severance payments to members of the Executive Committee were made during the reporting year.
As of December 31, 2016 and 2017, there were no outstanding loans or credits granted to the members of the Executive Committee or former members of the Executive Committee (audited).
In 2016 and 2017, no compensation was granted to former members of the Executive Committee or related parties (audited).