Compensation of the Executive Committee for 2019

In 2019, the Executive Committee received a total compensation of CHF 15’370’180 (previous year: CHF 16’703’113). Of this total, CHF 6’845’153 was in cash (previous year: CHF 7’773’076); CHF 6’290’403 was in PSU (previous year: CHF 4’462’417); CHF 1’908’991 was in pension and social security contributions (previous year: CHF 2’066’420), and CHF 325’632 was in other payments (previous year: CHF 2’401’200).

Compensation of the Executive Committee (audited)

The total compensation of CHF 15’370’180 awarded to the members of the Executive Committee for the 2019 financial year is within the maximum aggregate compensation amount of CHF 21’505’000 that was approved by the shareholders at the 2018 AGM.

No severance payments to members of the Executive Committee were made during the reporting year.

As of December 31, 2018 and December 31, 2019, there were no outstanding loans or credits granted to the members of the Executive Committee or former members of the Executive Committee (audited).

In 2018 and 2019, no compensation was granted to former members of the Executive Committee or related parties (audited).

Compensation for the Executive Committee: pay-for-performance assessment

In 2019, Sulzer successfully progressed on its expansion path. We acquired and integrated:

In both cases, this will supplement and further boost our local expertise and delivery power.

In the following, we elaborate further on how the relevant business performance impacted the variable compensation models of our Executive Committee. More detailed information about Sulzer’s operational and strategic performance in 2019 can be found in the financial report.

a) Total compensation and pay for performance relation

In 2019, the Executive Committee received a total compensation of CHF 15’370’180 (previous year: CHF 16’703’113). This is an overall decrease of 8.0% from the previous year. The main changes compared with the previous year are as follows:

For the entire Executive Committee, the variable component amounted to between 40% and 246% of the fixed component (base salary, other, pension and social security contributions). This pay for performance relation 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.

On a like-for-like basis (EC members employed in both 2019 and 2018), the base salaries of the EC members increased by 1.1% on average. Regarding cash bonus payments and LTI amounts, see the following paragraphs.

b) Short-term incentive (cash bonus payouts)

In 2019, Sulzer again made good progress towards its transformation goals. We grew organically but also through acquisitions in all divisions. The financial component of the bonus ranged from 109% to 133% of targeted payout (on average 127%) and significant progress on our transformation path led to a high level of achievement of individual objectives. The financial performance on group level was as follows:

The individual performance was set at 120% to consider the exceptional team performance. For the newly appointed Executive Committee member Girts Cimermans, individual performance was determined at 100%. In recent years, however, the individual performance was very diverse among the members of the Executive Committee.

Overall, this translated into an overall bonus payout factor ranging from 106% to 129% (on average 124%) for the members of the Executive Committee.

c) Long-term incentive (PSP)

We are convinced that the conditional awards to receive Sulzer shares, subject to operational return on capital employed (opROCEA), operating income before restructuring, amortization, impairments and non-operational items (opEBITA) and total shareholder return (TSR) performance as well as ongoing employment through the three-year vesting period:

The PSP framework (apart from the specific performance targets for each grant cycle), eligibility and grant entitlement remained unchanged in 2019 compared to previous years.

The roles and corresponding job sizes of two current EC members were reevaluated which resulted, based on a corresponding benchmark, in a higher LTI grant entitlement for those two individuals. This is reflected in the PSP grant amounts disclosed in this report.

The special grant in 2019 for the EC members is included in the PSP grant amounts disclosed in the above compensation tables.

The PSP 2017 vested on December 31, 2019. The relevant key performance indicators (KPI’s) were operating income before restructuring, amortization, impairments and non-operational items (opEBITA) growth, operational return on capital employed (opROCEA) and relative total shareholder return (TSR) over the three-year period from 2017 to 2019. Operational performance in this period was very good, even beyond expectations. The result was a total payout factor of 129% for the PSP 2017, which reflects growth and performance, both against budget targets and against market peers, in the three-year period from 2017 to 2019. The total payout factor results as follows:

Overall, the PSP vesting levels fairly reflected the operational performance, also against direct peers, over the respective three-year performance cycles, so Sulzer fully achieved the desired strong link between sustainable company performance and competitive long-term incentive payouts.

Shareholdings of the Executive Committee

As of the end of 2018 and 2019, the members of the Executive Committee held the following shares in the company:

Shareholdings at December 31, 2019

Shareholdings at December 31, 2018