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Paying for sustainable performance

Winterthur, February 17, 2020

Dear Shareholder,

On behalf of the Board of Directors and the Nomination and Remuneration Committee (NRC), I am pleased to present the Compensation Report for 2019. I appreciated the ongoing opportunity in 2019 to work together with my colleagues and our stakeholders towards ensuring that the Sulzer compensation structure continues to reflect best practice standards, proves to be attractive and competitive for employees, rewards sustainable performance and drives value creation for our shareholders.

In April 2018, Sulzer was unexpectedly exposed to existence-threatening US sanctions. The Executive Committee took effective countermeasures in a very short time to avert the sanctions. Therefore, this crisis also demanded that effective measures be taken to mitigate its negative consequences for Executive Committee’s compensation in a fair manner. These measures have only been applied for the duration of this extraordinary situation and to offset its effects, and we consider the crisis to be over at this stage. Therefore, we include an additional section in this year’s Compensation Report, which explains measures taken.

Executive Committee’s compensation

Our Executive Committee’s compensation system stands for a modern and tailor-made system to lead Sulzer successfully through the next years:

  • A significant portion of variable compensation ensures a strong pay-for-performance orientation.
  • Performance criteria are selected to provide appropriate incentives to achieve operational and strategic goals, thereby ensuring a strong alignment with Sulzer’s corporate strategy.
  • Variable compensation is granted in the form of performance share units, which are subject to malus and clawback provisions, to align interests of the Executive Committee with those of shareholders.
  • Share Ownership Guidelines are introduced in 2020 obliging the Executive Committee members to hold Sulzer shares for the term of their office.
  • Compensation levels are competitive and in line with market practice to attract and retain highly qualified employees who will keep Sulzer on the road to success through severe crises and beyond.

Paying for performance: our year 2019

In 2019, Sulzer successfully progressed on its growth path. The company acquired and integrated GTC Technology end of April and Alba Power in July, which in both cases supplements and further boosts local expertise and delivery power in important target markets. This is all part of Sulzer’s growth-based business strategy, which is reflected in our compensation models.

The compensation model and structure for EC members remained unchanged, and – apart from an increase in the LTI (long-term incentives) for two individuals – there was no increase in base salaries, target STI (short-term incentives) levels or regular LTI grant amounts. In 2019, the roles of two current EC members were reevaluated. This reevaluation, which also comprised market benchmarking, led to higher LTI grant entitlements. The Board also recognized the EC’s continued exceptional performance during and since the US sanctions episode. In this context, the Board decided to award all EC members a special grant of performance share units in addition to the regular annual LTI grants (details in special report).

The cash compensation for the EC was 25% lower in 2019 than in 2018. The aggregate EC compensation, including potential payments made over time, is reduced by 8.0% year on year and is below the maximum amount previously approved by the AGM for the respective period.

For 2020, two major changes to the current system have been decided. Firstly, mandatory shareholding requirements for members of the Executive Committee will be introduced. According to these Share Ownership Guidelines (SOG) the members of the Executive Committee are obliged to hold shares until the end of their service period. The value of the shares to be held is set at 200% of the gross base salary for the CEO and 100% of the gross base salary for the other members of the Executive Committee. Secondly, the TSR threshold for the industrial peer group will be set “back to normalˮ at the 25th percentile as before the US sanctions.

On October 21, 2019, Girts Cimermans joined Sulzer as the new President of our Applicator Systems (APS) division, succeeding Amaury De Menthière, who retired at the end of the year. As the new leader of APS, Girts will focus on profitably expanding the business and strengthening the APS offering, as well as capitalizing on opportunities across our diverse business segments. In the same context, the Board decided that the role of Division President APS should now be part of the Executive Committee (EC), with immediate effect.

Board of Directors compensation

The aggregate Board of Directors compensation paid in 2019 was below the maximum amounts previously approved by the AGM for the respective periods. An external and independent third-party expert assessed the Board compensation in the context of market benchmarks. Based on these findings, the NRC has suggested to revise the additional fees for chairmanship and membership in the Board committees. No additional changes to Board compensation were deemed necessary.

The aggregate Board of Directors compensation paid in 2019 was 3.6% lower than in 2018, and 5.7% lower than in 2017, the latter reflecting the resizing of the Board in 2018.


The Nomination and Remuneration Committee (NRC) performed its regular activities in 2019, including recommending EC performance targets to the Board, compensation of Board, CEO and EC members. You will find further information on the NRC’s activities, as well as compensation models and governance, in the following pages.

At the AGM in 2020, you will be asked to vote on the maximum aggregate compensation for the Board for its 2020–2021 term and on the maximum aggregate compensation for the EC for 2021. For the second consecutive year, the maximum aggregate for the Board will remain flat. Notwithstanding the addition of the new EC member, the maximum aggregate for the EC will be reduced by CHF 2 million.

As per practice, this Compensation Report will be submitted for a non-binding, consultative vote to our shareholders. We encourage and pursue an open, regular dialogue with our stakeholders. Your constructive input is highly valued and appreciated as we continue to improve and align our compensation system. On behalf of Sulzer, the NRC and the Board, I thank you for your supportive feedback and for your continued trust in our company.


Gerhard Roiss
Chairman of the Nomination and Remuneration Committee