Compensation of the Executive Committee for 2020

In 2020, the Executive Committee received a total compensation of CHF 14’647’266 (previous year: CHF 15’370’180). Of this total, CHF 7’297’984 was in cash (previous year: CHF 6’845’153); CHF 5’237’982 was in PSU (previous year: CHF 6’290’403); CHF 1’964’563 was in pension and social security contributions (previous year: CHF 1’908’991), and CHF 146’738 was in other payments (previous year: CHF 325’632).

Compensation of the Executive Committee (audited)

The total compensation of CHF 14’647’266 awarded to the members of the Executive Committee for the 2020 financial year is within the maximum aggregate compensation amount of CHF 21’505’000 that was approved by the shareholders at the 2019 AGM.

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

As of December 31, 2019, and December 31, 2020, there were no outstanding loans or credits granted to the members of the Executive Committee or former members of the Executive Committee (audited).

In 2019 and 2020, no compensation was granted to former members of the Executive Committee or related parties (audited).

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

With the acquisition of drug delivery device developer and manufacturer Haselmeier in October 2020, Sulzer successfully progressed on its expansion path. 

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 2020 can be found in the financial report.

a) Total compensation and pay for performance relation

In 2020, the Executive Committee received a total compensation of CHF 14’647’266 (previous year: CHF 15’370’180). This is an overall decrease of 4.7% from the previous year and 11.2% like for like, considering we have increased the number of Executive Committee members by one at year-end 2019. In comparison to 2019, there was no special grant under the PSP for EC members except for the CEO, for whom the special grant was spread over 2019 and 2020 (for details see special report 2019).

For the entire Executive Committee, the variable component amounted to between 95% and 235% 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 2020 and 2019), the base salaries of the EC members remained unchanged. Regarding cash bonus payments and LTI amounts, see the following paragraphs.

b) Short-term incentive (cash bonus payouts)

In 2020, Sulzer again made good progress towards its transformation goals. We grew organically but also through acquisitions in all divisions. Due to the impacts of COVID-19, the NRC decided to make minor adjustments to the short-term incentive, which are described in detail in the COVID-19 report. The financial component of the bonus ranged from 100% to 113% of targeted payout (on average 110%), 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 ranged from 100% to 150% to consider the exceptional team performance.

Overall, this translated into an overall bonus payout factor ranging from 103% to 124% (on average 115%) 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 (operational ROCEA), operating income before restructuring, amortization, impairments and non-operational items (operational profit) 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 2020 compared to previous years.

The CEO was granted the second tranche of the special grant under the PSP which was granted to the EC in 2019 due to the exceptional performance during and after the US sanctions in 2018, and which was spread over 2019 and 2020 for the CEO (for details see special report 2019).

The special grants in 2019 for the EC members and in 2020 for the CEO are included in the PSP grant amounts disclosed in the above compensation tables.

With the 2018 performance share plan vesting on December 31, 2020, the COVID-19 impacts on Sulzer’s performance are fully reflected in the Executive Committee’s long-term compensation which accounts for the largest share of the Executive Committee’s variable compensation.

The relevant key performance indicators (KPIs) were operating income before restructuring, amortization, impairments and non-operational items (operational profit) growth, operational return on capital employed (operational ROCEA) and relative total shareholder return (TSR) over the three-year period from 2018 to 2020. Operational performance in this period was very good, even beyond expectations. The result was a total payout factor of 126% for the PSP 2018, which reflects growth and performance, both against budget targets and against market peers, in the three-year period from 2018 to 2020. 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 2019 and 2020, the members of the Executive Committee held the following shares in the company:

Shareholdings at December 31, 2020

Shareholdings at December 31, 2019