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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)

 

 

2020

 

 

Cash compensation

 

Deferred compensation based on future performance

thousands of CHF

 

Base salary

 

Bonus 2)

 

Other 3)

 

Pension and social security contributions 4)

 

Total cash-based compensation

 

Estimated value of share-based grant under the performance share plan (PSP) 5)

 

Total (incl. conditional share-based grant)

Highest single compensation, Greg Poux-Guillaume, CEO

 

1’021

 

1’141

 

82

 

491

 

2’735

 

2’601

 

5’335

Total Executive Committee 1)

 

4’071

 

3’227

 

147

 

1’965

 

9’409

 

5’238

 

14’647

 

 

2019

 

 

Cash compensation

 

Deferred compensation based on future performance

thousands of CHF

 

Base salary

 

Bonus 2)

 

Other 3)

 

Pension and social security contributions 4)

 

Total cash-based compensation

 

Estimated value of share-based grant under the performance share plan (PSP) 5)

 

Total (incl. conditional share-based grant)

Highest single compensation, Greg Poux-Guillaume, CEO

 

1’021

 

1’183

 

67

 

493

 

2’765

 

2’709

 

5’474

Total Executive Committee 1)

 

3’663

 

3’182

 

326

 

1’909

 

9’080

 

6’290

 

15’370

1) The total Executive Committee compensation for 2020 and 2019 includes the compensation of Greg Poux-Guillaume, CEO since December 1, 2015; Jill Lee, CFO since April 2018; Daniel Bischofberger, Division President Rotating Equipment Services since September 2016; Torsten Wintergerste, Division President Chemtech since June 2016; Armand Sohet, Chief Human Resources Officer since March 2016; Frédéric Lalanne, Division President Pumps Equipment since January 2019; Girts Cimermans, Division President Applicator Systems since October 21, 2019.

2) Expected bonus for the performance years 2020 and 2019 respectively, to be paid out in the following year (accrual principle).

3) Other consists of housing allowances, relocation allowance, schooling allowances, tax services and child allowances.

4) 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 2020 and 2019, respectively (PSP).

5) Represents the full fair value of the PSU granted under the PSP in 2020 and 2019, respectively (including regular annual grants as well as a one-off special grant as outlined in the 2019 compensation report, which was granted on the same date and based on the same reference price as the regular annual grants). PSU granted in 2020 had a fair value of CHF 78.18 at grant date, based on a third-party fair value calculation. While the share price to convert the grant value into a number of granted PSU is based on the three-month weighted average share price before the grant date (CHF 64.93 per PSU for June 2020 grants), the disclosed fair values are calculated on the grant dates by using market value approaches, which typically leads to differences between the original grant value according to the compensation architecture and the disclosed fair market values.

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:

KPI

 

Weighting

 

Payout factor

Operational profitability

 

25%

 

85%

Sales

 

25%

 

72%

Operational ONCF

 

20%

 

200% 1)

Total

 

70%

 

113%

1) Actual operational ONCF overachieved in 2020, therefore the maximum payout factor was capped at 200%.

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:

  • constitutes a very attractive element of variable long-term remuneration for our key management;
  • supports and underlines the company’s focus on excellent, sustainable performance;
  • and provides for a strong alignment of interests with shareholders – also in the longer term.

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:

KPI

 

Weighting

 

Payout factor

Operational profit

 

25%

 

100%

Operational ROCEA

 

25%

 

162%

Relative TSR

 

50%

 

120%

Total

 

100%

 

126%

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

 

 

2020

 

 

Sulzer shares

 

Share units under vesting in equity plans (RSU and PSP)

 

 

Sulzer shares

 

Restricted share units (RSU)

 

Performance share units (PSU) 2018

 

Performance share units (PSU) 2019

 

Performance share units (PSU) 2020

Executive Committee

 

92’944

 

 

28’133

 

54’251

 

66’999

Greg Poux-Guillaume

 

58’062

 

 

12’820

 

23’363

 

33’267

Daniel Bischofberger

 

6’233

 

 

2’938

 

6’491

 

6’161

Girts Cimermans

 

 

 

 

705

 

5’083

Frédéric Lalanne

 

6’955

 

 

2’938

 

6’491

 

6’161

Jill Lee

 

7’945

 

 

3’561

 

6’491

 

6’161

Armand Sohet

 

6’624

 

 

2’938

 

5’355

 

5’083

Torsten Wintergerste

 

7’125

 

 

2’938

 

5’355

 

5’083

Shareholdings at December 31, 2019

 

 

2019

 

 

Sulzer shares

 

Share units under vesting in equity plans (RSU and PSP)

 

 

Sulzer shares

 

Restricted share units (RSU)

 

Performance share units (PSU) 2017

 

Performance share units (PSU) 2018

 

Performance share units (PSU) 2019

Executive Committee

 

68’838

 

 

25’292

 

28’133

 

54’251

Greg Poux-Guillaume

 

46’181

 

 

13’196

 

12’820

 

23’363

Daniel Bischofberger

 

2’562

 

 

3’024

 

2’938

 

6’491

Girts Cimermans

 

 

 

 

 

705

Frédéric Lalanne

 

4’492

 

 

3’024

 

2’938

 

6’491

Jill Lee

 

7’945

 

 

 

3’561

 

6’491

Armand Sohet

 

4’204

 

 

3’024

 

2’938

 

5’355

Torsten Wintergerste

 

3’454

 

 

3’024

 

2’938

 

5’355