Compensation governance

Rules relating to compensation in the Articles of Association

The Articles of Association of GF contain provisions regarding the compensation principles applicable to the Board of Directors and to the Executive Committee. Those provisions are available on GF’s website and include:

According to Articles 22 and 23 of the Articles of Association, the Annual Shareholders’ Meeting approves annually the maximum aggregate compensation of the Board of Directors for the period from the Annual Shareholders’ Meeting to the next Annual Shareholders’ Meeting, as well as the maximum aggregate compensation of the Executive Committee for the following calendar year. In addition, the Compensation Report is submitted to the Annual Shareholders’ Meeting for an advisory vote on a yearly basis, so that shareholders can express their opinion on the compensation policy and programs.

Compensation Committee

The Compensation Committee consists of three non-executive Members of the Board of Directors who are elected annually and individually by the Annual Shareholders’ Meeting for a one-year period until the next Annual Shareholders’ Meeting. At the 2020 Annual Shareholders’ Meeting, Eveline Saupper (Chairwoman), Riet Cadonau and Zhiqiang Zhang were elected as Members of the Compensation Committee.

The Compensation Committee supports the Board of Directors with the following duties:

During the year 2020, the Compensation Committee performed the following regular tasks:

The Compensation Committee convenes as often as necessary, but at least twice per year. In 2020, the Committee held five meetings of approximately two hours, each according to the schedule below:

Overview of meetings’ schedule 2020

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February

June

September

November

December

Business performance 2019; STI 2019 for CEO and EC Approval LTI 2016 vesting Determination business objectives for the year 2020 Adjustment of the Board remuneration policy Approval of the Compensation Report 2019 Maximum amounts of compensation for the Board of Directors until the next Annual Shareholders' Meeting Maximum amounts of compensation for the EC for the financial year 2021

Analysis of the voting results on compensation motions at the Annual Shareholders' Meeting Review of proxy advisors’ and investors’ feedback on compensation Approval of the Board remuneration policy Review of the compensation policy and incentive design applicable to the CEO and EC

Review of the compensation policy and incentive design applicable to the CEO and EC

Review of the compensation policy and incentive design applicable to the CEO and EC Review and discussion of investors' and proxy advisors' feedback on planned changes to the incentive design

Approval of the compensation policy and incentive design applicable to the CEO and EC Review compensation for the Board of Directors for the next compensation period Review target compensation for the CEO and EC members for the coming financial year 1 Review draft of the Compensation Report 2020

1 This regular agenda item was postponed to the first meeting in 2021

In 2020, all Compensation Committee members attended all meetings. The Chairman of the Board, the Independent Lead Director, the CEO, the Head of Corporate Human Resources, and the Head of Corporate Compensation and Benefits are invited to attend the Compensation Committee meetings in an advisory capacity. The Chairman of the Board and the CEO do not attend the meeting when their own compensation or performance is discussed.

The Chairwoman of the Compensation Committee reports to the Board of Directors after each meeting on the activities of the Compensation Committee. The minutes of the Compensation Committee meetings are available to all Members of the Board of Directors.

The compensation proposals and decisions are made based on the following levels of authority:

Levels of authority

Approval framework

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Subject

Recommendation from

Final approval from

Compensation policy and principles

Compensation Committee

Board of Directors

Aggregate compensation amount of the Board of Directors

Board of Directors based on proposal by Compensation Committee

Annual Shareholders’ Meeting (binding vote)

Individual compensation of the Members of the Board of Directors

Compensation Committee

Board of Directors

Aggregate compensation amount of the Executive Committee

Board of Directors based on proposal by Compensation Committee

Annual Shareholders’ Meeting (binding vote)

Individual compensation of the CEO

Compensation Committee based on proposal by the Chairman of the Board

Board of Directors

Individual compensation of the Executive Committee members

Compensation Committee based on proposals by the CEO

Board of Directors

Compensation Report

Board of Directors based on proposal by Compensation Committee

Annual Shareholders’ Meeting (consultative vote)

On behalf of the Board of Directors, internal and external Auditors annually review the compliance of the compensation decisions made with the Articles of Association, the Organizational Rules and the compensation regulations for the Executive Committee and the Board of Directors.

The Compensation Committee regularly calls in external compensation specialists and consultants to obtain independent advice and/or benchmarking compensation data. In the year under review, external compensation specialists provided advice on the review of the compensation policy and were involved in the new incentive design for the EC as well as for other executive compensation matters. These companies have no other mandates with GF.

Method used to determine compensation

Benchmarking

The compensation structure and levels of the Board of Directors and the Executive Committee are reviewed every two to three years and are tailored to the relevant sectors and labor markets in which GF competes for talent. For the purpose of comparison, the Compensation Committee relies on compensation surveys published by independent consulting firms and on publicly available information such as the compensation disclosures of comparable companies. Comparable companies are defined as multinational industrial companies listed on the Swiss stock exchange (SIX) with a similar size in terms of market capitalization, sales, number of employees, complexity, and geographic scope. The benchmark for the Board of Directors includes the companies in the SMI MID: AMS, Aryzta, Baloise, Barry Callebaut, Clariant, Dormakaba, Dufry, EMS-Chemie, Flughafen Zurich, GAM, Helvetia, Kühne + Nagel, Lindt, Logitech, OC Oerlikon, Partners Group, PSP Swiss Property, Schindler, Sonova, Straumann, Sunrise, Swiss Prime Site, Temenos, VAT and Vifor Pharma and was last conducted in 2019. The benchmark for the Executive Committee comprises the following industrial companies listed in Switzerland: Arbonia, Autoneum, Bobst, Bucher Industries, Conzzeta, Datwyler, Dormakaba, Geberit, Huber + Suhner, OC Oerlikon, Rieter, Schweiter Technologies, SFS Group, Sika, Sulzer, and Sonova and was also performed most recently in 2019. 

Performance management

The Compensation Committee also takes into consideration effective business and individual performance while determining the compensation amounts to be paid to the CEO and to the other Members of the Executive Committee. Individual performance is assessed through the annual Management By Objectives (MBO) process, where individual objectives are defined at the beginning of the year and the achievement against those objectives is evaluated at the end of the year. The objective setting and the performance assessment of the Members of the Executive Committee are conducted by the CEO and by the Chairman of the Board for the CEO. The performance assessment of the CEO and the other Members of the Executive Committee is reviewed by the Compensation Committee.

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