Introduction by the Chairwoman of the Compensation Committee
On behalf of the Board of Directors of GF and of the Compensation Committee, I am pleased to present the 2020 Compensation Report.
As in previous years, the Chairman of the Board and the Chairwoman of the Compensation Committee continued the dialogue with shareholders and proxy advisors. Based on their feedback and in the context of the new five-year strategy cycle 2025 starting in 2021, the Compensation Committee has conducted a thorough review of the compensation system. Further to this analysis, the Board of Directors decided to introduce the following changes:
- Environment – Social – Governance (ESG): In addition to the establishment of a sustainability committee (Nomination and Sustainability Committee) as per July 2020, the Board has decided to increase the weighting given to ESG objectives, which account for 10% of the short-term incentive (STI) as of financial year 2020. Consequently, the weight of the individual objectives (which include ESG) has been increased to 35% of the STI instead of 25% previously. The other individual objectives were adapted mid-year to take into account the unforeseen COVID-19 situation, in particular the measures required to cope with the pandemic. The financial targets set at the beginning of the year, which account for 65% of the STI, were not amended during the year.
- Short-term incentive (STI): Sustainability is an integral element of the Strategy 2025. Thus, starting with the financial year 2021 ESG objectives are now a dedicated separate component of the STI performance assessment, weighted 10% of the total STI.
To further align the performance measurement of the STI with the new business strategy, the weighting of the financial objectives will be slightly adjusted, with an increase of the organic sales growth target from 20% to 30%.
- Long-term incentive (LTI): As of financial year 2021, the value of the LTI grant is based on a percentage of the fixed based salary instead of a fixed number of shares. In addition, the vesting schedule for the relative total shareholder return (rTSR) measure, as well as the vesting rules in the event of termination, have been adjusted in order to be better aligned with shareholders’ interest and with the compensation philosophy of the company. These changes are based on a thorough analysis of peer company programs and follow best market practice in Switzerland.
The changes were discussed in detail with investors and proxy advisors at an early stage. The proposed changes have been supported and positively valued. Additional feedback from these conversations has been considered in the design and implementation of the new regulations. Details of the changes can be found in the Outlook section.
This Compensation Report includes all relevant information concerning the compensation policy and programs, the governance around compensation decisions, and the compensation awarded in the reporting year. You will be asked to approve the maximum compensation amount for the Board of Directors for the period until the next Annual Shareholders’ Meeting and the maximum compensation amount for the Executive Committee for the next financial year (prospective binding votes) at this year’s Annual Shareholders’ Meeting. Additionally, your opinion will be valued in regards to the Compensation Report by a consultative retrospective vote.
We trust that the adjustments made to the compensation system will help us to achieve the ambitious strategy. We are looking forward to continuing the dialogue with you as our shareholders and stakeholders.
Chairwoman of the Compensation Committee