Compensation awarded to the Board of Directors in 2016

This section is audited according to article 17 of the Ordinance against Excessive Remuneration in Stock Listed Corporations.

In 2016, the members of the Board of Directors received no compensation because the compensation of the Board of Directors for the period from the 2016 Annual General Meeting to the 2017 Annual General Meeting has not been approved by the shareholders and therefore could not be paid out. The compensation of the Board of Directors for the period from the 2015 Annual General Meeting to the 2016 Annual General Meeting had not been approved by the shareholders either and therefore could not be paid out. The compensation paid out in the year 2015 relates to the months of January to April 2015 (previous compensation period) and had been approved by the shareholders in a binding vote at the Annual General Meeting in 2014.

Total compensation (Proposed) (1)
in CHF
Retainer
(cash)
Committees Fees
(cash)(2)
Value of
Shares(3)
Social
Security
Total
2016
Paul Hälg,
Chairman
0 0 0 0 0
Jürgen Tinggren
0 0 0 0 0
Urs F. Burkard,
NCC Member
0 0 0 0 0
Willi K. Leimer,
AC Member
0 0 0 0 0
Monika Ribar,
AC Chairwoman
0 0 0 0 0
Christoph Tobler,
AC Member
0 0 0 0 0
Daniel J. Sauter,
NCC Member
0 0 0 0 0
Ulrich W. Suter 0 0 0 0 0
Frits van Dijk,
NCC Chairman
0 0 0 0 0
Total 0 0 0 0 0
in CHF
Retainer
(cash)
Committee Fees
(cash)(2)
Value of
Shares(3)
Social
Security
Total
2015
Paul Hälg,
Chairman
160,000 10,000 100,166 42,843 313,009
Jürgen Tinggren
50,000 0 17,270 5,161 72,431
Urs F. Burkard,
NCC Member
50,000 10,000 17,270 5,888 83,158
Willi K. Leimer,
AC Member
50,000 10,000 17,270 5,888 83,158
Monika Ribar,
AC Chairwoman
50,000 16,667 17,270 6,373 90,309
Christoph Tobler,
AC Member
50,000 10,000 17,270 5,888 83,158
Daniel J. Sauter,
NCC Member
50,000 10,000 17,270 5,888
83,158
Ulrich W. Suter 50,000 0 17,270 4,164
71,434
Frits van Dijk,
NCC Chairman
50,000 16,667 17,270 5,298 89,235
Total 560,000 83,333 238,326 87,391 969,050

1For 2015, includes the compensation effectively paid for the period January to April 2015.
2Committee fees include the representation allowance for the Chairman of the Board of Directors, who is not eligible for committee fees.
3Fair market value is defined as the average closing price of the first five trading days in April before the beginning of the year of office.

 

The table below discloses the remuneration that will be paid out to the Board of Directors for the year 2016 under the assumption of a positive shareholders’ vote on compensation.

In 2016, the members of the Board of Directors should receive a total compensation of CHF 2.8 million (2015: CHF 1.0 million, should have been CHF 2.8 million) in the form of retainer of CHF 1.7 million (2015: CHF 0.6 million, should have been CHF 1.6 million), committee fees and other expenses of CHF 0.2 million (2015: CHF 0.1 million, should have been CHF 0.3 million), social security contributions of CHF 0.2 million (2015: CHF 0.1 million, should have been 0.2 million) and shares of CHF 0.7 million (2015: CHF 0.2 million, should have been CHF 0.7 million). The amounts for the retainer in cash, the committee fees and the allocation of restricted shares have remained unchanged since 2012.

Total compensation (Proposed) (1)
in CHF
Retainer
(cash)
Committees Fees
(cash)(2)
Value of
Shares(3)
Social
Security
Total
2016
Paul Hälg,
Chairman
480,000 30,000 302,017 59,964 871,980
Jürgen Tinggren
150,000 0 50,893 15,414 216,306
Urs F. Burkard,
NCC Member
150,000 30,000 50,893 17,594 248,487
Willi K. Leimer,
AC Member
150,000 30,000 50,893 17,594 248,487
Monika Ribar,
AC Chairwoman
150,000 50,000 50,893 19,048 269,941
Christoph Tobler,
AC Member
150,000 30,000 50,893 17,594 248,487
Daniel J. Sauter,
NCC Member
150,000 30,000 50,893 17,594 248,487
Ulrich W. Suter 150,000 0 50,893 12,436 213,329
Frits van Dijk,
NCC Chairman
150,000 50,000 50,893 15,837 266,729
Total 1,680,000 250,000 709,158 193,074 2,832,232
in CHF
Retainer
(cash)
Committee Fees
(cash)(2)
Value of
Shares(3)
Social
Security
Total
2015
Paul Hälg,
Chairman
480,000 30,000 300,562 57,641 868,203
Jürgen Tinggren
150,000 0 52,634 15,547 218,181
Urs F. Burkard,
NCC Member
150,000 30,000 52,634 17,727 250,361
Willi K. Leimer,
AC Member
150,000 30,000 52,634 17,727 250,361
Monika Ribar,
AC Chairwoman
150,000 50,000 52,634 19,180 271,814
Christoph Tobler,
AC Member
150,000 30,000 52,634 17,727 250,361
Daniel J. Sauter,
NCC Member
150,000 30,000 52,634 17,727 250,361
Ulrich W. Suter 150,000 0 52,634 12,544 215,178
Frits van Dijk,
NCC Chairman
150,000 50,000 52,634 15,946 268,580
Total 1,680,000 250,000 721,634 191,765 2,843,399

1For 2015, includes the compensation effectively paid for the period January to April 2015 and the compensation proposed for the period May to December 2015 that is still to be paid out upon AGM approval. For 2016, includes the compensation proposed for the calendar year that is still to be paid out upon AGM approval.
2Committee fees include the representation allowance for the Chairman of the Board of Directors, who is not eligible for committee fees.
3Fair market value is defined as the average closing price of the first five trading days in April before the beginning of the year of office.

 

In the year under review, no compensation was paid to former members of the Board of Directors. No compensation was paid to parties closely related to members of the Board of Directors.

In accordance to the Articles of Association, no member of the Board of Directors was granted a loan during the reporting year. No loans were outstanding at the end of the year under review.

Compensation awarded to the CEO and to Group Management in 2016

This section is audited according to article 17 of the Ordinance against Excessive Remuneration in Stock Listed Corporations.

In 2016, the members of the Group Management received a total compensation of CHF 16.5 million (2015: CHF 16.2 million). This amount comprises fixed salaries of CHF 4.8 million (2015: CHF 4.8 million), short-term bonus of CHF 4.8 million (2015: CHF 4.6 million), long-term incentives of CHF 3.7 million (2015: CHF 3.5 million), other expenses of CHF 1.3 million (2015: 1.0 million) and contributions to social security and post-employment benefits of CHF 2.1 million (2015: CHF 2.1 million).

The total amount of compensation of CHF 16.5 million awarded to Group Management in 2016 is within the maximum aggregate amount of compensation of CHF 18 million approved by the shareholders at the 2015 Annual General Meeting for financial year 2016.

in CHF thousands
CEO 2016 CEO 2015
Total 2016 Total 2015
Fixed base salary (1) 908 908 4,774 4,771
Performance bonus (STI) cash (2) 1,322 877 4,539 3,438
Performance bonus (STI) shares (2) 0 263 469 1,143
Long-term incentive (3) 1,003 1,001 3,489 3,666
Other payments (4) 46 46 1,286 1,026
Social security and pension contributions (5) 503 414 2,131 2,109
Total 3,782 3,510 16,688 16,153

1Includes annual base salary and children/family allowances. All compensation amounts are gross payments.
2Estimated performance bonus (STI) for the reporting year that will be paid in April of the following year, split between immediate cash and deferred shares (including matching shares).
3Grant value of the grant in the reporting year.
4Includes other benefits in kind and perquisites at fair value such as anniversary payments and cost allowances (tax equalization, housing, schooling, home leave) for the international assignees.
5Includes social security contributions as well as contributions to company provided pension plans, including the service cost to the pre-retirement plan.

 

Explanatory comments to the compensation table:

  • From 2015 to 2016, the target compensation (fixed base salary, target bonus and grant value of long-term incentive) of the CEO and other members of Group Management has not been changed, with the exception of two members whose compensation level was still substantially below market benchmark.
  • The fixed compensation remained constant.
  • The increase in the “other” payments is due to the fact that a new member of Group Management has relocated to Switzerland and received benefits usually provided to internationally mobile employees, such as relocation support, housing allowance and tax advice.
  • The increase in pension contributions for the CEO is due to the fact that the contribution rates are age-related and that the CEO moved in a different age-bracket in 2016. The contribution rates in the pension plan have not changed since several years.
  • The performance achievement under the performance bonus was higher in 2016 than in 2015. Further details are provided below.•    The grant value of the Long-Term Incentive remained unchanged compared to previous year. The decrease in the grant value compared to previous years is due to the fact that the 2015 figures included the grant that was made to the new CFO including the pro rata participation in the unvested plans (LTI 2013–2015 and LTI 2014–2016). The new member joining the KL in 2016 did not receive any LTI grant in 2016 and will start to participate, including pro rata participation in the unvested plans, as of year 2017.

Performance in 2016 (not audited)

The financial year 2016 has been a strong year for Sika, with an 4.7% revenue growth (in local currencies 5.5%) and 18.1% profitability increase (earnings before interest and tax). In the performance bonus, Sika has outperformed the peer companies both in terms of net sales growth (ranked 13th, payout of 104%) and in terms of EBIT improvement year on year (ranked 8th, payout of 139%). The group performance achievement is estimated at 127% (best-estimate at time of publication) and will be calculated by Obermatt based on the annual report publications of the peer companies before the payout date in April 2017. This compares to a strong year 2015, where Sika outperformed its peers (12nd rank on net sales growth and 10th rank on EBIT improvement), with a payout of 119%.

Individual performance, which is mainly measured by EBIT and net working capital improvement versus previous year, at Group and regional level, ranges from 115% to 190% for members of Group Management and amounts to 178% for the CEO . Consequently, the overall bonus payout percentage ranges from 122% to 150% (cap) for Group Management and amounts to 147% for the CEO . This compares to a payout range of 101% to 149% for Group Management and to a payout of 122% for the CEO in 2015.

In the Long-Term Incentive that has been granted on 1 January 2016 (LTI 2016–2018), 288 performance share units have been granted to the CEO and 714 to the other members of Group Management. Those PSU had an overall grant value of CHF 3.5 million and will vest on December 31, 2018 based on the average ROCE performance during 2016–018 and upon the continuous employment of the participant.

In the long-term incentive that vested in 2016 (LTI 2014–2016), the performance condition of 20% average ROCE over the vesting period has been overachieved: the average three-year ROCE, excluding acquisitions, amounts to 28.2%, leading to a payout of 100% (cap). Therefore, the 953 units granted on 1 January 2014 to the current members of Group Management have vested with a vesting value of CHF 4.7 million. For the CEO , the 329 PSU granted on 1 January 2014 vested with a value of CHF 1.6 million. The value at vesting is higher than the value at grant due to the positive development in the share price during the vesting period (2014–2016).

Overview of the unvested PSU grants (includes members of Group Management as of December 31, 2016)

*For new members of Group Management, grant date may be different (January 1 of the year following their nomination, pro rata participation in the grants that are still in the vesting period).

 

In the year under review, no compensation was paid to former members of Group Management. No compensation was paid to parties closely related to members of Group Management.

In accordance with the Articles of Association, no member of the Group Management was granted a loan during the reporting year. No loans were outstanding at the end of the year under review.

Shareholdings of the members of the Board of Directors and Group Management in 2016

At the end of 2016, members of the Board of Directors held a total of 3,392 bearer shares of Sika AG (2015: 3,392). At the end of 2016, members of the Group Management held a total of 5,795 bearer shares of Sika AG (2015: 6,205). This figure includes both privately acquired shares and those allocated under the Group’s compensation schemes. Because of the new composition of Group Management, the figures cannot be compared on an exact basis.

At the end of 2016, members of the Board of Directors and of Group Management do not hold any options.

Information regarding participations of the Board of Directors and Group Management in Sika AG can be found in the Sika AG Financial Statements (on page 149 of the download version of this report).

Equity overhang and dilution as of December 31, 2016

In total as of December 31, 2016, the equity overhang, defined as the total number of share units and restricted shares outstanding divided by the total number of outstanding shares (2,151,199 bearer shares and 2,333,874 registered shares) amounts to 12,993 units, representing  0.29%.

The company’s “burn rate,” defined as the number of equities (restricted share and share units) granted in 2016 (3,722 units) divided by the total number of common shares outstanding is 0.08%.