Dear Shareholders,

In the name of the Board of Directors and the Nomination and Compensation Committee, I am pleased to introduce the 2018 Compensation Report.


2018 has again been a successful year with net sales growth of 13.4% in Swiss francs (13.6% in local currencies), the company reached a double-digit growth. EBIT has been increased by 5.5% despite increasing material cost and one-off cost. The positive development of the business in all regions, together with investments in new factories, the founding of an additional national subsidiary, the market launch of new products and the acquisition activities all contributed to Sika’s strong growth. With regard to relative performance, Sika outperformed its peers in terms of sales growth and matched the industry average in terms of profitability improvement. The Compensation Report outlines how these results impacted the variable incentive payments made to the members of Group Management under the different compensation plans.

During the reporting year, the Nomination and Compensation Committee conducted a thorough review of the compensation programs applicable to the Board of Directors and Group Management, on the basis of which the Committee decided to make the following changes, applicable as of business year 2019:

  • Board compensation: the board fees, which have been unchanged since 2012, will be adjusted and the proportion paid in blocked shares will be increased.
  • Compensation of Group Management:
    –– Benchmarking peer group: the peer group for benchmarking levels of compensation has been extended to 18 industrial companies with an international footprint and which are listed on the SIX Swiss Exchange.
    –– Performance bonus: the voluntary deferral in blocked shares (including matching shares) will be discontinued.
    –– Long-term incentive: the long-term incentive will include relative total shareholder return (TSR) as performance condition, in addition to the return on capital employed (ROCE). Furthermore, the maximum payout potential will be increased from 100% to 150%, in line with our pay-for-performance philosophy and with market practice.
    –– Clawback and malus provisions will be added to the performance bonus and long-term incentive plans.

Further details on those changes are provided in this Compensation Report.


In addition, the Committee performed its regular activities throughout the year, such as the succession planning for the positions on the Board of Directors and Group Management, the performance goal setting at the beginning of the year and the performance assessment at year end of Group Management, the determination of the compensation of the members of Group Management, as well as the preparation of the Compensation Report and of the say-on-pay vote at the Annual General Meeting.


At the 2018 Annual General Meeting, a binding vote on the aggregate maximum compensation amounts for the Board of Directors and for Group Management was conducted, as well as a consultative vote on the Compensation Report, so that shareholders could express their opinion on our compensation policies and principles. The shareholders approved the compensation amount for Group Management with a result of 99.6%, however the compensation amount for the Board of Directors (binding vote) and the Compensation Report (consultative vote) were again rejected, mainly because of the majority voting rights of the former main shareholder. Following the resolution of the dispute with the former main shareholder, an Extraordinary General Meeting was held on June 11, 2018, during which shareholders approved the proposed compensation of the Board of Directors for the terms of office from the Annual General Meeting 2015 to the Annual General Meeting 2019.


Looking ahead, we will continue to assess and review our compensation programs to ensure that they are still fulfilling their purpose in the evolving context in which the company operates, and are aligned with the interests of our shareholders. We will also continue to maintain an open dialog with our shareholders and their representatives. We would like to thank you for sharing your perspectives on executive compensation with us, and trust that you will find this report informative.

FRITS VAN DIJK Chairman of the Nomination and Compensation Committee


Chairman of the Nomination and Compensation Committee