Governance: principles and responsibilities in setting compensation

The guiding principles for the remuneration of the Board of Directors and the Corporate Executive Committee as well as the responsibilities for the remuneration system of Galenica are defined in the Articles of Association of Galenica. They include the provisions on the Remuneration Committee (Art. 21 of the Articles of Association) and remuneration (Art. 22 of the Articles of Association).

Each year, the Board of Directors submits the maximum remuneration of the Board of Directors and the Corporate Executive Committee to the Annual General Meeting for binding approval. Such approval is prospective for the next financial year following the Annual General Meeting. In addition, the Annual General Meeting holds a consultative vote on the Remuneration report for the year under review (Art. 22 (1) of the Articles of Association).

On the basis of the Articles of Association and the decisions of the Annual General Meeting, the remuneration strategy and the related remuneration system for the members of the Board of Directors and the Corporate Executive Committee are determined by the Board of Directors based on a proposal from the Remuneration Committee. The Board of Directors also decides on an annual basis on the individual remuneration of the Chair of the Board of Directors and the CEO. The remuneration of members of the Board of Directors is determined by the Board of Directors based on a proposal from the Remuneration Committee within the limits set by the Annual General Meeting.

Remuneration Committee

The Remuneration Committee consists of three members of the Board of Directors, all of whom are independent from Galenica and are elected annually by the Annual General Meeting. At the 2021 Annual General Meeting, Andreas Walde (Chairman), Markus Neuhaus and Michel Burnier (new member) were elected as members of the Remuneration Committee.

The Remuneration Committee reviews and approves the remuneration principles and programmes of Galenica, including the design of the incentive plans, determines the performance indicators and targets for the CEO and the other members of the Corporate Executive Committee at the beginning of the financial year and assesses the extent to which these targets have been achieved at year end. The Remuneration Committee is responsible for setting the individual target remuneration of the members of the Corporate Executive Committee and proposes the CEO’s target remuneration to the Board of Directors in consultation with the Chair of the Board of Directors.

Responsibility for the remuneration process

Activities of the Remuneration Committee during the year

In 2021, the Remuneration Committee held five ordinary meetings according to the annual schedule, and no ad hoc meeting.

In 2021, two members attended all meetings and one member attended four meetings, which corresponds to an attendance rate of 93%.

At each meeting of the Board of Directors, the Chair of the Remuneration Committee reports on the Remuneration Committee’s current topics of discussion and decisions. The minutes of the meetings are made available to the members of the Board of Directors.

The Chair of the Board of Directors is invited to all meetings of the Remuneration Committee (right of attendance, no voting rights), except those dealing with her own remuneration. The CEO is invited to attend discussions on a case-by-case basis, but not to discussions of agenda items that concern his performance or remuneration.

The Remuneration Committee conducted a benchmarking analysis of the remuneration levels of the Corporate Executive Committee in the reporting year. The outcome of the analysis showed that the remuneration levels are below market when comparing with other Swiss listed companies of similar size, but above market when comparing with private companies of the healthcare, retail and logistics sectors. Further information on the benchmarking analysis and its results can be found in the section Benchmarking and external advisors below.

Otherwise, the Remuneration Committee performed its regular duties, in particular setting performance targets and evaluating their achievement, determining the remuneration of the members of the Board of Directors and the Corporate Executive Committee and preparing the Remuneration report and the Annual General Meeting. In addition, the Remuneration Committee conducted a self-assessment of its functioning. It rated its discussions and decision-making as efficient and appropriate, and the support of the Board of Directors in matters of remuneration as effective.

Further details on the Remuneration Committee can be found in the Corporate Governance section as well as in the Remuneration Committee Charter, which can be found on the Galenica website.

Benchmarking and external advisors

In order to ensure its continued attractiveness as an employer, Galenica regularly compares its remuneration system and levels with those of relevant peers. In terms of compensation levels, Galenica considers a positioning at market median as being competitive.

In 2021, the Remuneration Committee carried out a benchmarking analysis of the remuneration levels of the Corporate Executive Committee. For this purpose, Klingler Consultants provided benchmarking data based on two different peer groups: a peer group of Swiss listed companies of comparable size and a peer group of private companies in the healthcare, retail and logistic sectors. The companies included in the peer groups are disclosed below. Overall, the benchmark study showed that the remuneration of the Corporate Executive Committee is below market levels when comparing with the Swiss listed peers and above market levels when comparing with the sector-based peers. This result can be explained by the fact that the sector-based peers do not offer a long-term remuneration component, while Swiss listed peers typically do. Further, most Swiss listed peers have an international organization. This is not the case at Galenica and could be a factor driving lower remuneration levels compared to other Swiss listed companies.

Peer groups to benchmark the remuneration levels of the Corporate Executive Committee

Those companies were selected by the Remuneration Committee as the most relevant for Galenica. Klingler Consultants only used compensation data of those companies for the benchmark analysis but did not have all of them in their database. However, due to confidentiality reasons, the names of the companies included in the database are not disclosed to Galenica.

The remuneration of the Board of Directors was last reviewed in 2018. This market comparison was carried out by Agnès Blust Consulting. Approximately 20 Swiss industrial companies of a similar size to Galenica in terms of market capitalisation (between CHF 1 billion and CHF 4 billion), sales and number of employees that were listed on the SIX Swiss Exchange (excluding the financial sector) were used as a peer group. The study showed that the remuneration of the Board of Directors was in line with the market.

The Remuneration Committee may decide to consult external advisors on specific compensation matters. In 2021, Agnès Blust Consulting provided services related to executive compensation and Klingler Consultants provided market data for the benchmarking analysis mentioned above. These companies do not have any other mandates with Galenica.