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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 (Article 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 (Article 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 2022 Annual General Meeting, Andreas Walde (Chairman), Markus R. Neuhaus and Michel Burnier were re-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

Level of authority

CEO

 

Remuneration Committee

 

Board of Directors

 

Annual General Meeting

Remuneration policy

 

 

proposes

 

approves

 

consultative vote on the Remuneration report

Performance objectives for short-term bonus and long-term remuneration

 

 

proposes

 

approves

 

 

Individual performance objectives for short-term bonus

proposes (except for own objectives)

 

proposes (CEO) approves (Corporate Executive Committee)

 

approves (CEO)

 

 

Remuneration of members of the Board of Directors

 

 

proposes

 

approves

 

approves maximum possible remuneration for the Board of Directors for the following year

Remuneration of the CEO

 

 

proposes (in consultation with CBD)

 

approves

 

approves maximum possible remuneration for the Corporate Executive Committee including the CEO for the following year

Remuneration of members of the Corporate Executive Committee

proposes (in consultation with the CBD)

 

approves

 

is informed

 

CBD = Chair of the Board of Directors

Activities of the Remuneration Committee during the year

Subject

1 st quarter

 

2 nd / 3 rd quarter

 

4 th quarter

Remuneration policy

 

 

Review of shareholders’ feedback Benchmarking and review (every 2-4 years)

 

Benchmarking and review (every 2-4 years)

Remuneration of Board of Directors

 

 

Review of remuneration regulations

 

Determination of remuneration (following year)

Remuneration of Corporate Executive Committee

Performance evaluation (previous year) STI payout (previous year) LTI vesting (previous period) Performance objectives for STI and LTI (current year/period)

 

Benchmarking of remuneration levels (every 2-4 years)

 

Target remuneration (basic salary, following year) Target STI (following year) LTI allocation (following year)

Remuneration governance

Remuneration report AGM preparation

 

 

 

Preparation of Remuneration report Annual meeting schedule and topics (following year) Remuneration Committee self-assessment Galenica Group salary review (following year)

In 2022, the Remuneration Committee held four ordinary meetings according to the annual schedule, and no ad hoc meeting.

In 2022, all members attended all meetings, which corresponds to an attendance rate of 100%.

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 that concern his performance or remuneration.

The Remuneration Committee conducted a benchmarking analysis of the remuneration structure and levels of the Board of Directors in the reporting year. Further information 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 (Chapter Remuneration Committee) 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 remuneration levels, Galenica considers a positioning at market median as being competitive.

The Remuneration Committee carried out a benchmarking analysis of the remuneration levels of the Corporate Executive Committee back in 2021. For this purpose, Klingler Consultants provided benchmarking data based on two different peer groups: a peer group of 21 Swiss listed companies of comparable size and a peer group of 25 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 organisation. 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

Swiss listed peers

 

 

Sector-based peers

Also

Aryzta

Bachem

Retail and logistics:

Medical insurances:

Belimo

Bell

BKW

Brack

Coop

Assura

Concordia

CSS

Bucher

Datwyler

dormakaba

Digitec

Galliker

Group Mutuel

Helsana

KPT

Emmi

Forbo

Georg Fischer

Kühne+Nagel

Manor

Sanitas

Swica

Sympany

Idorsia

Interroll

Oerlikon

Migros

Planzer

Visana

 

 

SFS

Siegfried

Sulzer

State-owned companies:

Healthcare:

Tecan

Valora

Zur Rose

SBB

Post

CHUV

Hirslanden

Inselspital

 

 

 

 

 

Swiss Medical Network

USZ

Those companies were selected by the Remuneration Committee as the most relevant for Galenica.

The remuneration structure and levels of the Board of Directors were reviewed in the reporting year. The market comparison was carried out by PricewaterhouseCoopers (PwC). The same 21 Swiss listed companies mentioned above were used as peer group. While the overall structure and levels of remuneration are in line with market practice, the Remuneration Committee proposed to express the remuneration of the Board of Directors in gross terms, rather than in net terms. This is not a change of the remuneration system or levels but an improvement in terms of disclosure and transparency.

The Remuneration Committee may decide to consult external advisors on specific remuneration matters. In 2022, PwC provided services related to executive compensation. PwC provides other services to Galenica and there are clear rules in place to ensure the independence of PwC consultants. No other external advisors were consulted on remuneration matters in the reporting year.

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