MCH Groupʼs remuneration system is aligned to standard market practice. Variable compensation components are in place to promote the achievement of corporate goals.
The remuneration system is designed in such a way that
- it is both proportionate and competitive in relation to comparable companies;
- it is commensurate with the quality of the work, the workload and the responsibility borne by the function in question and the contribution made by the individual;
- it is readily comprehensible and transparent;
- an appropriate ratio exists between the lowest and the highest remuneration;
- the ratio between the fixed and variable elements of the remuneration is commensurate with the sphere of influence of the individual;
- the variable remuneration is dependent on the achievement of performance objectives at Group and division level as well as on individual contributions.
Variable Remuneration in MCH Group
Currently, different bonus models are in force in various companies, divisions and/or countries for the employees at all levels of MCH Group. The payment of a bonus is dependent on the financial results at group and/or division level and on the individual performance.
In the past years, as well as in the business year 2022, the conditions for payment of the bonus portion linked to the financial results at the Group and/or division level have not been met. In 2020 and 2021, employees also waived the payment of the bonus portion linked to their individual performance. Only limited amounts were available for targeted measures. For the business year 2022, based on individual target achievement, employees will receive variable compensation totaling approximately CHF 1.7 million (not including variable remuneration of the Executive Board). In addition, an inflation compensation for a total amount of CHF 1.1 million will be paid out for the business year 2022 (excluding management levels with a higher salary).
In the second half of 2022, the leading operational management levels were restructured. The composition of the Executive Board has been reduced to the Group CEO and the Group CFO. The Executive Board established a new Management Team as the second management level, representing and linking all the business units and services. In future, the compensation model for the Executive Board and the Management Team will be harmonized and include, in addition to the fixed remuneration, a short-term variable compensation component (Short-term Incentive, STI) and a long-term variable compensation component (Long-term Incentive, LTI).
The new LTI program for the Executive Board and the Management Team was introduced in the business year 2022. In the business year 2023, the new STI program for the Executive Board and the Management Team will be introduced. In 2024, the new STI program will be rolled out at all levels throughout the company to further promote the performance orientation and strategy implementation.
Remuneration System for the Executive Board
The remuneration of the Executive Board consists of the fixed remuneration as wells as the short-term and long-term variable remuneration, in the business year 2022 also the one-time retention payment approved by the Annual General Meeting. However, the members of the Executive Board had different entitlements to these remuneration components. Due to the structural and personnel changes on the Executive Board, there were no uniform regulations for the business year 2022.
Fixed Remuneration and Benefits
The fixed remuneration of the members of the Executive Board comprises the annual basic salary and benefits, including pension insurance and other payments, such as family allowances, long-service awards and other allowances.
The annual basic salary is determined by the Board of Directors on the basis of the scope of the role, the skills required to perform the role, the external market value for the role and the skills and experience of the individual in the role.
Benefits consist mainly of retirement, insurance, and healthcare plans that are designed to provide a reasonable level of protection for the employees and their dependents in respect of the risk of retirement, disability, death, and illness. The members of the Executive Board participate in the occupation pension plan offered to all employees in Switzerland.
In the business year 2022, several members of the Executive Board in its 2020 composition were entitled to a retention payment that had been approved by the Annual General Meeting. Such retention payments are no longer foreseen in future.
Short-term Incentive (STI)
The STI is a short-term variable remuneration component designed to reward company and business unit performance over a time horizon of one year. The redesigned STI program strengthens the link between performance and remuneration and the strategic alignment throughout the company. The STI is paid out in cash in the spring of the following year.
The performance indicators and targets are set annually by the Board of Directors upon recommendation by the GNCC.
For the business year 2022, there was no uniform STI plan for the members of the Executive Board. The STI entitlement was based on the previous regulations (whereby only individual performance was taken into account) or on individually determined performance indicators and targets.
For the business year 2023, the new STI plan will apply to the Executive Board. The STI payout will be determined based on an STI target value, which is defined as a percentage of the annual basic salary and may be set between 30 % and 70 % for the members of the Executive Board. The Key Performance Indicators (KPI) are a financial and strategic target at Group level, each weighted at 50 % of the total STI. For each KPI, an expected performance level which provides for a 100 % payout is determined, as well as a minimum level of performance (threshold), below which there is no payout, and a maximum level of performance, for which the payout is capped at 200 %.
The KPIs and the expected performance levels are set annually by the Board of Directors on recommendation by the GNCC. For the business year 2023, the financial target at Group level will be the operating cash flow (OCF), in line with the spriority of the company.
Long-term Incentive (LTI)
The LTI introduced in 2022 for the members of the Executive Board and the Management Team rewards for the performance of the Group over a time period of three years. The LTI strengthens the alignment with shareholders' interests, promotes a performance-oriented attitude and reinforces the loyalty to the company.
The LTI program is awarded in the form of Performance Share Units (PSU). The individual grant amount is determined as a CHF amount and converted into a certain number of PSU on the basis of the averaged ten-day share price in the month prior to the grant date. A PSU is a conditional right to receive a certain number of shares of the company in the future, subject to a three-year vesting period, and dependent upon continuous employment of the participant with the company and the achievement of the following performance conditions:
- EBITDA, with a 66 2/3 % weight
- Revenue, with a 33 1/3 % weight
For the 2022 grant (LTI 2022-2024), the vesting period is staged over three years, i.e., one-third of the PSU is subject to a one-year vesting period, another third to a two-year vesting period and the last third to a three-year vesting period. For the 2023 grant (LTI 2023-2025), two-thirds of the PSU are subject to a two-year vesting period and one-third to a three-year vesting period. From the grant in 2024 (LTI 2024-2026) onward, the regular three-year vesting period will apply for all PSU.
At vesting, the final number of PSU determined will be converted into a number of shares and paid out under the condition that the predefined performance conditions have been met and subject to continuous employment of the participant with the company. The vesting level can range from 0 %, if the performance conditions are not met, to 150 % (cap) if both performance conditions are exceeded. This means that each PSU can provide for 0 to 1.5 shares.
In case of termination of employment, the PSUs are forfeited without any compensation, except for good leaver cases (retirement, disability, death or termination by the company for reasons that are not related to performance), where the PSU are subject to a pro rata vesting at the regular vesting date. In case of a change of control, the Board retains sole discretion.
The members of the Executive Board receive an expenses allowance which varies according to their function and a lump-sum vehicle allowance. These expenses allowances have been approved by the cantonal tax authorities.
Details on the remuneration of the Executive Board 2022 can be found in the section “Remuneration Executive Board”:
– Online: Link
– Download pdf: Page 157
Remuneration System for the Board of Directors
The regulations governing the remuneration of the Board of Directors, which apply up to and including the business year 2022, date from 2014 and have remained largely unchanged since then. The remuneration consists of a basic fee, attendance fees and a lump-sum expense allowance. The remuneration is paid quarterly in cash.
Fixed basic fee
The Chairman, Vice-Chairman and members of the Board of Directors receive a fixed basic fee. Additional fees are paid for chairmanship and the membership in a committee.
Basic fees (net amount p.a.)
- Chairman of the Board: CHF 76,000
- Vice-Chairman of the Board: CHF 36,000
- Members of the Board: CHF 21,000
- Chair of a committee: CHF 5,000
- Members of a committee: CHF 3,000
The members of the Board of Directors and the committees are entitled to an attendance fee of CHF 1 000 per meeting or per meeting day (in case of several meetings on the same day). In the business year 2022, the Board of Directors has adjusted this regulation to the effect that meetings of less than 90 minutes duration are remunerated with CHF 500.
All members of the Board of Directors receive a lump-sum expenses allowance. Expenses incurred in connection with meetings or representation functions (travel, accommodation, etc.) are reimbursed in accordance with the effective expenditures.
Lump-sum expenses allowance (net amount p.a.)
- Chairman of the Board: CHF 5,000
- Vice-Chairman of the Board: CHF 2,000
- Members of the Board: CHF 1,000
The remuneration of the Board of Directors is regularly reviewed against prevailing market practice. In 2022, a thorough analysis was conducted by PricewaterhouseCoopers AG to determine the competitiveness of the Board remuneration in terms of structure and quantum. For this purpose, a peer group of 25 Swiss listed companies was selected, comparable to MCH Group in terms of revenue and market capitalization. The analysis showed that the remuneration structure is not fully aligned with market practice and could be simplified and that the remuneration levels at MCH Group are significantly lower than those of the peer companies for all positions.
Based on the outcome of the benchmark and internal discussions, the Board of Directors has decided to adjust the remuneration model for the 2023 business year. The payment of attendance fees will be waived going forward, and compensation for attending meetings will be integrated into the basic fee. The lump-sum expenses allowance will remain unchanged. The overall aggregate amount of remuneration of the Board of Directors for the 2023 business year will not be increased and will be within the range of the remuneration for the previous business years and within the remuneration approved prior to the Annual General Meeting.
Basic fees with cancellation of attendance fees
from business year 2023 (gross amounts p.a.):
- Chairman of the Board: CHF 90,000
- Vice-Chairman of the Board: CHF 45,000
- Members of the Board: CHF 30,000
- Chair of a committee: CHF 15,000
- Members of a committee: CHF 10,000
The Board of Directors is currently considering a further adjustment of the remuneration model with additional remuneration in the form of shares. If necessary, a corresponding adjustment will be submitted to the Annual General Meeting 2024 for approval.
Details on the remuneration of the Board of Directors 2022 can be found in the section “Remuneration Board of Directors”:
– Online: Link
– Download pdf: Page 160