Compensation architecture for the Board of Directors

Members of the Board of Directors only receive a fixed compensation based on the responsibilities and time requirement of their function, without any entitlement to performance-related compensation. This ensures that the Board of Directors remains independent while exercising its supervisory duties towards the Executive Committee. The amount of compensation for each function of the Board of Directors is determined annually considering the market compensation trends and comparisons with other listed Swiss industrial companies which operate internationally. The last benchmarking analysis was conducted in financial year 2016/17 and had shown that overall the compensation of the Board of Directors is slightly below market practice. Nevertheless, the Board of Directors decided to keep the compensation structure and levels unchanged but to allocate the shares based on a fixed monetary amount rather than a fixed number of shares, starting with the compensation period from the 2017 AGM onwards. This decision has been taken in response to the feedback received by shareholders and proxy advisors and is also aligned with prevalent market practice. The compensation system and levels are documented in the Board of Directors compensation directive and are summarized in the table below.

1. Composition of compensation

The compensation paid to the Board of Directors comprises a cash payment of CHF 90,000 and an award of CHF 80’000 in restricted shares of dormakaba Holding AG. The Chairman of the Board of Directors receives a cash payment of CHF 330,000 and an award of CHF 240,000 in restricted shares. Additional fees are paid for specific functions such as chairmanship and/or membership in a committee of the Board of Directors or for performing special additional tasks assigned by the Board of Directors. The Chairman of the Board of Directors is not eligible to additional compensation for his participation in the committees.

The members of the Board of Directors may decide to receive part of the cash payment in the form of shares of the company. The number of shares awarded is calculated using the average closing share price for the last five trading days of the last month of the relevant compensation period. The awarded shares are restricted for a period of three years; this blocking period remains in place if a member leaves the Board of Directors. In addition, a shareholding ownership guideline is in place, requiring Board members to hold a minimum of 500 shares of dormakaba. This can be built up over a period of three years after the implementation of the guideline (in October 2014) or within three years after the election to the Board of Directors (in case of new members).

Compensation is paid on a pro-rata basis to Board members twice a year. For the financial year 2017/18, the first compensation period ended on 30 April 2018, the second will end on 31 October 2018. Actual expenses incurred are only reimbursed for travel and journeys outside Switzerland or as caused by special additional tasks performed on behalf of and assigned by the Board of Directors.

As at 30 June 2018, in compliance with the Articles of Incorporation, there were no outstanding loans or credit facilities between dormakaba and current or former members of the Board of Directors, or parties closely related to them. Investments held by members of the Board of Directors or related persons (including conversion and option rights) – if any – are listed here.

2. Assessment of actual compensation paid to the Board of Directors in the financial year 2017/18

The actual compensation paid to the Board of Directors remained stable compared to previous year (+0.7%). A slight difference relates to the value of the shares (a special cap was applied for the period from the AGM 2016 to the AGM 2017 and the system was changed from a fixed number of shares to a fixed monetary amount at the AGM 2017) and to a difference in the amount paid for special tasks in both years.

At the AGM 2017, the shareholders approved a maximum aggregate amount of CHF 2,750,000 for the Board of Directors for the compensation period from the AGM 2017 until the AGM 2018. The compensation effectively paid for the portion of this term of office included in this Compensation Report (October 2017–30 June 2018) is within the limit approved by the shareholders. A conclusive assessment for the entire period will be included in the Compensation Report 2018/19.

At the AGM 2016, the shareholders approved a maximum aggregate amount of CHF 2,750,000 for the Board of Directors for the compensation period from the AGM 2016 until the AGM 2017. The compensation effectively paid was CHF 2,340,000 and is within the limit approved by the shareholders.