Compensation architecture for the BoD

BoD members 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 BoD remains independent while exercising its supervisory duties towards the EC. The amount of compensation for each function of the BoD 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 by Agnès Blust Consulting in financial year 2017/18 based on the following peer companies: Autoneum, Bucher Industries, EMS Chemie, Geberit, Georg Fischer, Landis + Gyr, Logitech, Lonza, OC Oerlikon, Sonova, and Sulzer. The results of the analysis had shown that overall the compensation of the BoD was slightly below market practice. Nevertheless, the BoD had decided to keep the compensation structure and levels unchanged at the time. The compensation system and levels are documented in the BoD compensation directive and are summarized in the table below.

1. Composition of compensation

The BoD Chair does not receive any compensation for his function on the BoD as long as he acts in a dual role as Chair of the BoD and CEO.

The compensation paid to the other members of the BoD comprises a cash payment of CHF 90,000 and an award of CHF 80,000 in restricted shares of dormakaba Holding AG. Additional fees are paid in cash for specific functions such as committee chair and/or committee member of the BoD or for performing special additional tasks assigned by the BoD.

The members of the BoD 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 BoD. In addition, a shareholding ownership guideline is in place, requiring Board members to hold a minimum of 500 shares of dormakaba within three years after their election to the BoD.

Compensation is paid on a pro rata basis to Board members twice a year. For the term of office from the AGM 2018 until the AGM 2019, the first compensation period ended on 30 April 2019, the second will end on 31 October 2019. 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 BoD.

For the term of office from the AGM 2019 until the AGM 2020, the basic compensation will be increased to CHF 100,000 in cash and CHF 90,000 in restricted shares (previously CHF 90,000 in cash and CHF 80,000 in restricted shares) and the membership fee for the Audit Committee will be increased to CHF 20,000 (previously CHF 15,000). The BoD has decided to implement the above adjustments in view of the evolving requirements on the BoD members' role and considering that the compensation levels of the BoD had not been adjusted since 2014 despite being below the benchmark (see paragraph above on the benchmarking analysis). The intention is to keep the compensation levels for ordinary members unchanged for the next two to three years.

2. Assessment of actual compensation paid to the BoD in the financial year 2018/19

The actual compensation paid to the BoD for the financial year 2018/19 decreased compared to previous year (–14%). This is because since the AGM 2018, the BoD Chair did not receive any compensation for his function on the BoD in the reporting year due to his dual role as BoD Chair and CEO. The compensation system and levels remained otherwise unchanged compared to the previous year.

At the AGM 2018, the shareholders approved a maximum aggregate amount of CHF 2,190,000 for the BoD for the compensation period from the AGM 2018 until the AGM 2019. The compensation effectively paid for the portion of this term of office included in this Compensation Report (October 2018 – 30 June 2019) is within the limit approved by the shareholders. A conclusive assessment for the entire period will be included in the Compensation Report 2019/20.

At the AGM 2017, the shareholders approved a maximum aggregate amount of CHF 2,750,000 for the BoD for the compensation period from the AGM 2017 until the AGM 2018. The compensation effectively paid was CHF 2,345,000 and is within the limit approved by the shareholders.

As at 30 June 2019, in compliance with the Articles of Incorporation, there were no outstanding loans or credit facilities between dormakaba and current or former BoD members, or parties closely related to them. Investments held by BoD members or related persons (including conversion and option rights) – if any – are listed here.