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.

In view of the evolving requirements on the BoD members’ role and considering that the compensation levels of the BoD remained unchanged since 2014 despite being below benchmark, they were increased effective for the term of office from the AGM 2019 until the AGM 2020. The basic compensation was 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 was increased to CHF 20,000 (previously CHF 15,000). The intention is to keep the compensation levels for ordinary members unchanged for the time being.

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 100,000 and an award of CHF 90,000 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 compensation system and levels are documented in the BoD compensation directive and are summarized in the table below.

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 2019 until the AGM 2020, the first compensation period ended on 30 April 2020, the second will end on 31 October 2020. 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.

Effective 1 April 2021, the BoD Chair will step down from his dual role and hand over the CEO role to his successor. While compensation for his CEO role will stop as of the same date, he will start being remunerated in his capacity as BoD Chair with an annual fee of CHF 680,000, of which CHF 360,000 will be paid in cash and CHF 320,000 in restricted shares (following a similar ratio between cash and share compensation as for the other BoD members). The annual fee for the BoD Chair role was determined based on the expected time and effort required to effectively perform this role and with consideration of remuneration levels of defined benchmark companies. The BoD Chair is not eligible to receive any additional committee fees.

For the term of office from the AGM 2020 until the AGM 2021 and subject to approval by the AGM 2020, the BoD compensation system will be modified to accommodate the formation of the Nomination and Compensation Committee. The Committee Chair fee for the new Nomination and Compensation Committee will be CHF 60,000 and the membership fee will be CHF 20,000. This structure was determined based on the expected level of time and effort required to effectively run the committee and to be consistent with the existing structure for the Audit Committee. Upon implementation of the Nomination and Compensation Committee, the individual Compensation and Nomination Committees and their respective fee structures will be discontinued.

2. Assessment of actual compensation paid to the BoD in the financial year 2019/20

The actual compensation paid to the BoD for the financial year 2019/20 decreased compared to the previous year (–6%) mainly due to the former BoD Chair still being remunerated until he stepped down at the AGM 2018. Although the change in the compensation levels mentioned above resulted in slightly higher fees overall, all members of the BoD voluntarily and temporarily waived 10% of their basic compensation, starting from May 2020. Therefore, two months of the reporting period (May/June) were impacted by this reduction.

At the AGM 2019, the shareholders approved a maximum aggregate amount of CHF 2,390,000 for the BoD for the compensation period from the AGM 2019 until the AGM 2020. The compensation effectively paid for the portion of this term of office included in this Compensation Report (October 2019 – 30 June 2020) is within the limit approved by the shareholders. A conclusive assessment for the entire period will be included in the Compensation Report 2020/21.

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 was CHF 1,820,000 and is within the limit approved by the shareholders.

As of 30 June 2020, in compliance with the Articles of Incorporation, no loans or credits were granted to 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.