As a company listed in Switzerland, Georg Fischer Ltd is obliged to abide by the Swiss Code of Obligations (Art. 663b to CO and Art. 663c para. 3 CO) and para. 5.1 of the Corporate Governance Directive (RLCG) of the SIX Swiss Exchange in disclosing its compensation policy and the remuneration paid to the Board of Directors and management (at Georg Fischer the Executive Committee). Moreover, as regards Corporate Governance structuring and reporting, Georg Fischer complies with the Swiss Code of Best Practice for Corporate Governance of economiesuisse, the largest umbrella organization representing the Swiss economy. Georg Fischer prepares its consolidated financial statements in accordance with IFRS (International Financial Reporting Standards). These regulations may at times require different interpretations and presentations.
The following explanations follow para. 5.1 of the Corporate Governance Directive of the SIX Swiss Exchange, taking account of Annex 1 of the Swiss Code of Best Practice for Corporate Governance of economiesuisse. In this section we present the compensation policy. The remunerations paid in accordance with the above-mentioned provisions of the Swiss Code of Obligations are listed and commented on in the consolidated financial statements (pages 77 and 78) and in the statements of Georg Fischer Ltd (pages 86 and 87) in the
annual report 2007.
Compensation policyBoard of DirectorsExecutive CommitteeSeverance paymentsOptionsAdditional feesLoans to members of governing bodiesDecision-making authority and supervision of the Board of DirectorsDecision-making authority and supervision of the Executive CommitteeSupervisionCompensation policy
The Human Resources Policy lays down the principles of the compensation policy. It is designed to provide simple and clearly structured salary systems that ensure fair remuneration and are transparent for the Corporation’s employees. Georg Fischer gears salary levels to salaries in the relevant market and reviews these levels at regular intervals. Individual compensation is determined by the specifications of the position, competencies, performance and the corporation’s business success. Wherever possible, Georg Fischer uses results- and performance-driven compensation systems that include a results-related variable component. These principles also apply to the compensation policy for the Board of Directors and the Executive Committee, which are adopted by the Board of Directors on a proposal of the Compensation Committee.
Back to topBoard of DirectorsThe criteria for determining the remuneration of the Board of Directors are the responsibility conferred on its members, the complexity of their task, the specialist and personal requirements made of them and the average time expected to be involved. The details are set out in regulations which were amended in 2007.
The compensation consists of the following elements:
A) cash compensation
B) share-related compensation
C) other benefits.
A) Each member of the Board of Directors receives a fixed cash compensation as part of his or her basic remuneration. Additional time for special tasks such as chairmanship, vice-chairmanship or committee membership, for extraordinary meetings or for travel to and from meetings which does not take place on the day of the meeting is also remunerated in cash. The cash compensation may be paid out, wholly or in part, in Georg Fischer shares. The shares can be vested for five years. The accountable value of the shares is determined by the share price at the end of the reporting year. This stood at CHF 697 on December 31, 2007.
B) Each member of the Board of Directors receives a fixed number of shares as part of his or her basic remuneration.
C) The other benefits include employee contributions to social insurance funds and lump-sum remuneration for expenses which are assumed by Georg Fischer Ltd.
For the remunerations paid in the year under review, see
page 86 of the financial section in the annual report 2007.
Back to topExecutive Committee
The amount and the elements of the compensation are tailored to the respective sector and labour market and are reviewed regularly. Freely available information from companies of similar size and comparable sectors as well as the findings from surveys and studies by third parties are used for this purpose. The performance-related bonus paid to members of the Executive Committee is dependent on their reaching individual performance objectives and on the business success of the Corporation. The share-related remuneration paid to the Executive Committee members is a long-term incentive.
The compensation consists of the following elements:
A) a fixed base salary in cash
B) a performance-related bonus in cash
C) share-related remuneration (long-term incentive)
D) contributions to pension and social insurance funds.
A) The fixed base salary is determined primarily by the manager’s task, responsibility, skills, managerial experience and labour market conditions.
B) The performance-related bonus depends on the fulfilment of the individual performance objectives and the business success of the corporation.
As part of the management by objectives process, measurable individual targets are agreed at the beginning of the year between the Chairman of the Board of Directors and the Chief Executive Officer, and between the Chief Executive Officer and the individual members of the Executive Committee. Fulfilment of these targets is assessed at the end of the business year.
The business success of the Corporation as a whole and of the individual Corporate Groups is measured by three financial value drivers:
- organic sales growth (excluding acquisitions and divestments)
- EBIT margin (ROS)
- capital turnover (sales/net operating assets).
The objectives are set by the Board of Directors for the medium term and are weighted in accordance with the strategic priorities of the Corporate Groups and the Corporation. A lower threshold and an upper ceiling are defined for each of the three value drivers. If the lower threshold for the criterion in question is not reached, that part of the bonus will not apply. Exceeding the ceiling, however, does not lead to a further increase in the bonus. The amount of the bonus is derived from fulfilment of the targets. The maximum bonus for the members of the Executive Committee may not exceed 90 percent of the base salary; for the Chief Executive Officer the maximum is 110 percent.
The individual objectives and the business success are weighted as follows: For the Heads of a Corporate Group, the weighting is one third each for the individual targets, the business success of the Corporate Group and that of the Corporation. For heads of Corporate staff functions, the weighting is one third for the individual targets and two thirds for the business success of the Corporation. For the Chief Executive Officer, the business success of the Corporation has a slightly higher weighting.
C) The share-related remuneration is a long-term incentive. A fixed number of shares, vested for at least five years, are distributed to each member of the Executive Committee. The purpose of this share allocation is to reward managers for the long-term success of the Corporation over a period of at least five years. The number of shares allocated is dependent on the function.
D) The pension and social insurance fund expenses include employer contributions to social insurance funds and to obligatory and non-mandatory pension funds.
For the remunerations paid in the year under review, see page 87 of the financial section in the annual report 2007.
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Severance payments
There is no contractual entitlement to severance payments by the members of the Board of Directors or the Executive Committee. In the 2007 business year, no severance payments were made to persons who left governing bodies in the year under review or earlier.
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Options
Options are not allocated to members of the Executive Committee or the Board of Directors.
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Additional fees
The members of the Executive Committee and the Board of Directors or related parties did not receive any fees or other remuneration for additional services to Georg Fischer Ltd or one of its corporate subsidiaries in the 2007 business year.
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Loans to members of governing bodies
Neither Georg Fischer Ltd nor its corporate subsidiaries granted any guarantees, loans, advances or credit facilities to members of the Executive Committee or the Board of Directors or related parties.
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Decision-making authority and supervision of the Board of Directors
Based on the compensation regulations, each member of the Board of Directors receives an annual lumpsum compensation for expected time spent and the tasks assumed. The Compensation Committee may adjust the amount of the lump-sum payment should the actual time required deviate significantly from the assumptions on which the payment is based. Compensation is made on a pro rata basis for members joining or leaving during the year he or she is in office. The compensation due to members of the Board of Directors, in accordance with the regulations, is proposed by the Chairman of the Board of Directors to the Compensation Committee, which takes a decision at its regular meeting in December.
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Decision-making authority and supervision of the Executive Committee
Based on a proposal by the Compensation Committee, the Board of Directors decides on the amount of compensation paid to the Chief Executive Officer and on the total compensation paid to the Executive Committee. The individual salaries of the other members of the Executive Committee are set by the Compensation Committee based on a proposal by the Chief Executive Officer.
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Supervision
The internal auditors annually ensure compliance with the rules of compensation for the Executive Committee and the Board of Directors on behalf of the Board of Directors.
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