In my role as Chairman of the Nomination and Compensation Committee (NCC) and on behalf of its fellow members, I am pleased to introduce our 2022 Remuneration Report, which adheres to the remuneration disclosure obligation under the revised Swiss Code of Obligation. In this report, we outline the current compensation policies and the decisions made in relation to 2022 compensation for the Executive Committee of Lonza.
We are grateful for the active engagement and time with our shareholders, the investor community and proxy advisors in 2022. It helps to ensure we continue our open and transparent dialogue. Our discussions during 2022 covered matters relating to the implementation of environmental, social and governance (ESG) compensation measures into executive compensation, changes to the Executive Committee, as well as overall company developments.
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Lonza’s approach to compensation is designed to attract and retain talent with competitive compensation programs. Our compensation programs are performance-based, linking employee rewards with company and individual performance. Executive compensation is aligned with the short-term and long-term objectives of the wider business. Results are measured based on the achievement of specific short and long-term objectives, which are defined to achieve a balance between short-term and long-term outcomes. We encourage strategic decisions that drive competitive advantage but discourage executives from taking unnecessary or excessive risks that may threaten the financial health, reputation or sustainability of the Company.
| Base Salary | Benefits | Lonza Bonus | Long-term Incentive Plan (LTIP) | Lonza Restricted Share Unit Plan (LRSP) | Shareholding Guidelines |
| Fixed amount paid in return for the day-to-day duties and responsibilities performed | Retirement and other benefits to complement Lonza’s total compensation offering | Rewards performance against annual company financial and ESG objectives, and individual goals, values and behaviors | Rewards long-term company performance and aligns interests of the Executive with shareholders | Additional variable compensation component, used as a vehicle to support the Executive Committee Appointments Policy. Awarded solely in cases where an Executive forgoes certain compensation at their previous employer | Shareholding guidelines to align interests of the Executive with shareholders |
| Vehicle | |||||
| 100% cash | Retirement plans and other benefits such as transportation, expense and medical benefits and other insurances | 100% cash; or 50% cash and 50% equity until shareholding guidelines are met. The NCC may grant exceptions in justified cases | 100% vesting subject to a three-year performance period | 100% equity subject to a two to five-year time-based vesting period | |
| Levels | |||||
Consideration for • experience of individual; • direct role responsibilities; and • market levels observed at companies in the relevant industry to Lonza | Broadly aligned with the wider workforce and country benefits policy of the country in which they are employed | Target levels: CEO: Other EC: Minimum: Maximum: | Target levels: CEO: Other EC: Minimum: Maximum: | Levels set are less than forgone awards, considering, but not limited to previous employer variables such as historical company performance, volatility and the equity instrument | CEO: Other EC: To be accumulated over 5 years |
| Performance Measures | |||||
Company factor: Made up of four weighted components resulting in a company factor from 0 – 150% of target • Sales 22.5% • CORE1 EBITDA 37.5% • Free Cash Flow 15% • ESG KPIs 25% Personal factor: based on personal performance and may result in a multiplier from 0% – 130% in line with performance rating | 50% CORE1 EPS 50% ROIC | Sustained performance in role Continued employment | |||
| Clawback and Malus | |||||
| Variable compensation for Executive Committee members is subject to Clawback and Malus provisions to allow for forfeiture, reduction or recovery of awards. | |||||
| 1 CORE results exclude exceptional expenses and income related to e.g. restructuring, environmental-remediation, acquisitions and divestitures, impairments and amortization of acquisition-related intangible assets, which can differ significantly from year to year | |||||
Lonza Restricted Share Unit Plan (LRSP) awards are separate from typical total compensation and are awarded only in cases where a new Executive Committee member forgoes cash or equity at their previous employer. See page 194 for details of the LRSP award
Cash payment (including base salary, other benefits, short–term incentive and social security) and shares (LTIP) received by a departed member of the Executive Committee during 2022 and a cash payment to an Executive Committee member upon their appointment to compensate for forfeited annual bonus at their previous employer
Compensation Board of Directors Annual General Meeting (AGM) 2021 to 2022 (excluding social security contributions)
| In CHF | Base annual fee | Committee membership fee | Committee Chairperson fee |
|---|---|---|---|
| Chairperson of the Board of Directors 1 | 750,000 | - | - |
| Board of Directors Member 2 | 200,000 | 40,000 | 80,000 |
| The additional responsibilities of Vice-Chairperson and Lead Independent Director3 do not attract any additional fees | |||
| Form of payout | 50% in Lonza Group shares and 50% in cash and paid in quarterly installments | ||
The compensation of the Chair of the Board of Directors includes compensation as a member of the Innovation and Technology Committee of the Board of Directors
The compensation for a Committee Chairperson amounts to CHF 280,000 where chairing one committee. In the case of multiple committee memberships each attracts a separate fee
The roles and responsibilities of Lead Independent Director are in line with sect. 18 para. 2 of the Swiss Code of Best Practice for Corporate Governance, requiring adequate control mechanisms, and commensurate to such position
