Dear Shareholders,
In my role as Chair of the Remuneration Committee (RemCo) and on behalf of its fellow members, I am pleased to introduce our Remuneration Report 2024, which was prepared in compliance with the Swiss Code of Obligations, the SIX Exchange Regulation, the Swiss Code of Best Practice and Lonza’s Articles of Association. In this report, we outline the current compensation policies and the decisions made in relation to 2024 compensation for the Executive Committee and Board of Directors of Lonza Group Ltd (the Board). In an effort to further enhance and ensure robust succession planning, continuity and further strengthen governance, the RemCo and the Nomination and Governance Committee (NGC) were formed in mid-2024. Both were split from the previous Nomination and Compensation Committee (NCC).
We are grateful for the active engagement and time with our shareholders, the investor community and proxy advisors in 2024. It helps to ensure we continue our open and transparent dialogue. Our discussions during 2024 included for the first time dedicated engagements with external stakeholders in relation to our remuneration approach, governance and remuneration system evolution. In addition our discussions covered matters relating to changes to the Executive Committee, changes to the Board of Directors and Board Committee structure, peer group simplification as well as overall company developments.
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Pay for Performance - our compensation programs are performance-based, linking employee reward with individual and company performance, both financial and non-financial. Non-financial targets focus on ESG goals to support UN Sustainable Development Goals.
Drive Sustainability - our compensation programs are linked to our sustainability strategy. Strategic decisions that drive competitive advantage are encouraged but excessive risk taking is discouraged to avoid jeopardizing the financial health, reputation or sustainability of the Company. We believe in equal pay for equal work. Our compensation programs are simple, transparent and communicated internally and externally.
Create Shareholder Value - our share-based compensation encourages long-term performance and alignment of interests of our management with those of our shareholders. Our Executives are required to hold a minimum level of shares to ensure they have a stake and interest in the long-term success of the company.
Drive Strategy - a strong focus on growth, sustainability and personal contribution means our incentive programs support our strategic priorities including service (right first time), scope (breadth of offerings), solutions (scientific, manufacturing, regulatory) and speed. Our competitive compensation programs are designed to attract and retain diverse talent who drive these strategic priorities.
| Fixed pay and benefits | Performance related variable pay | ||||
| Base Salary | Pension and Benefits | Lonza Bonus | Long-term Incentive Plan (LTIP) | Lonza Restricted Share Plan (LRSP) | |
| Purpose | Attract and retain Payment for role | Attract and retain Protection against risk and retirement savings | Reward for year-over-year performance | Retain Reward for long-term performance Align to shareholders | Attract and retain including employees in the wider organization Supports EC Appointment Policy |
| Form of payment | Cash | Pension contributions Benefits, allowances and insurances | 100% cash; or 50% cash and 50% equity until shareholding guidelines are met | Performance shares subject to a three-year vesting period | Restricted shares subject to a two to five year vesting period |
| Drivers | Role and responsibilities Skills and experience Market value | Market practice Role | Performance against annual company financial and ESG objectives, individual goals, values and behaviors | Business performance over 3 years | Replacement award if on joining Lonza, certain compensation at their previous employer is forfeited Level is set lower than forgone awards |
| Performance measures | Sales CORE1 EBITDA Free cash flow ESG KPIs Personal performance | CORE1 Earnings per share (EPS) Return on invested capital (ROIC) | Sustained performance in role Continued employment | ||
CORE results for incentive plans are adjusted for divestitures, acquisitions, restructuring and extraordinary one-time events and as approved by the RemCo including rounding.
Lonza Restricted Share Unit Plan (LRSP) awards are separate from typical total compensation and are awarded at appointment and only in cases where a new Executive Committee member forgoes cash or equity at their previous employer and in line with Lonza's EC Appointment Policy.
Cash payment (including base salary, other benefits, short–term incentive and social security) and shares (LTIP) received by departed members of the Executive Committee during 2024.
Compensation of Board of Directors from Annual General Meeting (AGM) 2024 to 2025 excluding employer social security contributions.
| Gross | Base annual fee (CHF) | Committee membership fee per Committee (CHF) | Committee Chair fee (CHF) |
|---|---|---|---|
| Chair of the Board of Directors 1 | 750,000 | - | - |
| Member of the Board of Directors 2 | 200,000 | 40,000 | 80,000 |
| The additional responsibilities of Vice-Chair 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 is inclusive of all committee work.
The compensation for a Committee Chair 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 such 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.
