4.3 – Aggregate Compensation of the Executive Committee
The table below shows the breakout of the Executive Committee Compensation.
Executive Committee's Compensation 1
Cash payments and benefits
|Short-term incentive (cash)2||3.573||2.844|
|Post-employment benefits / other benefits 3||1.444||1.282|
|Value of STIP paid out in shares 4||0.441||0.223|
|Corrective One-Time True-Up for CEO 5||0.534|
|Value of LTIP equity at market value 6
(number of equity awards 2016: 18,872 / 2015: 27,930)
|Ratio of fixed compensation to the performance-related components of compensation (without termination payment)||50.11%||69.36%|
The decrease in base salary in the aggregate is due to a reduction in the number of EC members in 2016 compared with 2015 offset by salary increases to current Executive Committee members as approved by shareholders at the AGM 2016.
Throughout 2016 Lonza continued to deliver record financial results with outstanding improvements across all key performance indicators, leading to the best-ever full-year results in Lonza’s history. The strong sales growth and high margin improvement are the result of diligent and disciplined application of Lonza’s successful strategy, resulting in a STIP 2016 payout increase of 31% compared to 2015. This increase in its entirety is attributable to the improved business performance and underlines the sustained overall performance of the past years.
The number of LTIP Equity Awards decreased in 2016 (2016: 18,872 versus 2015: 27,930) due to a reduction in the number of EC members as well as the increase in share price on the date of grant of CHF 156.30 (2015: CHF 109.20). Note that the value of LTIP Equity Awards in CHF decreased from CHF 3.050 million in 2015 to CHF 2.950 million in 2016. The 2016 LTIP Equity Award budget was approved by shareholders in April 2016.
The 2016 LTIP value represented a decrease of 3.3% compared with the 2015 LTIP. This decrease is mainly due to the reduction in the number of Executive Committee Members from 5 to 4. A potential vesting of 200% of the LTIP equity awards would require CORE EPS / CORE RONOA performance at very challenging levels. As indicated by the performance of the LTIP in recent years, Lonza has consistently set challenging LTIP targets in application of the pay for performance principle.
Effective October 2015 the NCC made the decision to introduce shareholding requirements for the Executive Committee to further align the Executive Committee with the interests of shareholders (See Section 5). In support of this strategy, it was decided that the STIP will pay out 50% in cash and 50% in stock as long as the minimum shareholding requirements (See Section 4.2) are not met.
No loans or credits were granted to current or former members of the Executive Committee during 2016 (nor in 2015). No loans or credits were outstanding as of 31 December 2016. During 2016 no payments (or waiver of claims) were made to current or former members of the Executive Committee nor to persons closely linked to them. No member of the Executive Committee benefits materially from any contract between a Lonza company and a third party.
As illustrated below, Lonza’s excellent financial performance has increased the ratio of performance-related vs. fixed compensation.