4.2 – Remuneration Components
The compensation of the members of the Executive Committee consists of the following components:
The base salary is paid in cash and determined for each position considering the responsibilities of the position and performance of each member of the Executive Committee.
Short-Term Incentive (STIP)
The company provides the members of the Executive Committee with a Short-Term Incentive Plan. Performance metrics are defined for each financial year; achievement determines the payout of STIP. The STIP in principle pays out in cash, though it is conveyed in 50% shares when shareholding requirements are not met. For details regarding the STIP, please refer to Section 4.6 – Short-Term Incentive Plans (STIP).
Long-Term Incentive (LTIP)
The LTIP is designed to align the interests of the Executive Committee with those of Lonza’s shareholders and to serve as a retention incentive for the executives. The LTIP is a 100% equity-based plan with conditional equity awards vesting after three years according to performance conditions. Executive Committee members are awarded the right to receive a number of shares in Lonza in the future, provided that certain performance-related conditions are achieved. For more details regarding the LTIP, please refer to Section 4.6 – Long-Term Incentive (LTIP).
The Executive Committee’s compensation package also includes certain benefits, e.g. pension plans and other benefits, such as a car, expenses allowance, health insurance and (if applicable) tuition fees. Please note for 2016, pension benefits reflect the adoption of Lonza’s retirement plans based on a Swiss-specific pension review to ensure market competitiveness and retention of executives and the increase in employer pension contributions. These plans were approved by shareholders at the AGM 2016 as part of the total compensation budget.