The Board of Directors is made up of ten non-executive members.
|Name||Nationality||Year of birth||Year of initial
|Albert M. Baehny2||Swiss||1952||2017||2018||Independent|
The assessment of the independence of the members of the Board of Directors is made pursuant to Article 14 of the Swiss Code of Best Practice for Corporate Governance. Independent members shall mean non-executive members of the Board of Directors who have never been members of the Executive Committee, or were members thereof more than three years ago, and who have no or comparatively minor business relations with the company.
Since 2017, Dr Patrick Aebischer has been a Senior Partner and Member of the Investment Advisory Committee of NanoDimension Management Limited. In 2017 Lonza decided to commit to a limited investment in a venture fund managed by NanoDimension Management Limited. Dr Aebischer abstained from voting on this item. The indirect business relations between Lonza and Dr Aebischer resulting from said commitment are considered comparatively minor; and pursuant to the principles set forth in the preceding paragraph, Dr Aebischer is considered independent.
Limitation of Number of Mandates
According to Article 26 of Lonza’s Articles of Association, no member of the Board of Directors may hold more than:
- eight additional mandates in listed and non-listed companies, out of which not more than four mandates may be in listed companies;
- five mandates held at the request of Lonza or companies controlled by it; and
- ten mandates in associations, charitable foundations, trusts and employee welfare foundations.
The Chairperson of the Board of Directors may not hold more than eight additional mandates in listed and non-listed companies, out of which no more than three may be in listed companies.
Mandates shall mean mandates in the supreme governing body of a legal entity that is required to be registered in the commercial register or a comparable foreign register. Mandates in different legal entities that are under joint control or in the same beneficial ownership are deemed to be a single mandate. Mandates in companies that are controlled by Lonza or that control Lonza are not subject to the limitation set forth above.
All Board members comply with the provisions regarding their mandates. This is verified by Lonza on a regular basis.
Elections and Terms of Office
Each member of the Board of Directors is individually elected by the Annual General Meeting for a term of office of one year until the end of the next Annual General Meeting. Board members may not serve more than nine complete terms of office on the Board of Directors. If deemed in the best interest of the Company, the Board of Directors can extend this limit.
The Chairperson of the Board of Directors is elected by the Shareholders’ Meeting. The Vice-Chairperson is appointed by the Board of Directors. The members of the Nomination and Compensation Committee are elected by the Shareholders’ Meeting on an annual basis. The members of the other Board Committees are appointed by the Board of Directors. The Chairpersons of the Board Committees are nominated by the members of the respective Board Committees, except the Chairperson of the Nomination and Compensation Committee that is elected by the Board in corpore.
Internal Organizational Structure
The Board of Directors consists of the Chairperson, the Vice Chairperson and the other Board members. In accordance with Lonza’s Articles of Association, the number of members must be at least five.
The members of the Board of Directors sat on the following committees in 2017 3:
|Name||Audit and Compliance
|Nomination and Compensation
|Innovation and Technology
3Albert M. Baehny does not sit on any of the committees of the Board of Directors.
The Board of Directors strives to select the committee members based on their professional background and experience.
Audit and Compliance Committee
The Audit and Compliance Committee meets and consults regularly with the Executive Committee, the Lonza Audit Services and the external auditors to review the scope and results of their work and their performance, according to the Audit and Compliance Committee Charter. Among other responsibilities, the Audit and Compliance Committee reviews (i) the external auditors’ independence, (ii) the systems of internal control and financial reporting, (iii) the risk management system, (iv) compliance with laws, regulations and policies and (v) Lonza’s financial statements and results (including releases). The Audit and Compliance Committee is empowered to decide the tasks assigned to it, and it regularly informs the full Board of Directors on all matters discussed and decided in its meetings. The members of the ACC benefit from their broad professional backgrounds and experience as finance director, CFO and CEO for their committee work. Internal and external auditors have full and free access to the Audit and Compliance Committee, which also oversees the Lonza Audit Services. The Lonza Audit Services have a direct reporting line to the Chairperson of the Audit and Compliance Committee.
Nomination and Compensation Committee
The Nomination and Compensation Committee is entrusted with responsibilities that include the review and recommendation of compensation policies and plans (e.g. incentive compensation and equity plans) and the compensation of the members of the Executive Committee. This Committee also makes an assessment to ensure that the area of nomination and compensation is in compliance with the standards set forth in the associated charter. Further, the Nomination and Compensation Committee evaluates potential members of the Board of Directors. The Nomination and Compensation Committee is empowered to decide the tasks assigned to it and regularly informs the full Board of Directors on matters discussed in its meetings and submits proposals for Board decision in accordance with the Nomination and Compensation Committee Charter.
Innovation and Technology Committee
The Innovation and Technology Committee monitors potential technology breakthroughs, supports management in driving innovation projects and provides and facilitates contacts, e.g. with academia and research institutions. With regard to the tasks assigned to it, the Innovation and Technology Committee regularly informs the full Board of Directors on all matters discussed and decided in its meetings, in accordance with the Innovation and Technology Committee Charter.
Number of Meetings, Duration and Attendance
|Board of Directors||Audit and Compliance
|Nomination and Compensation
|Number of meetings||9 (6 ordinary meetings and 2 extraordinary conference calls) and 1 extraordinary meeting||6 (5 ordinary and 1 extraordinary meeting)||6||5|
|Average duration||Conference calls: 1 hour
Ordinary meetings: 6:30 hours
|2:15 hours||2:15 hours||2 hours|
The Regulations Governing Internal Organization and Board Committees set out in detail the powers and responsibilities of the Board of Directors, its Committees and the Executive Committee. These standing Board Committees provide support to the Board of Directors in their respective areas of responsibility.
The Board of Directors meets with all members of the Executive Committee at each ordinary Board meeting for business updates and decisions to be taken. The CEO is a permanent guest of the Innovation and Technology Committee and is regularly invited to the meetings of the Nomination and Compensation Committee. The CFO attends all meetings of the Audit and Compliance Committee.
Areas of Responsibility
In accordance with the law and the Lonza Articles of Association, the Board of Directors is the supreme governance body of the Group. The Board of Directors is responsible for the tasks assigned to it according to (i) Article 18 of the Lonza Articles of Association and (ii) the Regulations Governing Internal Organization and Board Committees (Article 2.8). The Board of Directors defines the strategic direction and is responsible for the ultimate management of Lonza as well as the supervision of the persons entrusted with Group management. It is responsible for issuing the necessary instructions especially with regard to compliance with the law, the Articles of Association, the regulations and directives. In compliance with law and the Articles of Association, the Board of Directors has – with the exception of non-delegable and inalienable duties – delegated the management of the company to the Executive Committee.
The Board of Directors commits itself to maintaining the highest standards of integrity and transparency in its governance of Lonza. On an annual basis, the Board undertakes a self-assessment process. The aim is to achieve continuous improvement in the functioning of the Board.
Information and Control Instruments
The Board of Directors ensures that it receives sufficient information from the Executive Committee to perform its supervisory duty and to make the decisions that are reserved for the Board of Directors through several means.
The Regulations Governing Internal Organization and Board Committees confer on the CEO the duty to inform the Executive Committee and – together with the Chairperson – the Board of Directors on the business activities and all important business transactions, including risk issues. In addition, during Board meetings, each member of the Board may request information from the other members of the Board, as well as from the members of the Executive Committee present on all affairs of the Company and the Group. Outside of Board meetings, each member of the Board may request from the members of the Executive Committee information concerning the course of business of the Company and the Group.
Regular Reports to the Board
In addition to the documents required to pass resolutions, the Board of Directors receives the following reports:
- Monthly reports on the sales and earnings performance of the Group structured by segments.
- Reports on the cash flows, debt and debt-equity ratio, plus other relevant key figures for the Group on a quarterly basis.
- Qualitative assessments of the segments on a quarterly basis.
- Reports of the external audits for the full-year and half-year results (through the Audit and Compliance Committee).
- In cases involving extraordinary events of considerable commercial relevance, the Board of Directors receives direct, immediate information.
- Risk assessment reports submitted at least once per year; they are designed to provide the Board with a consistent, Group-wide perspective of key risks.
The Board of Directors, through the Audit and Compliance Committee, is supported by Lonza Audit Services. The Lonza Audit Services group comprises 12 internal audit positions, reviewing financial, operational and information technology-related activities of the entire Lonza Group with a risk-based audit program.
They continually evaluate the adequacy and effectiveness of the system of internal controls as well as compliance with company policies and procedures, and they recommend appropriate actions to correct deficiencies identified. In 2017, they delivered 48 internal audit reports to the Audit and Compliance Committee.
Internal Control System
Lonza has a system of internal financial and accounting policies, procedures and controls to provide a reasonable assurance – given the inherent limitations of all internal control systems to be implemented at an appropriate cost – that transactions are executed in accordance with company authorization, that they are properly recorded and reported in the financial statements, and that assets are properly safeguarded.
In addition to the above-mentioned control instruments, Lonza has implemented various other measures to improve compliance within the Group. The implementation of these measures is supervised by the Audit and Compliance Committee. One of these measures is the issuance of a Code of Conduct that expresses Lonza’s core principles and values in regard to professional business behavior. It also provides assistance in recognizing, understanding and complying with the laws and ethical standards that govern Lonza’s business activities. The Code of Conduct is available to all employees and information about it has been widely circulated within the Group. Lonza employees have to pass iComply tests in online training courses, dealing with topics such as those addressed by the Code of Conduct, in particular antibribery, competition law, insider trading and conflicts of interest. In addition to these measures, Lonza offers a “whistleblower” hotline (known as "Lonza Ethics Hotline"), which is operated by an external company. Cases disclosed through the “whistleblower” hotline are ultimately reported to the Audit and Compliance Committee. Lonza periodically reviews and updates its policies to address changes of laws and regulations and strengthen compliance.
The Board of Directors carries out risk assessments at least on an annual basis. The objective of the risk assessments is to make the principal risks to which Lonza is exposed more transparent and to improve the risk mitigations. In its risk assesment for 2017, the Board of Directors of Lonza identified inter alia the following risks:
- Long-term Contracts – Lonza depends and will depend on its ability to secure and maintain profitable long-term commercial relationships and contracts with customers.
- Quality – Failure to provide quality offerings to customers could have an adverse effect on Lonza's business and could subject it to regulatory actions, product recalls, and costly litigation.
- Competitive Market – Lonza's markets, in particular those with higher profit margins, may become more intensely competitive, and may be characterized by significant pricing and margin pressure.
- Cybersecurity – Lonza relies on the proper functioning of its computer and data processing systems, and a large-scale malfunction or potential unauthorized access to critical and sensitive information could result in disruptions to Lonza's business.
For more details on risk management policy, financial risks (credit, liquidity and market risks) and enterprise risk management, please refer to financial note 29 and note 31 of the Consolidated Financial Statements.