Remuneration Overview

Letter from the Chairman of the Nomination and Compensation Committee

Dear Shareholder,

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 2020 Remuneration Report, which adheres to the Swiss Ordinance Against Excessive Compensation for stock exchange listed companies. In this report, we outline the current compensation policies and the decisions made in relation to 2020 compensation for the Executive Committee of Lonza.

We are thankful for the active engagement and time with our shareholders, the financial regulators and proxy advisors in 2020. It helps to ensure we continue our open and transparent dialogue. Our discussions covered matters relating to changes to the Executive Committee and overall Company developments.

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At a Glance

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 achievement of specific short and long-term objectives.

Our performance objectives 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.

2020 Executive Committee Compensation Policy Table

Base SalaryBenefitsShort-term Incentive Plan (STIP)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 performedPost-employment and other benefits to complement Lonza’s total compensation offeringShort-term variable compensation component, rewards for annual company and individual performanceLong-term variable compensation component, rewards for long-term company performance. Aligns interests of the Executive with ShareholdersAdditional variable compensation element, used as a vehicle to support the Executive Committee Appointments Policy. Awarded solely in cases where an Executive forgoes certain compensation at their previous employerShareholding guidelines to align interests of the Executive with Shareholders
Vehicle
100% cashPension and other benefits such as company car and expense allowances and insurances100% cash; or 50% cash and 
50% equity, (until shareholding guidelines are met)
100% vesting subject to a three-year performance period100% 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
Aligned with companywide and country specific  benefits policies Target levels: 
• CEO – 100% of salary 
• Other EC – 75% of salary  
Min. = 0% of target 
Threshold = 50% of target 
Max. = 200% of target
Target levels: 
• CEO – 150% of salary 
• Other EC – 125% of salary 

Min. = 0% of target 
Threshold = 50% of target 
Max. = 200% of target
Levels set at less than forgone awards, considering, but not limited to, previous employer variables such as historical company performance, volatility and the equity instrument

• CEO – 300% of salary 
• Other EC – 200% of salary 

To be accumulated over 5 years

Performance Measures
  

May be a mix of financial and individual measures, typically with weighting of 80% and 20% respectively

2020 was based on 100% financial measures

50% CORE EBITDA 1

31.25% Lonza sales

18.75% Operating free cash flow

50% CORE EPS 1

50% ROIC

Sustained performance in role

Continued employment

 
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

2020 STIP and LTIP Outcomes

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  1. Includes 10% CORE EBITDA, 6.25% Lonza Sales and 3.75% operational free cash flow distributed from 20% individual performance element

2020 Total Remuneration Paymix (CHF)

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  1. 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 211 for details of the LRSP award

  2. 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 2020

Board of Directors

Compensation Board of Directors Annual General Meeting (AGM) 2020 to 2021 (excluding social security contributions)

In CHFBase annual feeCommittee  membership feeCommittee Chairperson fee
Chairperson of the Board of Directors 1600,000--
Board of Directors Member 2200,00040,00080,000
 The additional responsibilities of Vice-Chairperson and Lead Independent Director 3 do not attract any additional fees
Form of payout50% in Lonza Group shares and 50% in cash. This is paid in quarterly installments during the 2020 financial year
  1. The compensation of the Chairperson of the Board of Directors includes compensation as a member of the Innovation and Technology Committee of the Board of Directors. For details on the compensation received for the role of CEO ad interim during 2020 please see page 210 in the Remuneration Report PDF

  2. The compensation for Committee Chairpersons amounts to CHF 280,000 and includes the committee membership fee. In the case of multiple committee memberships, this attracts one committee membership fee only

  3. The roles and responsibilities of such Lead Independent Director are in line with sect. 19 para. 2 of the Swiss Code of Best Practice for Corporate Governance, requiring adequate control mechanisms, and commensurate to such position