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3 Remuneration paid to the Board of Directors

3.1 Principles

The remuneration system for the members of the Board of Directors is designed to attract and retain experienced and motivated individuals for the Board of Directors’ function. It also seeks to align the interests of the members of the Board of Directors with those of the shareholders. The remuneration is commensurate with the activities and level of responsibility of each member and is proportionate to the normal market remuneration for comparable functions. The basic principles regarding the remuneration of the Board of Directors and the allocation of equity shares are set out in Articles 6.4 and 8.1 of the Articles of Incorporation.

See www.swisscom.ch/​basicprinciples

The remuneration is made up of a Director’s fee which varies in relation to the member’s function, meeting attendance fees as well as pension fund and any fringe benefits. No variable performance-related emoluments are paid. The members of the Board of Directors are obligated to draw a portion of their fee in the form of equity shares and to comply with the requirements on minimum shareholdings, thus ensuring they directly participate financially in the performance of Swisscom’s shares. The remuneration is reviewed every December for the following year for ongoing appropriateness. In December 2015, the Board of Directors assessed the appropriateness of the remuneration as part of a discretionary decision basing itself on the study published in 2015 by ethos, the Swiss Foundation for Sustainable Development. This study provides information for the 2014 financial year on the remuneration of the management of Switzerland’s 100 largest listed companies. No external consultants were called on with regard to the structuring of remuneration. In view of the efficiency improvement measures adopted by the Group in the year under review, the Board of Directors decided to set an example and reduced its remuneration from 1 January 2016.

3.2 Remuneration components

Director’s fee

The Director’s fee is made up of a basic emolument and functional allowances as compensation for the individual functions. As of 1 January 2016, the basic emolument for all members of the Board of Directors excluding employee social insurance contributions is CHF 110,000 (net) per year (previously CHF 120,000).

The functional allowances amount to CHF 255,000 net per year for the Chairman (previously CHF 265,000), CHF 20,000 net each for the Vice Chairman and the Chairmen of the Finance and Compensation Committees, CHF 50,000 net for the Chairman of the Audit Committee, and CHF 40,000 net for the representative of the Swiss Confederation. Annual remuneration of CHF 10,000 net is awarded for membership in a standing committee. No functional allowance, however, is paid for participation in ad-hoc committees appointed on a case-by-case basis.

Under the Management Incentive Plan, the members of the Board of Directors are obligated to draw 25% of their Director’s fee in the form of shares, with Swisscom adding a 50% top-up to the amount invested in shares. In this manner, the remuneration (excluding meeting attendance fees, pension fund benefits and fringe benefits) is made up of a two-thirds cash portion and a one-third equity share portion. The amount of the share purchase obligation can vary in the case of members who join, leave, assume or give up a function during the year. Shares are allocated on the basis of their value accepted for tax purposes, rounded up to the next whole number of shares, and are subject to a blocking period of three years. This restriction on disposal also applies if members leave the company during the blocking period. The shares, which are allocated in April of each reporting year in respect of the reporting year, are recorded at market value on the date of allocation. The share-based remuneration is augmented by a factor of 1.19 in order to take account of the difference between the tax value and the market value. Further information on the Management Incentive Plan can be found in Note 11 to the consolidated financial statements. In April 2016, 1,308 shares were allocated to the members of the Board of Directors (prior year: 1,302 shares) with a tax value of CHF 439 per share (prior year: CHF 473). Their market value was CHF 522.50 (prior year: CHF 563) per share.

See report page 180
Meeting attendance fees

For meetings, attendance fees of CHF 1,100 net (previously CHF 1,250) are paid for each full day and CHF 650 net (previously CHF 750) for each half-day.

Pension fund and fringe benefits

Swisscom assumes the full costs of social insurance, in particular old-age and survivors’ insurance and unemployment insurance, for the members of the Board of Directors. The disclosed remuneration paid to the members of the Board of Directors includes the employee’s share of social security contributions. The employer’s share of contributions is disclosed separately and is also included in the total remuneration.

With regards to the disclosure of services rendered, non-cash benefits and expenses, a tax-based point of view is taken. No significant non-cash benefits are paid nor services rendered. Out-­of-pocket expenses are reimbursed on the basis of actual costs incurred. Accordingly, neither services rendered and non-cash benefits nor out-of-pocket expenses are included in the reported remuneration.

3.3 Total remuneration

Total remuneration paid to the individual members of the Board of Directors for the financial years 2015 and 2016 is presented in the tables below, broken down into individual components. The lower amount of total remuneration for 2016 is attributable to the reduction in remuneration rates and meeting attendance fees and to the fact that fewer meeting days were held.

  Base salary
and functional allowances
   
   
   

2016, in CHF thousand
 
Cash
remuneration
 
Share-based
payment
 
Meeting
attendance fees
  Employer
contributions
to social security
 

Total 2016
Hansueli Loosli   315   186   27   29   557
Roland Abt 1   59   49   11   7   126
Valérie Berset Bircher 1   64   53   16   8   141
Alain Carrupt 1   64   53   14   8   139
Frank Esser   105   66   18     189
Barbara Frei   112   66   17   11   206
Hugo Gerber 2, 3   34   4   6   3   47
Michel Gobet 3   32   4   5   2   43
Torsten Kreindl 3   38   5   5     48
Catherine Mühlemann   96   57   16   10   179
Theophil Schlatter   158   93   21   12   284
Hans Werder   134   80   23   11   248
Total remuneration to members of the Board of Directors   1,211   716   179   101   2,207
1 Elected to the Board of Directors as of 6 April 2016.
2 The cash remuneration (including meeting attendance fees) till 6 April 2016 for the mandate as member of the Board of Directors of Worklink AG of CHF 2,500 is included.
3 Resigned from the Board of Directors as of 6 April 2016.
  Base salary
and functional allowances
   
   
   

2015, in CHF thousand
 
Cash
remuneration
 
Share-based
payment
 
Meeting
attendance fees
  Employer
contributions
to social security
 

Total 2015
Hansueli Loosli   330   196   34   31   591
Frank Esser   104   62   23   11   200
Barbara Frei   120   71   23   12   226
Hugo Gerber 1   111   62   28   12   213
Michel Gobet   104   62   22   11   199
Torsten Kreindl   127   75   24   13   239
Catherine Mühlemann   104   62   23   11   200
Theophil Schlatter   167   99   28   17   311
Hans Werder   142   84   28   12   266
Total remuneration to members of the Board of Directors   1,309   773   233   130   2,445
1 The cash remuneration (including meeting attendance fees) of CHF 8,500 for the mandate as member of the Board of Directors of Worklink AG is included.

3.4 Comparison with the total amount approved by the Annual General Meeting

Total remuneration paid to the members of the Board of Directors is within the maximum total amount approved by the 2015 Annual General Meeting (AGM) for 2016 of CHF 2.6 million.

WSGE_DP_GR_VergleichVerwaltungsrat

3.5 Minimum shareholding requirement

Since 2013, the members of the Board of Directors have been required to maintain a minimum shareholding equivalent to one annual emolument (basic emolument plus functional allowance). The members of the Board of Directors have four years to build up the required minimum shareholding, in the form of the blocked shares paid as part of remuneration and, if necessary, through share purchases on the open market. Compliance with the shareholding requirement is reviewed annually by the Compensation Committee. If a member’s shareholding falls below the minimum requirement due to a drop in the share price, the difference must be made up by no later than the time of the next review. In justified cases such as personal hardship or legal obligations, the Chairman of the Board of Directors can approve individual exceptions at his discretion.

3.6 Shareholdings of the members of the Board of Directors

Blocked and non-blocked shares held by members of the Board of Directors and/or related parties as at 31 December 2015 and 2016 are listed in the table below:

Number   31.12.2016   31.12.2015
Hansueli Loosli   2,350   2,012
Roland Abt 1   88  
Valérie Berset Bircher 1   96  
Alain Carrupt 1   96  
Frank Esser   332   205
Barbara Frei   648   528
Hugo Gerber 2     1,233
Michel Gobet 2     1,600
Torsten Kreindl 2     1,322
Catherine Mühlemann   1,326   1,223
Theophil Schlatter   1,225   1,054
Hans Werder   1,128   982
Total shares held by the members of the Board of Directors   7,289   10,159
1 Elected to the Board of Directors as of 6 April 2016.
2 Resigned from the Board of Directors as of 6 April 2016.

No share of the voting rights of any person required to make disclosure thereof exceeds 0.1% of the share capital.