4 Remuneration paid to the Group Executive Board
- Total remuneration is competitive and is in an appropriate relation to the market as well as the internal salary structure.
- Remuneration is based on performance in line with the results achieved by Swisscom and the contribution made to results by the area for which the member of the Group Executive Board is responsible.
- Through direct financial participation in the performance of Swisscom’s shares, the interests of management are aligned with the interests of shareholders.
The basic principles regarding the performance-related remuneration and the profit and participation plans of the Group Executive Board are set out in Article 8.1 of the Articles of Incorporation.See
As a rule, the Compensation Committee reviews individual remuneration paid to members of the Group Executive Board every three years of employment. In view of the newly adopted efficiency improvement measures, the Board of Directors decided to defer the periodic remuneration review of the individual members of the Group Executive Board, which was due to take place in the year under review, and leave the remuneration unchanged. In connection with this, the Group Executive Board also opted to forego 10% of the variable performance-related salary component due to it as a result of having achieved its targets.
4.2 Remuneration components
The base salary is the remuneration paid according to the function, qualifications and performance of the individual member of the Group Executive Board. It is determined based on a discretionary decision taking into account the external market value for the function and the salary structure for the Group’s executive management. The base salary is paid in cash.
Variable performance-related salary component
The members of the Group Executive Board are entitled to a variable, performance-related salary component which represents 70% of the base salary if objectives are achieved (target bonus). The amount of the performance-related component paid out depends on the extent to which the targets are achieved, as set by the Compensation Committee, taking into account the performance evaluation by the CEO. If targets are exceeded, up to 130% of the target bonus may be paid. The maximum performance-related salary component is thus limited to 91% of the base salary. This ensures that the maximum performance-related salary component does not exceed the annual base salary, even taking account of the market value of the component paid in shares.
Targets for the variable performance-related component
All members of the Group Executive Board are measured against targets at the levels “Group”, “Customers” and “Segments”. Group targets consist of financial targets. Customer targets for the reporting year are measured using the Net Promoter Score – a recognised indicator of customer loyalty – taking into consideration the customer group for which the Group Executive Board member is responsible. Further information on customer satisfaction can be found in the Management Commentary.See report
The following table illustrates the target structure valid for the CEO and other Group Executive Board members in the year under review, showing the three target levels, individual targets and the respective weighting.
Weighting of targets level
|Weighting of targets level
of other members of the
Group Executive Board
|Operating free cash flow||24%||20–24%|
|Customers||Net promoter score||20%||20%|
Achievement of targets
The Compensation Committee determines the level of target achievement in the following year once the consolidated financial statements become available. Its decision is based on a quantitative assessment of the extent to which targets have been met using a scale for the overachievement and underachievement of each target. The achievement of an individual target can vary from 0% (if the lower limit is not achieved) to 200% (if the upper limit is exceeded).
In view of the efficiency improvement measures adopted in the year under review, the Group Executive Board opted for a 10-percentage-point reduction of the payment of the variable performance-related salary component to which it was entitled based on the achievement of its targets. Allowing for this reduction, the payment of the performance-related component is 92% of the target bonus for the CEO and between 85% and 95% of the target bonus for the other members of the Group Executive Board.
Payment of the variable performance-related component
The variable performance-related component is paid in April of the following year, with 25% being paid in the form of Swisscom shares, in accordance with the Management Incentive Plan. Group Executive Board members may opt to increase this share by up to a maximum of 50%. The remaining portion of the performance-related component is settled in cash. In the event of a departure during the course of the year, the payment of the performance-related component for the current year is generally made in full in cash. The decision of what percentage of the variable performance-related salary component is to be drawn in the form of shares must be communicated prior to the end of the reporting year, but no later than in November following the publication of the third-quarter results. In the year under review, two members of the Group Executive Board opted for a higher share component. The shares are allocated on the basis of their tax value, rounded up to whole numbers of shares, and are subject to a three-year blocking period. This restriction on disposal also applies if the employment relationship is terminated during the blocking period. The share-based remuneration disclosed in the year under review is augmented by a factor of 1.19 in order to take account of the difference between the market value and the tax value. The market value is determined as of the date of allocation. Shares in respect of the current year are allocated in April 2017. Further information on the Management Incentive Plan can be found in Note 11 to the consolidated financial statements.See report
In April 2016, a total of 1,841 shares (2015: 1,268 shares) with a tax value of CHF 439 (prior year: CHF 473) per share and a market value of CHF 522.50 (prior year: CHF 563) per share were allocated for the 2015 financial year to the members of the Group Executive Board.
Restricted share plan
Swisscom has so far not allocated any restricted share units to members of the Group Executive Board.
Pension fund and fringe benefits
The members of the Group Executive Board, like all eligible employees in Switzerland, are insured against the risks of old age, death and disability through the comPlan pension plan (see pension fund regulations at www.pk-complan.ch). The disclosed pension benefits (amounts which give rise to or increase pension entitlements) encompass all savings, guarantee and risk contributions paid by the employer to the pension plan. They also include the pro rata costs of the AHV bridging pension paid by comPlan in the event of early retirement and the premium for the supplementary life insurance concluded for Swisscom management staff in Switzerland. Also included is the share of the special contribution to comPlan determined by the Board of Directors in the year under review and attributable to the members of the Group Executive Board. Swisscom is paying the special non-recurring contribution designed to mitigate the impact of pension reductions suffered by employees born in or before 1969 as a result of the lowering of the conversion rate on 1 July 2017. Further information about this is provided in Note 10 to the consolidated financial statements.See report
With regard to the disclosure of services rendered and non-cash benefits and expenses, these are dealt with from a tax point of view. The members of the Group Executive Board are entitled to the use of a company car. The disclosed services rendered and non-cash benefits therefore include an amount for private use of the company car. Out-of-pocket expenses are reimbursed on a lump-sum basis in accordance with expense reimbursement rules approved by the tax authorities, and other expenses are reimbursed on an actual cost basis. They are not included in the reported remuneration.
4.3 Total remuneration
The following table shows total remuneration paid to the members of the Group Executive Board for the 2015 and 2016 financial years, broken down into individual components and including the highest amount paid to one member. In the year under review, the variable performance-related salary component (CHF 2,579 thousand in total) was 68.2% of the base salary (CHF 3,782 thousand in total) The total remuneration paid to the highest-earning member of the Group Executive Board (CEO, Urs Schaeppi) increased by 0.1% compared to the prior year The increase in total remuneration paid to the Group Executive Board is attributable to the one-time special contribution made to the pension plan to offset the impact of the reduction in the conversion rate for employees born in 1969 or earlier. The increase this caused in retirement provision contributions was largely compensated by the lower variable remuneration.
In CHF thousand
|Fixed base salary paid in cash||3,782||3,775||882||882|
|Variable earnings-related remuneration paid in cash||1,604||1,792||284||336|
|Variable earnings-related remuneration paid in shares 1||975||1,018||338||327|
|Service-related and non-cash benefits||84||85||14||17|
|Employer contributions to social security 2||541||538||126||126|
|Retirement benefits 3||1,064||816||189||144|
|Total remuneration to members of the Group Executive Board||8,050||8,024||1,833||1,832|
1 The shares are reported at market value and are blocked from sale for three years.
2 Employer contributions to social security (AHV, IV, EO and FAK, incl. administration costs, and daily sickness benefits and accident insurance) are included in the total remuneration.
3 Includes the share of the exceptional contribution to the pension fund attribuable to the members of the Group Executive Board. Swisscom makes a non-recurring contribution to mitigate the impact of the pension reductions resulting from the lowering of the conversation rate as of 1 July 2017.
4.4 Comparison with the total amount approved by the Annual General Meeting
Total remuneration paid to the members of the Group Executive Board is within the maximum total amount approved by the 2015 Annual General Meeting (AGM) for 2016 of CHF 9.7 million.
4.5 Minimum shareholding requirement
Since 2013, the members of the Group Executive Board have been required to hold a minimum amount of Swisscom shares. The minimum shareholding to be held by the CEO shall be equivalent to two years’ basic salary. The remaining members shall maintain a shareholding equivalent to one year’s basic salary. The members of the Group Executive Board have four years to build up the required minimum shareholding in the form of the blocked shares paid as part of remuneration and, if applicable, 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 or a salary adjustment, 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.
4.6 Shareholdings of the members of the Group Executive Board
Blocked and non-blocked shares held by members of the Group Executive Board or related parties as at 31 December 2015 and 2016 are listed in the table below:
|Urs Schaeppi (CEO)||3,229||2,602|
|Hans C. Werner||897||571|
|Roger Wüthrich-Hasenböhler 1||–||1,032|
|Dirk Wierzbitzki 2||64||–|
|Total shares held by the members of the Group Executive Board||8,269||7,860|
1 Resigned from the Group Executive Board as of 31 December 2015.
2 Joined the Group Executive Board as of 1 January 2016.
No share of the voting rights of any person required to make disclosure thereof exceeds 0.1% of the share capital.
4.7 Employment contracts
The employment contracts of the members of the Group Executive Board are subject to a twelve-month notice period. No termination benefits apply beyond the salary payable for a maximum of twelve months. The employment contracts stipulate that Swisscom may allow wrongfully awarded or paid remuneration to lapse or reclaim such remuneration. They do not contain a non-competition clause or a clause on change of control.