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Compensation Report

This Compensation Report sets out the compensation system and the compen­sation paid to the members of the Board of Directors and the Manage­ment Board of Tecan Group Ltd. It has been drawn up based on the applicable regulatory provisions for Switzerland and will be put to the Annual General Meeting on April 16, 2019, retrospectively for the past fiscal year for an advisory vote. 

Policies

The Compensation Report contains information on the total compensation paid to members of the Board of Directors and Management Board and refers to the 2018 reporting year unless otherwise noted. The Tecan Group has a set of uniform compensation policies, which are systematic, transparent and have a long-term focus. Compensation is determined on the basis of four factors: corporate profit, individual performance, position held and the labor market. The ultimate goal of the compensation system is to attract highly qualified and motivated specialists and managers, ensure their long-term loyalty to the Company and align the interests of employees and shareholders. The variable performance component is a complementary management tool designed to promote the achievement of the ultimate goal. In addition, the Performance Share Matching Plan (PSMP) – the stock ownership plan in place for all members of the Management Board – aligns long-term financial incentives with the long-term financial development of the Group. The compensation of the Board of Directors is in line with the current corporate governance recommendations for compensation systems, which stipulate only a fixed fee. Members of the Board of Directors receive, in addition to a specified cash component, a fixed allotment of shares, which vest fully upon completion of their term and pro rata in the event of an early exit. The total amounts for the individual members are nominally determined in Swiss francs, from which the cash component is deducted and the remainder converted into shares. As is the case with the PSMP, the value of the shares is based on the Tecan share’s average closing price on the SIX Swiss Exchange during the first four months of the relevant fiscal year. The amount and composition of the compensation paid to both the Board of Directors and the Management Board is assessed and determined by the Compensation Committee. In the year under review, the Compensation Committee comprised Christa Kreuzburg (Chairwoman), Oliver Fetzer and Dan Marshak. All members were directly elected by the General Meeting. The CEO, CFO and Corporate Head of Human Resources regularly attend meetings in an advisory capacity. Invited members of the Management Board do not take part in discussions on agenda items concerning themselves. Minutes are kept of the meetings. The Compensation Committee proposes motions to the Board of Directors, which in turn must approve the HR and salary policies for the entire Group as well as the general conditions of employment for members of the Management Board. In the year under review, the Compensation Committee held four meetings in total. 

 

The Compensation Committee defines the compensation amounts to be paid to the members of the Management Board. The Board of Directors then reviews and approves the target achievement of the CEO and members of the Management Board and the actual variable salary component to be paid. The amount and type of compensation to be paid to the Board of Directors is reviewed annually by the Compensation Committee and put before the Board of Directors. Every two years, the compensation of the Board of Directors and Management Board is benchmarked by an external specialist and, if necessary, adjustments are proposed. Each year, the Board of Directors submits a proposal to the Annual General Meeting on the maximum total compensation for the members of the Management Board for the fiscal year following the Annual General Meeting (January 1 to December 31). 

 

In 2018, a comparison was made of the salaries of the Management Board members by the external specialist Pearl Meyer. Compensation at Tecan was evaluated in comparison with that at three different groups: 1. with selected firms listed on the SIX Swiss Exchange that have similar market capitalization, 2. with selected firms listed on the London Stock Exchange and also with similar market capitalization, and 3. with firms from the same industry sector (Life Science Tools and Services). As a general rule, the compensation paid to individual members of the Management Board is in line with that paid in these benchmark firms, provided that the achievement of the performance targets results in higher variable components. The compensation paid for two roles was identified as below the average. The compensation paid to the CEO is regarded as at the market rate. As in earlier benchmarking exercises, it became evident that the compensation system is more weighted towards the long-term elements, while short-term compensation (the cash component) is less competitive by comparison. 

The System

The compensation system for members of the Management Board and the extended Management Board of Tecan Group Ltd. is based on three central pillars: a fixed cash component, a variable cash component, and a variable long-term Performance Share Matching Plan (PSMP). For members of management levels three and four (senior management) at the Tecan Group and key employees, the third pillar consists of either the PSMP or a performance-based option plan. The compensation system for members of management levels one and two (middle management) in most cases consists of two pillars: a fixed cash component and a variable cash component based on the performance review. In addition, outstanding performance may be rewarded with one-time bonuses in the form of options. Employees are paid a fixed salary and may receive individual, performance-based, one-time spot cash bonus payments.

CASH COMPENSATION

The compensation structure at all management levels is based on the Variable Pay Policies adopted by the Board of Directors. These provide for a target salary to be determined in cash. For members of the Management Board, the target salary is made up of a fixed component (60% of the target salary for the CEO or 70% for the other members) and of a variable component (40% of the target salary for the CEO or 30% for the other members). The amount of the variable component is based on achievement of both Group financial targets and other quantitative and qualitative corporate goals. The financial targets (sales growth and EBITDA margin) are set annually by the Board of Directors in December for the following year. If the target is fully met, 100% of the variable compensation is paid out. In the year under review, financial targets at Group level reached 141% and thus exceeded the overall target. The average payout of 129% to members of the Management Board was below the overall target achievement based on a broader set of targets. If the defined targets are exceeded, depending on the degree of exceedance, up to 200% of the variable component may be paid out. The Articles of Incorporation stipulate that the CEO’s short-term variable compensation may not exceed 150% of the fixed salary and that of the other Management Board members may not exceed 100% of the fixed salary. These and other provisions on compensation may be found in the Articles of Incorporation, which are available for consultation on the Company’s website at: www.tecan.com/tecan-corporate-policies.

Employee Participation Plans

In addition to cash compensation, the members of the Management Board participate in a long-term incentive plan. This Performance Share Matching Plan (PSMP) is based on quantitative targets defined for a three-year period. The 2016 to 2018 cycle came to an end in the year under review. The PSMP is initially (first year of the cycle) based on the allotment of Tecan Group Ltd. registered shares to the Management Board and the extended Management Board. The shares are blocked for three years from the allotment date. Employees are eligible to receive additional shares (“matching shares”) if certain quantitative targets of the Tecan Group are reached three years after the allotment of shares. Participants in the PSMP are eligible for matching shares only if a certain economic profit was achieved. This mechanism ensures that shareholders' interests are aligned with those of PSMP participants. The factor used to calculate the matching share portion is between 0x and 2.5x, depending on the degree to which the targets are achieved. This means that a participant in the PSMP may be eligible for up to 2.5 matching shares per originally allotted share. A formula incorporating, among other factors, the two principal components of “sales growth in local currencies” and “EBITDA margin” (as of the 2016 cycle; prior to that the bases were sales growth and EBIT margin), has been devised for the calculation of the matching share factor. The two parameters are linked, meaning that the EBITDA margin must be higher to achieve a specific factor if growth is lower, while higher growth is required if the EBITDA margin is lower. The sales growth component has been given a higher weighting, and accounts for two-thirds for the purposes of calculating the matching share factor. The parameter grid is specified anew each year on a look-ahead basis for the coming three-year period in order to clearly establish the financial targets in advance. 

 

In 2018, the initial allotment for Management Board members averaged 33% of total compensation.

 

STRUCTURE OF THE COMPENSATION SYSTEM
STRUCTURE OF THE COMPENSATION SYSTEM
MANAGEMENT BOARD

Annual General Meeting
Vote on Compensation

The Ordinance against Excessive Compensation in Listed Companies (OeEC) took effect on January 1, 2014. The compensation and approval mechanism was amended accordingly in 2015 and is set out in the Articles of Incorporation of Tecan Group Ltd. The structure of the compensation system of the Tecan Group, with the components described in this chapter, has remained unchanged since 2016. 

 

COMPENSATION AND APPROVAL MECHANISM

Each year, the Board of Directors proposes to the Annual General Meeting for its approval the maximum total amount of compensation to be paid to the Board of Directors for the period up to the next Annual General Meeting and to the Management Board for the following fiscal year. In addition, as previously, each year the Board of Directors presents the Annual General Meeting with the Compensation Report for its retrospective, advisory approval in accordance with Art. 15 (7) of the Articles of Incorporation. The Board of Directors will propose to the 2019 Annual General Meeting the advance approval of compensation for the Board of Directors and Management Board for the fiscal year 2020. For 2019, the Compensation Report will be presented to the shareholders for retrospective, advisory approval at the 2020 Annual General Meeting.

SALARY STRUCTURE CEO
SALARY STRUCTURE MANAGEMENT BOARD
(WITHOUT CEO)

 

COMPENSATION AND APPROVAL MECHANISM

 

 

Application for a maximum total amount for the Management Board

The Annual General Meeting on April 16, 2019 will be asked to approve a maximum total amount in Swiss francs for compensation of the Management Board for the fiscal year 2020. The most significant factors in the calculation of this maximum amount are the estimated performance-based compensation and the number of members of the Management Board. As was the case last year, the proposal for 2020 is based on eight members. 

 

In determining variable compensation, the calculation of this maximum amount assumes that the defined performance targets are significantly exceeded and that the threshold for the payment of 200% of the annual variable component is met. The maximum matching share factor of 2.5 is also assumed for the long-term stock ownership plan, the Performance Share Matching Plan. To make the calculation of the maximum amount as transparent and comprehensible as possible, complex mathematical formulae and methods have been avoided. For example, future payments were not discounted. Likewise, in calculating the value of matching shares, no complex formula such as a Monte Carlo model was used, but simply the value of the initial allotment of shares in Swiss francs multiplied by the maximum factor of 2.5. 

 

In 2018, the average target attainment of all Management Board members for the variable cash component was approximately 125%, and a matching share factor of 2.5 was attained for the three-year cycle ending in 2018 (2016 to 2018). 

 

In table 1 on page 79, the theoretical maximum amounts from the already completed three-year cycles in the years 2015 – 2017 and 2016 – 2018 are compared with the actual amounts in order to provide a better understanding. These figures are not available for the cycles for the years 2017 – 2019 and 2018 – 2020, as the cycles of the stock ownership plan have not yet come to an end. If the proposed maximum total amount is not approved by the Annual General Meeting, the Board of Directors can submit new proposals to the same Annual General Meeting at any time or call a new General Meeting if it does not submit new proposals or if the Annual General Meeting also rejects the new proposals. The Board of Directors can submit a proposal to retrospectively increase an approved total amount to the Annual General Meeting at any time.

 

TABLE 1

 

Completed Cycles

Motion 2018

Motion 2019

 

Theoretical <br/>Maximum <br/>Cycle 2015 – 2017

Theoretical <br/>Maximum <br/>Cycle 2016 – 2018

Cycle 2019 – 2021

(anticipated)

Cycle 2020 – 2022

(anticipated)

 

2015

2017

2016

2018

2019

2021

2020

2022

Base salary & fringe benefits

2,635

 

2,701

 

 

 

 

 

Variable salary

2,533

 

2,604

 

 

 

 

 

Social benefits

878

 

850

 

 

 

 

 

Contingencies

0

 

0

 

 

 

 

 

Total cash payments

6,046

 

6,155

 

 

 

 

 

(Number of members of the Management Board)

8

 

8

 

8

 

8

 

 

 

 

 

 

 

 

 

 

Initial share grant (value)

1,924

 

2,506

 

 

 

 

 

Potential additional shares (value “Matching

  Shares”)

 

4,810

 

6,265

 

 

 

 

Social security for granted shares

117

348

173

426

 

 

 

 

Potential additional shares (value “Matching 

  Shares”) on voluntary shares

 

4,749

 

0

 

 

 

 

Contingencies

0

0

 

 

Total (potential) long-term incentives

11,948

9,370 

 

 

Motion to AGM

18,500 

18,500 

 

 

Effective 
Compensation 

Cycle 2015– 2017

Effective 
Compensation 

Cycle 2016 – 2018

Effective 
Compensation 

Cycle 2019 – 2021

Effective 
Compensation 

Cycle 2020 – 2022

Base salary & fringe benefits

2,635

 

2,701

 

 

 

 

 

Variable salary

1,488

 

1,389

 

 

 

 

 

Social benefits

769

 

766

 

 

 

 

 

Total cash payments

4,892

 

4,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Initial share grant (value)

1,924

 

2,506

 

 

 

 

 

Voluntary shares (value)

568

 

 

 

 

 

 

 

Social security for granted shares1

197

 

173

 

 

 

 

 

Additional shares (“Matching Shares”; 

  initial grant and voluntary investment)2

 

10,169

 

5,579

 

 

Total long-term incentives

12,858

8,258

 

 

Effective compensation in % as of the 
  theoretical maximum

99 %

84 %

 

 

All data in CHF 1,000
  1. Cycle 2016-2018: excl. social security for matching shares.
  2. Cycle 2015-2017: share price per 16.3.2018 (CHF 203.00).Cycle 2016-2018: share price per grant date (CHF 134.20); effective value can vary.
Comparability of the proposal to the Annual General Meeting with the disclosure of annual compensation of Management Board members

As outlined, the calculation of a maximum total amount for the members of the Management Board depends on certain assumptions. The amounts in the disclosed compensation table on page 82 will therefore generally differ from those in the proposal to the Annual General Meeting and from the values in Table 1 on page 79. The deviations are mainly the result of the differing treatment of the long-term stock ownership plan. In order to increase comparability, the key differences are described below. 

 

In the disclosure of annual compensation,

  • the actual variable component paid is used.
  • only the fair value of initial shares granted as part of the long-term stock ownership plan is taken into account in the stated total compensation.
  • in addition, the theoretical maximum matching share factor of 2.5 is used to determine the number of potential matching shares together with the matching shares actually granted in the fiscal year for the three-year cycle that ended in 2018. In the proposal to the Annual General Meeting, however, a fair value has already been calculated and the maximum matching share factor of 2.5 is assumed.
Application for a maximum total amount for the Board of Directors

The Board of Directors will propose to the Annual General Meeting for its approval the maximum total compensation to be paid to the Board of Directors, consisting of a fixed cash component and a share component nominally determined in Swiss francs. No payments to a pension fund are planned.

Compensation to Former Members of Governing Bodies

No compensation was paid to former members of the Board of Directors or Management Board in 2018 after the end of their term of office or contract with Tecan respectively. 

Related Party Compensation

No compensation was paid in 2018 or the previous year to parties related to present or former members of the governing bodies.

Severance Benefits

Members of the Board of Directors and Management Board are not contractually entitled to any severance payments.

Loans and Credits

Current and former members of governing bodies

Neither in 2018 nor in the previous year were any loans or credits extended to current or former Members of the Board or of the ­Management Board that remained outstanding at the end of the year.

Related Parties

Neither in 2018 nor in the previous year were any loans or credits extended to related parties of current of former members of governing bodies that remained outstanding at the end of the year.

Compensation to members of the Board of Directors and Management Board

Compensation to the Board of Directors

 

CHF 1,000

Year

Fixed 

fee

Committee fee

Total cash compensation

Social benefits1

Share award plan: shares granted

(number)2

Fair value of shares granted3

Total 
compensation

Rolf Classon4 
(Chairman) (till 30.04.2018)

2017

 150 

 27 

 177 

 – 

 501 

 86 

 262 

2018

 50 

 7 

 57 

 – 

 – 

 – 

 57 

Dr. Lukas Braunschweiler 
(Chairman) (since 01.05.2018)

2017

 – 

 – 

 –

 – 

 – 

 – 

 –

2018

 133 

 7 

 140 

 11 

 491 

 108 

 259 

Heinrich Fischer 

(Vice Chairman) 

2017

 85 

 34 

 119 

 3 

 313 

 54 

 176 

2018

 85 

 28 

 113 

 4 

 246 

 54 

 171 

Dr. Oliver S. Fetzer

2017

 75 

 31 

 106 

 – 

 250 

 43 

 148 

2018

 75 

 23 

 98 

 – 

 196 

 43 

 141 

Lars Holmqvist

2017

 75 

 10 

 85 

 – 

 250 

 43 

 128 

2018

 75 

 10 

 85 

 – 

 196 

 43 

 128 

Dr. Karen Hübscher

2017

 75 

 10 

 85 

 11 

 250 

 43 

 139 

2018

 75 

 10 

 85 

 11 

 196 

 43 

 139 

Dr. Christa Kreuzburg

2017

 75 

 18 

 93 

 11 

 250 

 43 

 147 

2018

 75 

 20 

 95 

 12 

 196 

 43 

 150 

Gérard Vaillant5
(till 30.04.2018)

2017

 75 

 20 

 95 

 – 

 250 

 43 

 138 

2018

 25 

 7 

 32 

 – 

 – 

 – 

 32 

Daniel R. Marshak
(since 01.05.2018)

2017

– 

 – 

 – 

 – 

 – 

 – 

 – 

2018

 50 

 13 

 63 

 – 

 196 

 43 

 106 

 

 

 

 

 

 

 

 

 

Total 

2017

 610 

 150 

 760 

 25 

 2,064 

 354 

 1,138 

2018

 643 

 125 

 768 

 38 

 1,717 

 378 

 1,184 

  1. Employer’s contribution to social security.
  2. Vesting condition: Graded vesting from May 1, 2017 to April 30, 2018 (Share Plan BoD 2017) and from May 1, 2018 to April 30, 2019 (Share Plan BoD 2018). Vested shares are transferred at the end of the service period (April 30, 2018 and April 30, 2019, respectively). The shares are fully included in the amount of fair value of shares granted.
  3. Formula for 2017: Shares granted in 2017* fair value at grant (CHF 171,30) and formula for 2018: Shares granted in 2018 * fair value at grant (CHF 220,20).
  4. Parting gift not included in the total compensation; worth CHF 9,500 (2017)
  5. Seniority gift worth CHF 4,000 (2017) and parting gift worth CHF 1,500 (2018) not included in the total compensation.
Compensation to the Management Board

CHF 1,000

Year

Fixed Salary

Calculated variable salary1

Taxable fringe 
benefits2

Total cash compen­sation

Social benefits3

PSMP: Initial shares granted (number)4

Fair value of initial grant5

Total compensation

Theoretical maximum of matching shares (number)

 

Cycle 2018 – 2020

Fair value of matching shares pay out 

 

Cycle 2015 – 2017 (2017)6

Cycle 2016 – 2018 (2018)7

Dr. David Martyr (CEO)8

2017

 686 

 575 

 12 

 1,273 

 450 

 11,6209

 1,991 

 3,714 

 n/a 

2,683

2018

 690 

 623 

 11 

 1,324 

 432 

 3,625 

 798 

 2,554 

 9,063 

2,396

Dr. Rudolf Eugster (CFO)

2017

 354 

 190 

 9 

 553 

 201 

 2,279 

 390 

 1,144 

 n/a 

1,448

2018

 357 

 211 

 6 

 574 

 228 

 1,788 

 394 

 1,196 

 4,470 

1,182

Other members of the Management Board10

2017

 1,448 

 777 

 136 

 2,361 

 782 

 8,838 

 1,518 

 4,661 

 n/a 

4,994

2018

 1,640 

 903 

 193 

 2,736 

 944 

 8,059 

 1,775 

 5,455 

 20,148 

4,355

 

 

 

 

 

 

 

 

 

 

 

 

Total

2017

 2,488 

 1,542 

 157 

 4,187 

 1,433 

 22,737 

 3,899 

 9,519 

 n/a 

9,126

2018

 2,687 

 1,737 

 210 

 4,634 

 1,604 

 13,472 

 2,967 

 9,205 

 33,680 

7,933

  1. Payment will be made in the following year.
  2. Including the first third of the special payment to a new MB member for lost LTI.
  3. Employer's contribution to social security and contributions to post-employment benefit plans (including social security on shares transferred during the reporting period).
  4. Vesting and granting conditions: Vesting January 1, 2017 (PSMP 2017) granted May 2, 2017. Vesting January 1, 2018 (PSMP 2018) granted May 2, 2018. Vested shares are blocked until the end of the performance period (December 31, 2019 and 2020, respectively).
  5. Formula for 2017: Shares granted in 2017 * fair value at grant (CHF 171,30); Formula for 2018: Shares granted in 2018 * fair value at grant (CHF 220,20).
  6. Assigned/allocated matching shares * Stock price as 16.03.2018 (CHF 203,00)
  7. Assigned/allocated matching shares * Stock price as 28.12.2018 (CHF 190,80)
  8. Member of the Managment Board with the highest compensation in 2017 and 2018
  9. In 2017, the CEO was granted a one-off 7,000 PSMP shares as an additional long-term incentive (LTI), although the matching share potential is limited to 3,000 shares.
  10. 2017: Total six members (leaving of a member March, 31; entry of a member Dec,1); 2018: Total six members 
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