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905 5865969526FinancialNon ESGFinancialsFinancialNon ESGFinancialsESG FinancialFunctional38 Compensation reportAnnual Variable Pay (AVP)For members of the Executive Committee, the annual variable pay is directly linked to the achievement of financial, non-financial/functional, and Environmental, Social and Governance (ESG) Key Performance Indicators (KPIs). Financial KPIs are set, inter alia, on Business Unit level for Earnings before Interest and Taxes (EBIT) and Net Operating Capital (NOC), and on Group level for Return on Net Operating Capital (RONOC, twelve months average) and EBIT. The AVP is derived from these KPIs following a predefined formula that is regularly reviewed by the Nomination and Compensation Committee and determined and approved by the Board of Directors. The KPIs weightings that define the variable compensation for members of the Executive Committee are individually set for each member. For performance achievements below 70% against target, no payout is made. For achievements above 100% of target, the AVP performance factor is based on a 1:2.5 pay-out curve, whereby a 1% deviation in realization versus target leads to a 2.5% change in pay-out. The pay-out for the AVP is capped at a maximum of CHF 5.0 million for the CEO, at a maximum of CHF 1.5 million for the CFO and at 200% of target for all other members of the Executive Committee.For the CEO and the CFO, the Financial KPI includes Profit After Tax (PAT) and RONOC achievements on Group level. For Business Unit Heads, the Financial KPI includes EBIT and NOC days achievements on Business Unit level (40% to 60%, and 15% to 25%, respectively), and EBIT achievements on Group level (20%). For other Function Heads, the Financial KPI includes 60% to 80% EBIT achievements on Group level as well as EBIT and digital sales achievements on Business Unit level. All Executive Committee members%u2019 AVP includes ESG KPI achievements of 5%. Non-financial/functional KPI achievements are 5% for the CEO and CFO, up to 15% for Business Unit Heads, and up to 35% for other Function Heads.In 2023, the weighted average weighting of all Executive Committee members%u2019 Financial KPIs was 84.5%. For Individual/functional KPIs, the weighted average weighting was 10.5%, and for ESG KPIs, it was 4.9%. In the financial year 2023, the AVP for individual members of the Executive Committee ranged from 9.7% to 40.4% of their total compensation. On average, AVP in 2023 for all members of the Executive Committee was 23.7% of the total compensation. This entrepreneurial approach ensures the alignment of the interests of the CEO and the members of the Executive Committee to create sustainable value for the Company, its shareholders, and its business partners.Long-Term Incentive Plan (LTIP)The Long-Term Incentive Plan was introduced in 2015. Its purpose is to ensure long-term value creation for the Company by providing eligible key managers1 of the DKSH Group with the possibility to become shareholders of the Company, to participate in the long-term success and prosperity of the DKSH Group, and to further align long-term interests of the key managers and the DKSH Group.Every financial year, a number of performance share units (PSUs) shall be granted to eligible key managers by, and at the full discretion of the Board of Directors; the number of PSUs is individually defined for each key manager. In principle, each PSU is an entitlement to a maximum of 1.5 shares of the Company, provided certain performance targets are achieved during the three-year performance cycle. In case the performance does not reach certain pre-determined thresholds after three years, no shares of the Company will vest under the LTIP. In the performance cycle 2023 to 2025, 112 eligible key managers participate in the LTIP.1 Key managers are typically responsible for the company%u2019s results with potential EBIT contribution or hold/manage responsibilities that are linked to the strategic interest of DKSH.Average KPI Weighting for AVP(in %)CEO and CFO Business Unit Heads Other Function Heads