I. Summary of advancements to the compensation framework for 2022 & 2023
The Board of Directors and the CNC highly welcome the feedback received from shareholders on our 2021 Compensation Report and continuously review potential adaptations to the compensation framework, system, and processes. During the reporting year, the CNC conducted an overall holistic review of the compensation philosophy on behalf of the Board of Directors. Based on this review, the Board of Directors resolved upon certain amendments to the compensation framework. A summary of these advancements to our processes and approaches is provided below and in more detail in the relevant chapters of this Compensation Report. While some of these have been applied already in this Compensation Report, others will only become effective as of the reporting year 2023. For more details regarding the changes as of 2023, please refer to the chapter “Outlook to the compensation framework 2023”.
1) Key performance indicators (KPIs) for allocations under the short-term performance-based compensation (Cash Bonus) and grants under the long-term performance-based compensation (Option Plan)
To increase transparency on decisions regarding the allocation of compensation:
- Cash Bonus: Compensation Report to include certain additional information on the scorecard (incl. financial and qualitative KPIs), which is used to assess the Group Management members’ performance and determine the payout under the Cash Bonus.
- Option Plan: Compensation Report to provide more insights into the CNC’s considerations when determining the individual grant amounts under the Option Plan to the Group Management members.
To further strengthen the link between the implementation of strategic priorities, company performance outcomes as well as pay decisions:
- Cash Bonus: We further streamlined and formalized the scorecard to measure the Group Management’s performance relevant for the Cash Bonus, also giving more weight to quantitative KPIs.
- Option Plan: We will elaborate on the criteria used to assess the Group Management members’ performance (emphasizing multiple aspects of operational performance) relevant to determining individual grant amounts under the Option Plan.
2) Ex-post disclosure regarding achievements of performance targets for the Cash Bonus
- Cash Bonus: To make the connection between compensation outcomes and realized performance more comprehensible to shareholders, the Compensation Report to provide further insights into the outcomes of performance assessment for the previous year by way of a description of the financial and qualitative target achievements.
- Cash Bonus: Based on the advancements on the scorecard for the Cash Bonus mentioned above, the new structure will also further facilitate transparent ex-post performance disclosure as of the Compensation Report 2023.
3) Possible grant levels and payout opportunities with respect to the Cash Bonus and under the Option Plan
- Cash Bonus: Going forward, the minimum and maximum payout percentages of the Cash Bonus in relation to the Base Salary will generally be limited to a range of 0–100% (and up to a maximum of 130% in extraordinary cases) for the CEO and, in each case depending on the function, to a range of 0–70–90%, as applicable (and up to a maximum of 130% in extraordinary cases) for the other Group Management members, respectively.
- Option Plan: The grant amounts under the Option Plan in relation to the respective Base Salary will generally be limited to a range of 0–100% (and up to a maximum of 180%) for each of the Group Management members, including the CEO.
4) Performance-considerations under the Option Plan
- Adequacy of options: Following careful considerations, the Board of Directors believes that options for participation certificates with vesting periods of up to 5 years still constitute an optimal instrument to reward Group Management members for their contributions to the growth and long-term value creation of Lindt & Sprüngli and hence align their interests with those of the shareholders of Lindt & Sprüngli.
- Taking into account market performance at vesting: The options granted under the Option Plan are subject to staggered vesting periods between three and five years with the exercise price being determined at grant based on the average closing prices of the participation certificates of Chocoladefabriken Lindt & Sprüngli AG on the five trading days on the SIX Swiss Exchange prior to grant. Therefore, at the time of vesting, the benefits represented by the options at vesting are already subject to the performance of Lindt & Sprüngli, which is reflected in the then current market price of the participation certificates and registered shares of Lindt & Sprüngli.
- Taking into account operational performance criteria at grant: The individual amounts granted under the Option Plan are determined based on multiple factors which include different operational performance aspects.