VIII. Outlook to the compensation framework 2023

As mentioned at the beginning of this Compensation Report, the CNC on behalf of the Board of Directors reviewed the compensation framework of Lindt & Sprüngli in 2022. As a result of this review, the Board of Directors, upon recommendation of the CNC, has decided to implement certain amendments to the compensation framework of the Group Management that are applicable as of 2023. This chapter provides a summary outlook to the approved changes taking effect as of 2023 onwards.

Short-term performance-based compensation, Cash Bonus

As of 2023, the possible minimum, target, and maximum payouts for the CEO as well as the other members of the Group Management under the short-term performance-based compensation (Cash Bonus) will be adjusted, in each case in accordance with the respective overall responsibility as per the table below. With these changes, the maximum Cash Bonus will amount to 100% of the Base Salary for the CEO and between 70–90% of the Base Salary for the other members of Group Management. The maximum Cash Bonus can be increased to a maximum amount of 130% of the relevant Base Salary for both the CEO and the other members of the Group Management in extraordinary cases and provided that the targets are overachieved, in each case as assessed and determined by the CNC at its discretion. In case set performance targets are not achieved, the Cash Bonus is reduced and can even be zero. This means that there is no (guaranteed) bonus if (collective or individual) targets are not fully or partially met.

As of the year 2023, the relevant performance achievements for the Cash Bonus will be measured predominantly (80%) based on quantitatively measurable financial KPIs (measured on Group level or split into 60% Group and 20% regional level, where applicable) and to a lesser extent (20%) based on individual ESG and Transformation KPIs for all members of the Group Management, including the CEO. Financial KPIs on Group level will reflect profitability (60%) and organic sales growth (40%).

The minimum and maximum performance levels to be achieved for the corresponding payouts are determined by the CNC and, in case of the CEO, by the Board of Directors, respectively, in December of each year for the following year, taking into account budget targets, current market conditions, including volatilities and uncertainties, etc., in order to allow for a balanced pay-for-performance profile. The Board of Directors reserves the right to re-adjust the initial target setting in case of extraordinary, unforeseen major events.

Financial KPIs comprise the main indicators of annual Group performance for the relevant year, including profitability and growth aspects. Individual ESG and Transformation KPIs focus on Lindt & Sprüngli’s key long-term goals such as:

The payment of the Cash Bonus in cash is made in spring of the following year once the determination regarding the level of achievement of the performance targets has been made. Forfeiture or withholding of unsettled short-term performance-based compensation and clawback provisions for settled short-term performance-based compensation may apply in a range of events (e. g. in case there is reasonable doubt regarding, but not limited to, misconduct, non-compliance, fraud, reporting, or audit issues with a potential negative financial or reputational impact on Lindt & Sprüngli Group).

Long-term performance-based compensation, Option Plan

As of 2023, for each member of Group Management, the grant levels under the Option Plan as an amount in Swiss Francs will be determined on an individual basis and can generally range between 0–100% (max. 180% as assessed and determined by the CNC at its discretion; previously 0–200%) of the respective Base Salary. The individual grant decision by the CNC and, in case of the CEO, by the Board of Directors, respectively, in any particular year will be based on a holistic assessment of the following criteria:

1. Historical achievements on operative and strategic levels,
2. Position and influence on Lindt & Sprüngli’s long-term success, yet not depending on immediate previous year’s performance,
3. Level of overall responsibility,
4. Importance of acquired experience and know-how to contribute to future growth of financial parameters as EBIT margin, organic sales, and free cash flow as well as future progress on ESG and transformational topics, and
5. Relevance of retention of talents.

Option grants may be withheld or clawed back completely in case there is doubt regarding, but not limited to, misconduct, non-compliance, fraud, reporting, or audit issues with a potential negative financial or reputational impact on Lindt & Sprüngli Group.