Investors - Poised for sustainable success
Sonova is all about people: we strive to be a strong team working together, with and for our customers, to succeed in the market. This is why we need to be able to attract and retain skilled, dedicated, and ambitious colleagues to continuously improve and grow the company for all our stakeholders.
Compensation policy and principles
To support the objective of engaging the best talent needed to ensure our success and to maintain our position as globally leading manufacturer and provider of innovative hearing care solutions and services, Sonova’s compensation system is based on the following principles:
|Market competitiveness||To be able to attract, motivate, and retain talented executives and employees, compensation is regularly benchmarked and is in line with competitive market practice.|
|Pay for performance||Compensation rewards best-in-class performance. A large portion of compensation depends on the company's performance and individual contributions. We recognize both short-term success and long-term value creation through a well-balanced combination of incentive plans.|
|Alignment with shareholder’s interests||A substantial portion of the compensation of the Board of Directors and the Management Board is delivered in company equity. We also have share ownership guidelines to foster the long-term committment and alignment of their interests with those of our shareholders.|
|Alignment with company’s values||Compensation incentivizes behavior that is in line with the company’s values of innovation, engagement and responsibility as well as our high standards of integrity.|
The compensation of the Board of Directors consists of fixed compensation only, paid partly in cash and partly in the form of restricted shares. The independence of the Board of Directors in its supervisory function is reinforced by the practice that no performance-related compensation is awarded.
The compensation of the Management Board consists of fixed and variable, performancebased compensation components. The base salary and benefits form the fixed components and are determined based on current market practice. Targets for the short-term and longterm incentives are defined at the beginning of each financial year and assessed at the end of the term, and not revisited during the respective incentive period.
To avoid compensation for inappropriate risk taking or short-term profit maximization at the expense of the long-term health of the company, a cap applies to both the short-term and the long-term variable compensation component and claw -back provisions are applicable on the VCC. Finally, Sonova has mandatory share ownership guidelines in place for members of the Board of Directors and the Management Board. These guidelines require members to invest defined amounts in Sonova shares and thus reinforce the alignment between the interests of the Board of Directors and the Management Board with those of our shareholders.
Board of Directors composition, competence and independence
Board of Directors composition
As determined in Art. 1 of the Organizational Regulations and in Art. 1 of the Rules on Board Operations and Procedures, the Board of Directors plans the succession of its members and defines the criteria for selecting candidates so that the composition is well-balanced in terms of size, professional skills, international experience, and diversity in general. Sonova ensures that newly elected members receive appropriate introduction and orientation and that the members of the Board of Directors receive further training with respect to their responsibilities.
The current composition of the Board of Directors represents a good mix of competencies, age, and diversity. The average age is 61 years and the average length of service is 8 years. As a general rule, the Board of Directors shall not nominate for re-election a candidate for the Board of Directors who has completed his or her 70 year of age, although in justified individual cases the Board of Directors can make an exception.
Board of Directors competence
The Board of Directors competence process evaluates each member of the Board of Directors against a set of pre-defined competencies and skills. The competencies relate to specific requirements which are relevant for Sonova and are compiled in the Board of Directors competence matrix. More information on the Board of Directors’ competences can be found in the corporate governance report.
Board of Directors independence
Members of the Board of Directors are considered to be independent according to Art. 14 of the Swiss Code of Best Practice for Corporate Governance and Art. 6 lit. c of the Organizational Regulations, if they personally or in association with related persons have not been a member of the Management Board over the last three years, and have no or only comparatively minor business relations with the Company.
Lukas Braunschweiler, former CEO and member of the Board of Directors since the AGM 2018, is not considered as independent according to these rules. For the time being, he will not be a member of any board committees.
Given the overall balance in Sonova’s Board of Directors in terms of professional skills and expertise, background, international experience, length of service, and general diversity, and as all other members are considered to be independent, the Board of Directors remains confident that it is well-positioned and experienced in ensuring that the members as part of this governing body exercise independent control and supervision.
Board of Directors fees are structured for consistency with principles of independence; members therefore only receive fixed fees paid in the form of a cash retainer and nondiscounted shares with a blocking period of five years and four months (Chairman of the Board of Directors) or four years and four months (all other members of the Board of Directors). The allocation of shares strengthens alignment with shareholders’ interests.
In addition, members of the Board of Directors receive committee retainers for their services on Sonova’s committees. Members of the Board of Directors do not receive performancerelated compensation, severance payments or benefits.
Nomination and Compensation Committee
As determined in the Articles of Association, the Organizational Regulations, and the NCC Charter of Sonova Holding AG, the NCC supports the Board of Directors in the fulfilment of its duties and responsibilities in the area of compensation and personnel related matters. Its tasks and responsibilities include, among others:
- Periodical review of Sonova’s compensation principles
- Periodical benchmark reviews covering compensation of the members of the Board of Directors (including the Chairman of the Board of Directors), the CEO, and the other members of the Management Board
- A yearly review of the individual compensation of the CEO and of the other members of the Management Board, including the VCC and the EEAP
- Review, amendment, and approval of the performance appraisal of the members of the Management Board (prepared by the CEO) and of the CEO (prepared by the Chairman of the Board of Directors)
- Preparation of the compensation report
- Succession planning
- Selection and nomination of candidates for the role of the CEO, for membership of the Management Board as proposed by the CEO, as well as pre-selection of suitable candidates for the Board of Directors; and
- Periodical review of the employment terms and policies.
Approval and authority levels on compensation matters:
|Decision on||CEO||NCC||Board of Directors||AGM|
|Compensation principles and system for the Board of Directors and Management Board within the framework of the Articles of Association||proposes||approves|
|Maximum aggregate amount of compensation for the Board of Directors and the Management Board to be submitted to shareholders’ vote||proposes||reviews and proposes to AGM||binding vote|
|Individual compensation, including cash components and shares, to be granted to the members of the Board of Directors*||proposes||approves|
|Individual compensation, including fixed base salary, variable cash compensation and long-term equity incentives, of the CEO*||proposes||approves|
|Employment terms of the CEO*||proposes||approves|
|Individual compensation, including fixed base salary, variable cash compensation and long-term equity incentives, of the Management Board (excluding CEO)*||recommends||proposes||approves|
|Annual total aggregate amount of long-term equity incentives to be granted to all other eligible employees||proposes||approves|
|Compensation report||proposes||approves||consultative vote|
* within the framework of the Article of Association and / or maximum aggregate amount of compensation approved by the Annual General Shareholders’ Meeting.
The NCC consists exclusively of independent and non-executive members of the Board of Directors, who are elected individually and annually by the AGM. For the period under review, the NCC consisted of Robert F. Spoerry (Chairman of the Board of Directors), Stacy Enxing Seng, and Beat Hess.
The NCC meets as often as business requires but at least three times per year. In the 2018/19 financial year, it held four meetings. For detailed information please consult the compensation report.
As a general rule, the Chairman of the Board of Directors, the CEO, and the Group Vice President (GVP) Corporate Human Resource Management & Communications (HRM) participate in the meetings of the NCC. However, they do not participate during the section of the meetings where their own performance and/or compensation are discussed.
There is a closed session (without participation of any executive or guest) after each NCC meeting. The Chairman of the NCC reports to the Board of Directors on its activities and recommendations after each meeting and the minutes of the meetings are available to the full Board of Directors.
The NCC may decide to consult external advisors for specific compensation matters. In the reporting year, Willis Towers Watson was mandated to conduct the above mentioned two compensation benchmarking analyses. Aon Hewitt is tasked with the PSU valuation and performance measurement under the EEAP and Algofin performs the option valuation. In addition, support and expertise is provided by internal compensation experts such as the GVP HRM and the VP Compensation & Benefits.
Governance and shareholders’ involvement
Authority for decisions related to compensation of the members of the Board of Directors and the Management Board is governed by the Articles of Association:
The prospective maximum aggregate compensation amounts to be awarded to the Board of Directors and the Management Board are subject to a yearly binding shareholder vote at the AGM. The provisions of the Articles of Association foresee that shareholders vote prospectively: on the maximum aggregate compensation for the Board of Directors for the period until the next ordinary AGM, and for the Management Board for the following financial year. In addition, Sonova annually submits the compensation report to a consultative shareholders’ vote, so that our shareholders have an opportunity to express their opinion on the compensation of the previous financial year.
Over the past several years Sonova has engaged in ongoing dialog with shareholders and proxy advisors and has made significant efforts to continuously improve its compensation disclosure in terms of transparency and level of detail provided about its principles and system of compensation.
Board of Directors compensation
The compensation of members of the Board of Directors is defined in a regulation adopted by the Board of Directors; it consists of fixed compensation, namely a cash retainer and shares with a restriction period of five years and four months (Chairman of the Board of Directors) for four years and four months (all other members). In addition, members of the Board of Directors receive a committee fee (if applicable), a meeting attendance fee, and a travel allowance.
The total compensation in the 2018/19 financial year was CHF 3.4 million based on the grant value of the restricted shares (2017/18: CHF 3.1 million). For detailed information please consult the compensation report.
Management Board compensation
For detailed information please consult the compensation report.
For detailed information please refer to the Compensation Report. The Compensation Report is part of the Annual Report and describes the compensation system in place at Sonova, including its key elements and general principles, the bodies responsible for the design, the approval framework, and the implementation in detail. The report also provides detailed information on the compensation paid to the Board of Directors and the Management Board.