REMUNERATION - Vifor Pharma · 2021. 3. 4. · Remuneration of the members of the Executive...

R E M U N E R A T I O N

124 Vifor Pharma Ltd. Annual Report 2020

126 Chairwoman’s overview128 Philosophy and approach to remuneration130 Governance134 Board and Executive remuneration139 Remuneration awarded in 2020 and 2019146 Overview of executive remuneration in 2020 and 2019147 Outlook: changes in remuneration model for 2021148 Statutory auditor’s report

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125Vifor Pharma Ltd. Annual Report 2020

C H A I R W O M A N ’ S O V E R V I E WR E M U N E R A T I O N

S U E M A H O N Y

CHAIRWOMAN OF THE

REMUNERATION COMMITTEE

The remuneration programs of Vifor Pharma are designed to support our corporate strategy and to ensure a sustainable performance towards our future objectives.”

“

Vifor Pharma Ltd. Annual Report 2020126

Vifor Pharma’s remuneration philosophy aims to attract and retain highly talented and ethical individuals who help us ensure the long-term competitiveness and success of our business, to meet the needs of patients, to look after the interests of our stakeholders and the environment in order to deliver on the strategy and to sustain profitable growth. This report sets out the remuneration policies for the Board of Directors and Executive Commit-tee which are designed to help them achieve these goals.

A year of unprecedented challenges for countries and companies around the world has underlined the importance of a strong and transparent remuneration framework. Notwithstanding, as in previous years, Vifor Pharma’s philosophy and approach to remu-neration has remained stable: we reward entrepreneurial behavior that drives sustain-able performance and long-term value creation. The negative effect of the sales growth below the set targets in this challeng-ing year has been mitigated by an EBITDA exceeding the targets due to management’s careful contingency planning and cost control.

2020 also saw major changes to the composi-tion of the Board of Directors, with the former Executive Chairman (now Honorary Chairman) Etienne Jornod, passing on his tasks and responsibilities after over 40 years of remark-able service to Jacques Theurillat, as Chairman, and Stefan Schulze, as Chief Executive Officer. This change is also reflected in the remunera-tion structure and will lead to a reduction of the remuneration for the Board of Directors and an increase of the remuneration of the Executive Committee. The full effect of which will become visible as from 2021 onwards. Apart from the reduction of such shift, the remuneration of the Board of Directors remained unchanged.

In the past year Vifor Pharma has been able to attract highly regarded talents in a compet-itive market. The Executive Committee was substantially strengthened in 2020 with the recruitment of Lee Heeson as President International, Dr. Klaus Henning Jensen as

Chief Medical Officer and Gregory Oakes as President North America.

The Remuneration Committee considers Vifor Pharma appropriately positioned to enable it to compete successfully with its peers and to support its ambitious growth plans. Nonethe-less, are we constantly scrutinizing our remuneration and promotion processes to foster equitable career flows for both women and men when it comes to pay equity, leader-ship development training and organizational culture.

Our Chairman, the members of the Board of Directors as well as the Executive Committee continue to demonstrate their personal commitment, alignment with the shareholders’ interest and their confidence in Vifor Pharma Group by being remunerated significantly in blocked shares. On the following pages, we explain how the different remuneration programs for the Board of Directors, the Chairman of the Board of Directors and the Executive Committee are designed to ensure sustainable success and to protect the interests of our shareholders.

Yours sincerely,

Sue Mahony Chairwoman of the Remuneration Committee

We reward entrepreneurial behaviour that drives sustainable performance and long-term value creation.”

“

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Vifor Pharma Ltd. Annual Report 2020 127


To reflect their different roles on delivering the strategy, the Board of Directors (Board) and the Executive Committee are remuner-ated through different programs.

Board members receive a fixed remuneration, independent of operational performance, to underscore their focus on corporate strategy, supervision, governance and sustainability.

To strengthen the alignment with sharehold-ers’ interests, Board members, including the non-executive Chairman of the Board, receive all or part of their remuneration in the form of restricted shares. Members of the Executive Committee are remunerated according to the principles below.

A T T R A C T I O N A N D R E T E N T I O N

We aim to attract and retain highly talented, entrepreneurial, effective individuals who comply with the highest ethical standards and who can help us promote the well-being of patients, protect the interests of our share-holders and drive the long-term success of our company.

S T R A T E G I C A N D S H A R E H O L D E R A L I G N M E N T

Our remuneration principles are in line with our vision and strategy, both in terms of driving performance and of delivering the returns expected by our shareholders. Vifor Pharma’s remuneration system is part of a sustainable, long-term development policy to support the strategic goals defined

by the Board, who recognizes that under certain circumstances, achieving economic success may require a longer period of time. In order to strengthen the alignment of executives and shareholders, members of the Executive Committee receive part of their remuneration in restricted shares and are subject to a minimum shareholding require-ment. Selected members of senior manage-ment involved in long-term company projects may also be invited to participate in the share-based Long-Term Incentive Program.

P A Y- F O R - P E R F O R M A N C E A L I G N M E N T

In addition to their fixed salary, members of the Executive Committee receive variable remuneration to reflect the operational performance of the company as well as their individual contributions.

F A I R N E S S

We strive to remunerate our employees fairly in the highly competitive market environment.

C L A W - B A C K P R O V I S I O N S

Correct and ethical behaviour is the foun-dation of our activities. Should any wilful misconduct or fraud lead to a restatement of the accounts of Vifor Pharma, bonus and long-term incentives awarded or paid during the past three years to members of the Executive Committee directly involved in such activities may be withheld or be subject to reimbursement.

P H I L O S O P H Y A N D A P P R O A C H T O R E M U N E R A T I O N

The company’s philosophy and approach to remuneration have remained stable in recent years.


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129Vifor Pharma Ltd. Annual Report 2020


S H A R E H O L D E R S ’ E N G A G E M E N T

Our shareholders have been given a greater voice on remuneration matters in recent years. The Articles of Association that outline the principles of remuneration are approved by the Annual General Meeting. In addition, shareholders annually elect the members of the Remuneration Committee for the coming period of office and approve the maximum aggregate remuneration amounts each year for the Board and the Executive Committee prospectively for the next business year. Furthermore, shareholders may express their opinion on the remuneration report in a consultative vote at the Annual General Meeting. The remuneration report describes the remuneration principles and programs as well as the governance framework related to the remuneration of the Board and Executive Committee. The report also provides details on the remuneration awarded to the members of the Board and of the Executive Committee in the reporting year.

P R O V I S I O N S I N T H E V I F O R P H A R M A A R T I C L E S O F A S S O C I A T I O N : S U M M A R Y

The responsibilities of the different deci-sion-making bodies in determining remunera-tion and the guiding principles are defined in the Vifor Pharma Articles of Association. The Articles of Association form the basis for our remuneration strategy and policy for the Board and the Executive Committee. They are also the basis for any recommendation or proposal that the Remuneration Committee formulates. Key provisions of the Articles of Association on remuneration are summarized in the table below and can be found online at viforpharma.com/governance.

R E S P O N S I B I L I T I E S O F T H E D I F F E R E N T B O D I E S I N D E T E R M I N I N G R E M U N E R A T I O N

Vifor Pharma’s remuneration and reporting comply with:

– the Swiss Code of Obligations, – the Swiss Federal Ordinance against

excessive compensation in publicly listed corporations (VegüV),

– the standards on corporate governance of SIX Swiss Exchange and

– the Swiss Code of Best Practice for Corpo-rate Governance of Swiss national federa-tion, economiesuisse.

The Board is responsible for designing the remuneration policy and programs and for determining individual remuneration for the members of the Board and the Executive Committee. Furthermore, the Board is accountable for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the VegüV. The Remuneration Committee approves the individual remuneration of EC members other than the CEO. For the remuneration of the CEO and the Board, the Remuneration Committee acts in an advisory capacity while the Board retains the decision authority on matters relating to remuneration except for the maximum aggregate remuneration amounts for the Board and for the Executive Committee, which are approved by sharehold-ers at the Annual General Meeting. The responsibilities of the different bodies regarding remuneration matters are detailed in the table on page 132.

G O V E R N A N C E


https://www.viforpharma.com/en-gb/investors/corporate-governance

T H E R E M U N E R A T I O N C O M M I T T E E

The Remuneration Committee supports the Board in defining the principles of the remu-neration policy and in determining the remuneration awarded to members of the Board and the Executive Committee within the maximum aggregate amount of remunera-tion approved by shareholders at the Annual General Meeting. The Remuneration Commit-tee supports the Board in designing participa-tion and incentive programs and in all other tasks related to remuneration of the Board and the Executive Committee. The Board may delegate further duties and powers to the Remuneration Committee. The Chair of the Remuneration Committee reports to the Board after each meeting on its activities and

formulates appropriate recommendations. The Chairman of the Board is invited regularly to meetings in an advisory capacity.

The Chairwoman of the Remuneration Commit-tee may also invite other Executives, such as the CEO, as appropriate. Agenda items and matters directly affecting the Chairman of the Board, the CEO or other Executives are deliberated in their absence.

The Remuneration Committee meets as often as business requires, but at least quarterly accord-ing to the annual remuneration planning cycle described on page 133. In the 2020 business year, the Committee held five meetings, each lasting between one and three hours.

Topic Article Summary

Remuneration Committee

19 a The Remuneration Committee generally comprises three members who are elected individually by the shareholders at the Annual General Meeting for a period of one year. The Remuneration Committee supports the Board in establishing and reviewing the remuneration strategy, principles and programs, in preparing the proposals to the Annual General Meeting on remuneration matters and in determining the remunera-tion of the Board and of the members of the Executive Committee.

“Say-on-pay” votes 19 b par. 1

Shareholders approve the maximum possible amount of remuneration of the Board and the Executive Committee for the following financial year.

Remuneration principles

19 b par. 2

Remuneration of the members of the Board consists of fixed remuneration only. Remuneration of the members of the Executive Committee consists of fixed and variable elements. Variable remuneration may comprise short-term and long-term components. Remuneration may be paid in cash, shares or other benefits.

Supplementary amount for new Executive Commit-tee members

19 b par. 6

If the maximum approved remuneration amount is not sufficient to also cover the remuneration of newly promoted/hired members of the Executive Committee, the maximum possible remuneration amount for such newly promoted/hired members may exceed the average of existing members excluding the CEO by up to 25% as a supplementary amount to cover the remuneration of such new Executive Committee member(s). For a newly promoted/hired CEO the supplementary amount is 40% of the maximum possible remuneration amount of his or her predecessor.

Credits and loans 19 b par. 8

Credits and loans may not be granted to members of the Board and only up to 50% of the annual base salary for members of the Executive Committee.

P R O V I S I O N S O N R E M U N E R A T I O N I N T H E V I F O R P H A R M A A R T I C L E S O F A S S O C I A T I O N : S U M M A R Y

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U S E O F B E N C H M A R K S A N D E X T E R N A L A D V I S O R S

The remuneration of the Board and the Executive Committee is benchmarked based on public information, recognized market data providers, data published by non-profit organi zations focused on socially responsible investment and active share ownership, and on our Remuneration Committee members’ experience and expertise from similar compa-nies.

The remuneration of the Board is bench-marked from time to time (every two to four years) against a group of listed companies on the SIX Swiss Exchange of comparable size, including market capitalization. The latest analysis was conducted in 2020 based on the following 14 companies: Adecco, Barry Callebaut, Clariant, DKSH, Dufry, Geberit,

Georg Fischer, Kühne + Nagel, Lindt, Logitech OC Oerlikon, Sonova, Straumann and Temenos.

The remuneration of the Swiss-based Execu-tive Committee members is compared with the remuneration of Executive Committee members in comparable European pharma-ceutical companies and Swiss listed compa-nies, as well as with the remuneration of executives in Swiss subsidiaries of internation-al pharmaceutical companies. The remunera-tion awarded to the Executive Committee member based in the United States is com-pared to the data of pharmaceutical compa-nies in the San Francisco Bay Area (no specific peer group). A company is regarded as similar if it is comparable to Vifor Pharma in terms of sector, structure and complexity, size (sales, market capitalization and number of employ-ees), geographic presence and profitability.

CEORemuneration

Committee Board of Directors Shareholders

Remuneration policy and incentive plans Proposes Approves

Maximum remuneration amount of EC Proposes Recommends Approves

CEO remuneration Proposes Approves

Individual remuneration of EC members other than the CEO

Proposes Approves Informs

Is informed

Performance objectives and assessment of CEO Proposes Approves

Performance objectives and assessment of EC other than the CEO

Proposes Approves Informs

Is informed

Shareholding requirements of CEO and EC Proposes Approves

Maximum remuneration amount of the Board Proposes Recommends Approves

Individual remuneration of Board members Proposes Approves

Remuneration report Proposes Approves Consultative vote

R E S P O N S I B I L I T I E S R E G A R D I N G R E M U N E R A T I O N D E C I S I O N S


Biocare, Novartis, Novo Nordisk, Roche, Shire, Smith & Nephew, Sonova, Syngenta, Tecan, Zoetis

External consultants may provide analytical support to the Remuneration Committee in the development of the remuneration strategy and of the review of short-term and long-term incentive programs, cash and equity-based remuneration and salary levels.

In 2019, Mercer and Willis Towers Watson carried out a benchmark study on the remu-neration levels of the Executive Committee. Agnès Blust Consulting AG carried out the benchmark of the Board remuneration and was mandated on certain other executive remuneration matters in 2020. Those compa-nies hold no other mandates with Vifor Pharma Ltd.

The composition of the benchmarking peer groups is disclosed below.

Peer group of Swiss listed companies – Barry Callebaut, Clariant, EMS-Chemie,

Galenica, Idorsia, Lindt, Lonza, Siegfried, Sika, Sonova, Straumann, Swiss Prime Site, Tecan, Ypsomed

Peer group of European pharmaceutical companies – Grifols, Hikma, Indivior, Ipsen, Lundbeck,

Orion, Recordati, Sonova, Swedish Orphan Biovitrum, UCB

Peer group of Swiss subsidiaries of interna-tional pharmaceutical companies – Allergan, Beckman Coulter, Catalent

Pharma Solutions, Clariant, CSL, John-son & Johnson (former Actelion), Leica Microsystems, Lonza, Nestlé, Nobel

Q1 Q2 Q3 Q4

Annual Shareholder Meeting ×

Remuneration policy and incentive plans × ×

Maximum aggregate remuneration amount for Board to be submitted to shareholders’ vote

×

Maximum aggregate remuneration amount for Executive Committee to be submitted to shareholders’ vote

×

Performance achievement of Executive Committee (mid-year assessment) ×

Performance achievement of Executive Committee (final assessment) of the previous year

×

Performance objectives for the Executive Committee for the following year ×

Variable remuneration of Executive Committee (short-term bonus for the previous business year and vesting level of the Long Term Incentive for the preceding three years)

×

Remuneration Report on the previous business year to be submitted to shareholders’ consultative vote

×

A N N U A L R E M U N E R A T I O N P L A N N I N G C Y C L E

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Remuneration of the Board of Directors

The Board sets the remuneration for its members in order to attract and retain a mix of Swiss and international high-calibre individuals with global experience. Board members do not receive variable perfor-mance-based remuneration or options, and are not eligible to company paid pension benefits, which underscores their focus on corporate strategy, supervision and gover-nance.

Each Board member receives an annual fee for the Board membership, as well as additional fees for the functions as chair and/or member of a Board committee. The level of remunera-tion for each role is determined based on the skill set, experience and time required for the function as described below.

Net amounts in CHF*

Board chair 900,000

Board member 140,000

Board vice-chair 50,000

Committee chair 30,000

Committee member 10,000

* The social security contributions are fully paid by the company (employer and employee contributions).

Remuneration is paid 50% in cash and 50% in shares, which are blocked for five years. Board members may elect to be remunerated fully in shares. The remuneration amount to be paid in shares (50% or 100% of the total remunera-tion) is divided by the average share price during the last month preceding the election less a 25% discount. Board members are subject to a minimum shareholding require-ment: They must build-up and hold the equivalent of at least their annual remunera-tion in shares within two years of their first election to the Board.

Remuneration for the former Executive Chairman

The former Executive Chairman, Etienne Jornod, did not stand for re-election at the 2020 Annual General Meeting. His remunera-tion for the term until the 2020 Annual General Meeting is included in this Remuneration Report. Since 2012, Etienne Jornod has been remunerated almost exclusively in registered shares for his responsibilities and duties as Executive Chairman of the Board. The agree-ment between the Board and Etienne Jornod was that, conditionally upon his reelection by shareholders at the Annual General Meeting, his annual share-based remuneration would remain unchanged until 2020. His annual share-based remuneration was therefore held constant at CHF 3,670,000 and awarded at the end of each business year in form of shares, which are blocked for five years. In addition, Etienne Jornod also received a cash remuner-ation of CHF 150,000 per annum to cover his pension and social security contributions and of CHF 120,000 per annum to compensate for the allocation of the share-based remunera-tion in arrears introduced in 2016 and the introduction of a five year lock-up period on newly allocated shares.

B O A R D A N D E X E C U T I V ER E M U N E R A T I O N



Remuneration for the Executive Committee

In order to reward performance and promote the Executive Committee members’ loyalty and long-term engagement, the remuneration system comprises an annual base salary, an annual short-term bonus, a long-term incentive and customary benefits. The ratio between fixed and variable remuneration may vary depending on criteria such as position level, scope and responsibility of the role (eg, impact on organisation, profit and loss, budget and team, headcount).

A N N U A L B A S E S A L A R Y

The annual base salary constitutes the fixed pay that reflects the scope and responsibilities of the function, the required skills and the profile of the incumbent (qualifications and previous experience). The annual base salary is determined according to typical market practice (external benchmarks) and the Vifor Pharma Group’s internal salary structure. An annual base salary around the median of the benchmark is considered competitive. The annual base salary is reviewed annually in line with market salary trends, the company’s ability to pay based on its financial perfor-mance and the evolving experience of the incumbent.

V A R I A B L E R E M U N E R A T I O N ( I N C E N T I V E S )

Executive Committee members are eligible for an annual short-term bonus to reward the company’s overall financial results and individual contributions during a given business year. They may also be invited to participate in an annual Long-Term Incentive Program (LTI) that recognizes and rewards the achievement of company goals over several

years, such as specific long-term financial objectives or the integration of a new business (eg, Relypsa). The short-term bonus and the LTI are variable, performance-based income. This incentive system is designed to ensure that the participants’ actions, behaviour and decisions support the fulfilment of the company’s goals and its sustainable success.

These incentive schemes constitute indepen-dent remuneration elements and are therefore weighted and calculated individually. The ratio between the annual base salary and the variable elements of remuneration is deter-mined by the Remuneration Committee based on function level. The maximum payout level of both the short-term bonus and the LTI is capped at 200% of target.

S H O R T-T E R M B O N U S

The purpose of the annual short-term bonus is to reward the company’s financial perfor-mance and individual contributions during a given business year. The target bonus is defined once a year at the beginning of a performance period and constitutes the amount to be paid out to the extent that all performance objectives have been fully achieved (100% payout). The target bonus amounts to 90% of the annual base salary for the CEO and up to 60% of the annual base salary for the other members of the Executive Committee.

The annual short-term bonus is based on the annual financial performance of the company, weighted at 75%, and on the individual contributions of the Executive Committee member, weighted at 25%. The financial performance consists of Net Sales weighted 40% and EBITDA weighted 60%. Those performance metrics have been chosen as they combine top-line growth with bottom- line profitability and thus are well aligned with the strategy of profitable growth. The

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individual performance objectives consist of either quantitative or qualitative goals (eg, strategic, operational or project-based objectives including safety, compliance and corporate responsibility). For each objective, the Remuneration Committee determines a minimum level of performance (threshold) below which the payout is zero, a target level of performance for which the payout amounts to 100% and a maximum level of performance (cap) above which the payout is capped at 200%. The evaluation of an Executive Commit-tee member’s individual performance is conducted at the end of the year and includes a qualitative assessment of whether they have carried out their duties in line with company values and expected leadership behaviours.

Specific performance targets are not pub-lished as they are considered commercially sensitive information.

The short-term bonus is allocated annually after the full-year results have been published. Executive Committee members receive 32% of their annual short-term bonus in Vifor Pharma shares, which are subject to a block-ing period of five years. Such shares are allocated at the average share price for the month of December of the year prior to payment of the annual short-term bonus, minus 25% discount. The remaining 68% of the annual short-term bonus is paid out in cash. If the Board in exceptional cases awards a discretionary bonus for extraordinary performance, the bonus would usually be paid out in cash only.

L O N G -T E R M I N C E N T I V E P R O G R A M ( LT I )

The LTI recognizes and rewards Executive Committee members for the achievement of specific long-term objectives, such as long-term financial targets or the successful integration of a major acquisition. The LTI is designed to align management and company interests over the medium and long terms to ensure sustainable value for patients, custom-ers and shareholders. LTI participants also have the opportunity to benefit from the long-term appreciation of Vifor Pharma’s overall value through the development of the share price, which strengthens their personal investment in the company and gives them a compelling reason to stay at Vifor Pharma. The LTI is a long-term equity plan whose value is influenced by the Group’s operating performance and the Vifor Pharma share price. The LTI is awarded in form of perfor-mance share units (PSUs) that vest and are converted into Vifor Pharma Ltd. shares at the end of a three-year vesting period. The Remuneration Committee defines the target amount for an LTI award as a percentage of the annual base salary for each member of the Executive Committee at the beginning of a three-year vesting period. The target amount for Executive Committee members ranges from 40% to 60% of annual base salary (except for the President North America for whom the grant size amounts to 120%). For the CEO, the Board determines the LTI target amount. It corresponds 80% of the annual base salary.

The number of PSUs granted at the beginning of a vesting period depends on the target amount and on the average Vifor Pharma Ltd. share price during the final month prior to allocation. The number of PSUs is subject to the achievement of a performance conditions during the vesting period. The Return on Investment Capital (ROIC) was chosen as performance indicator because it expresses



how well the company is generating cash relative to the capital it has invested in its business and is a simple and easily accessible metric for management on all levels. The target level for the three-year vesting period that is determined is generally substantially above the weighted average cost of capital.

The PSUs granted under the LTI are subject to full or partial forfeiture in the event of termina-tion of employment. In the cases of death or disability, a pro-rata vesting applies on the date of termination. In case of change of control, eg, if the shares were to be delisted, outstanding PSUs may vest in full immediately.

Vifor Pharma maintains a long-term incentive plan pursuant to which Relypsa employees may be granted restricted share unit awards in shares of Vifor Pharma Ltd. On 30 June 2020, 43,920 such restricted share units were granted. For the following years, further grants of up to 100,000 restricted share units per year may be made. These restricted share units vest in three annual tranches. Awards may not be transferred, other than by will or the laws of descent and distribution, and may be proportionately adjusted in the event of any change in the capitalization of Vifor Pharma Ltd.

P E N S I O N S A N D O T H E R E M P L O Y E E B E N E F I T S

Vifor Pharma offers additional benefit plans that are designed to protect and support employees around the uncertainties of life. These benefits including retirement, disability and death plans are country-specific and are designed in accordance with local legal requirements and competitive market prac-tices. Members of the Executive Committee based in Switzerland are covered by the pension scheme for all Vifor Pharma employ-ees in Switzerland. The Vifor Pharma pension plan in Switzerland was adjusted in 2020 to

align calculatory pay-out with increased statisticial longevity. It exceeds the legal requirements stipulated by the Swiss Federal Law on Occupational Pension Schemes (BVG) and is in line with what other listed companies of similar size in Switzerland offer. The Presi-dent North America is covered by a compara-ble pension scheme in the United States. Independent of their remuneration, employees, including Executive Committee members, are entitled to acquire up to 100 of Vifor Pharma Ltd. shares per year under the share acquisition plan. These shares, which may be acquired at a 30% discount on the market price, are blocked for three years.

Other benefits may include an expense allowance, a company car and reimbursement for one-time expenses relating to relocation, tax and legal advice (eg, in order to move to Switzerland) for the Executive Committee and selected management members. The fair value of these other benefits is part of the remuneration and disclosed in the table on page 142. Members of the Executive Commit-tee do not receive additional benefits.

E M P L O Y M E N T C O N T R A C T S

Members of the Executive Committee are employed under contracts of unlimited duration and subject to a maximum notice period of 12 months during which also non-compete obligations apply. No additional compensation is awarded for the non-com-pete period. They are not entitled to severance, termination or change-of-control payments, except the special vesting provisions under the LTI as described above.

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M I N I M U M S H A R E H O L D I N G R E Q U I R E M E N T S

The members of the Executive Committee are required to own at least 75% of their annual base salary and annual target short-term bonus in Vifor Pharma Ltd. shares within five years of their appointment to the Executive Committee.

H O W P S U S A R E C O N V E R T E D I N T O S H A R E S U N D E R T H E LT I P R O G R A M

Target amount

=

=

×

Vifor Pharmashare price

Number of PSUs awarded

Final number of shares delivered

Number of PSUs

awarded

% of target achievement

during three-year period

B E G I N N I N G O F C Y C L E

E N D O F C Y C L E

O P T I O N S A N D L O A N S

Vifor Pharma does not issue any tradeable options. The Vifor Pharma Articles of Associa-tion do not allow loans or credits to members of the Board; loans and credits to members of the Executive Committee are permitted up to 50% of an individual annual base salary.



R E M U N E R A T I O N O F T H E B O A R D O F D I R E C T O R S

Since the Annual General Meeting last year the new Chairman has taken up his role as non-executive Chairman. The tasks of the former Executive Chairman have been divided between the new Chairman and the newly promoted CEO. Their increased role and responsibility is also reflected in their respec-tive remuneration and described below for the Board of Directors and for the Executive Committee respectively.

The overall remuneration of the Board of Directors for 2020 amounted to CHF 5,876,000. It remained on the same level as the previous year and remained unchanged for all Directors other than the Chairman. It is within the maximum amount of CHF 6,500,000 approved by the shareholders for the year 2020. The lower level of remuneration of the former Executive Chairman due to pro-rated payments was partially offset by the contrac-tual obligations due to him as an executive of the Company. In addition, the overall remu-neration for the Board of Directors includes a higher remuneration of the non-executive Chairman (including for his tenure in the Board before being elected Chairman) and for significantly increased workload during the

COVID-19 crisis overlapping with the transi-tion from an Executive Chairman supported by a COO to a non-executive Chairman supported by a CEO.

The remuneration for Board and Committee memberships other than the role of the Chairman remained unchanged from previous years. The remuneration amount, which was delivered in shares was converted at the average share price for the month of Decem-ber 2019, ie, CHF 176.30, minus a 25% dis-count. For the new board member the average share price was determined for the month of April 2020, ie, CHF 141.66, minus a 25% discount.

R E M U N E R A T I O N O F T H E E X E C U T I V E C O M M I T T E E

The remuneration system and programs for the Executive Committee remained essentially unchanged in 2020. Overall, the total aggre-gate remuneration of the Executive Commit-tee for 2020 was CHF 13,127,000. This amounted to 77.2% of the maximum aggre-gate amount of CHF 17,000,000, approved by the shareholders for the year 2020. This was an increase of 18.8% compared to previous year, mainly for the following reasons:

R E M U N E R A T I O N A W A R D E D I N 2 0 2 0 A N D 2 0 1 9

In accordance with the Articles of Association, Vifor Pharma shareholders vote prospectively, ie, one year in advance, on the maximum aggregate remuneration for members of the Board and of the Executive Committee for the next business year. In order to allow for a comparable basis with this prospective vote, remuneration paid or attributed in 2020, and that of the previous year, is presented on the same basis perspective of cost to the company.

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P E R F O R M A N C E A C H I E V E M E N T F O R T H E S T I I N 2 0 2 0


– The CEO, promoted from the former position as COO as of 14 May 2020, received a higher annual base salary and an increase in short-term bonus and LTI grant value compared to the prior year to reflect his increased responsibilities of the new role and to align with market practice.

– The remuneration of selected Executive Committee members was increased in order to adjust to market levels already applied for members who joined in 2020. These individual increases in 2020 amounted to an average of 9% on annual base salary.Additionally the target short-term bonus for the selected members was set to 60% at target and the LTI target amount was set to between 40% and 60% of the annual base salary.

– The financial performance achieved under the short-term bonus, which accounts for 75% of the payout, reached 42.5% of the maximum potential (previous year: 81.9%). For the individual portion of the bonus, which accounts for 25% of the payout, the average performance achievement was 42.5% of the maximum potential (previous

year: 72%), resulting in an overall bonus payout of between 41.9% and 44.4% of the maximum potential (previous year: 76.5% to 81.5%).

– Remuneration includes contractual obliga-tions to the former member of the Execu-tive Committee, Patrick Treanor.

The variable portion (excluding social security) of the total remuneration for the Executive Committee who were in office at the end of the year in 2020 was 49.5% (2019: 46.9%). For the CEO it was 55.1% (2019: 59.6%).

The allocation of Performance Share Units (PSUs) under the Long-Term Incentive Pro-gram (LTI) was defined on the basis of the average Vifor Pharma Ltd. share price during the month of May 2020 of CHF 148.94. The performance achievement under the LTI 2018–2020 that vested at the end of 2020 was 108.4%, based on an average ROIC of 8.1% over the three years 2018, 2019 and 2020.

Financial Goals (75% weight)

Net Sales (40% weight)

EBITDA (60% weight)

Individual Goals (25% weight)

Minimum0%

Target100%

Maximum200%


O P T I O N S , L O A N S A N D C R E D I T S

As of 31 December 2020, no member of the Executive Committee or the Board of Direc-tors held tradable options or was granted any loan or credit from the company. There was no outstanding loan to any member of the Board of Directors or the Executive Committee.

F O R M E R M E M B E R S O F T H E B O A R D O F D I R E C T O R S A N D E X E C U T I V E C O M M I T T E E

Vifor Pharma continued to pay contractually agreed remuneration in the reporting period to the former Executive Chairman (as disclosed) and to a former member of the Executive Committee Patrick Treanor, who resigned on 30 September 2020 as disclosed in the remuneration table for the Executive Committee on page 142. Otherwise, Vifor Pharma did not pay any remuneration to former members of the Board of Directors or the Executive Committee.

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R E M U N E R A T I O N O F E X E C U T I V E C O M M I T T E E M E M B E R S I N 2 0 2 0 1

In thousand CHF TotalOf which

Stefan Schulze, CEO

Base salary 5,078 876

Bonus in cash 1,682 449

Bonus in shares 952 2 282

Long-Term Incentive Program 3,621 701

Social security costs 684 161

Contributions to pension funds 748 117

Other remuneration 362 15

Executive Committee member remuneration 13,127 3 2,601

Maximum Remuneration approved by the Annual Shareholder Meeting for 2020 17,000

Within approval limit Yes

1 All remuneration amounts are gross amounts (excluding pension fund and social security contributions).2 Includes the 25% discount on the share price at alloction.3 Remuneration for the eight members of the Executive Committee who were in office in 2020, including TCHF 1,341 remuneration to the former

member of the Executive Committee, Patrick Treanor.

E X E C U T I V E C O M M I T T E E M E M B E R S S H A R E H O L D I N G S A N D O U T S T A N D I N G P E R F O R M A N C E S H A R E U N I T S ( P S U )

Number of registered shares

held as at 31.12.2020 1

Number of PSU granted in 2020

Total number of PSUs outstanding 2

Stefan Schulze 12,200 4,707 26,073

Barbara Angehrn 747 2,179 6,070

Colin Bond 7,607 2,272 9,898

Lee Heeson 100 4,032 4,032

Klaus Jensen 100 3,679 3,679

Gregory Oakes — 3,009 3,009

Michael Puri 7,998 1,071 6,691

Dr. Christoph Springer 31,823 1,481 7,451

1 Registered shares held by related parties of members of the Executive Committee are also included in the totals disclosed above.2 Upon vesting, each Performance Share Unit (PSU) will be converted to registered shares within a range of 0 and 2 depending on the target

achievement.


R E M U N E R A T I O N O F T H E V I F O R P H A R M A B O A R D O F D I R E C T O R S I N 2 0 2 0 1

Registered shares

In thousand CHF Role(s) Fee in cashFee equivalent

in sharesOther

remuneration 2 TotalHeld as at

31.12.2020Allocated

for 2020

Etienne Jornod, Executive Chairman (until Annual Shareholder Meeting 2020) 3 CG 63 1,529 1,733 4 3,325 n/a 12,427

Executive member of the Board of Directors 63 1,529 1,733 3,325 n/a 12,427

Jaques Theurillat, Chairman (as of Annual Shareholder Meeting 2020) CG 5 660

6 480 — 1,140 1,581 2,723

Gilbert Achermann (as of Annual Shareholder Meeting 2020) CA 57 80 17 154 — 534

Michel Burnier CS, R — 240 23 263 9,460 1,362

Romeo Cerutti VC, A, G,

R — 293 33 326 7,967 1,664

Sue Mahony CR, CU 100 133 — 233 661 757

Kim Stratton A, S, U 85 113 26 224 562 643

Gianni Zampieri G, S 80 107 24 211 20,483 606

Non-executive members of the Board of Directors 982 1,446

7 123 2,551 40,714 8,289 8

Remuneration of the members of the Board of Directors 1,045 2,975 1,856 5,876 40,714 20,716


Within approval limit yes

1 All remuneration amounts are net amounts. The Company does not pay any pension contributions to members of the Board.2 Other remuneration includes the employer’s and employee's contribution to social security. 3 Etienne Jornod received TCHF 500 for consultancy services rendered to various entities of Vifor Pharma group after May 15, 2020.4 Includes contractual obligations and payments in line with employee regulations.5 CA and S until AGM 2020 included in remuneration pro rata.6 Includes TCHF 300 compensating extraordinary workload during the Covid-19 crisis overlapping with the transition period.7 Includes the 25% discount on the share price at alloction.8 Allocated in February 2021.

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold. A: Membership in the Audit and Risk Committee; CA: Chair of the Audit and Risk Committee; CG: Chair of the Governance Committee; CR: Chair of the Remuneration Committee; CS: Chair of the Scientific Committee; CU: Chair of US Committee; G: Membership in the Governance Committee; R: Membership in the Remuneration Committee; S: Membership in the Scientific Committee; U: US Committee; VC: Vice-Chairperson

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R E M U N E R A T I O N O F E X E C U T I V E C O M M I T T E E M E M B E R S I N 2 0 1 9 1

In thousand CHF TotalOf which

Stefan Schulze, COO

Base salary 5,512 666

Bonus in cash 1,785 575

Bonus in shares 979 361

Long-Term Incentive Program 1,427 466

Social security costs 576 139

Contributions to pension funds 494 105

Other remuneration 277 41

Executive Committee member remuneration 11,050 2 2,353


Within approval limit Yes

1 All remuneration amounts are gross amounts (excluding pension fund and social security contributions).2 Remuneration for the eight members of the Executive Committee who were in office in 2019, including TCHF 2,715 remuneration and

contractual obligations to two former EC members David Bevan and Dario Eklund.

E X E C U T I V E C O M M I T T E E M E M B E R S S H A R E H O L D I N G S A N D O U T S T A N D I N G P E R F O R M A N C E S H A R E U N I T S ( P S U )

Number of registered shares

held as at 31.12.2019 1

Number of PSU granted in 2019

Total number of PSUs outstanding 2

Stefan Schulze 6,664 3,699 23,803

Barbara Angehrn 85 1,332 3,891

Colin Bond 3,687 2,032 14,874

Michael Puri 2,898 1,246 11,811

Dr. Christoph Springer 24,133 1,332 12,535

Patrick Treanor — 1,235 2,303

1 Registered shares held by related parties of members of the Executive Committee are also included in the totals disclosed above.2 Upon vesting, each Performance Share Unit (PSU) will be converted to registered shares within a range of 0 and 2 depending on the target

achievement.


R E M U N E R A T I O N O F T H E V I F O R P H A R M A B O A R D O F D I R E C T O R S I N 2 0 1 9 1

Registered shares

In thousand CHF Role(s) Fee in cashFee equivalent

in sharesOther

remuneration

2 TotalHeld as at

31.12.2019Allocated

for 2019

Etienne Jornod, Executive Chairman CG 150 3,670 684 3 4,504 286,711 27,366

Executive member of the Board of Directors 150 3,670 684 4,504 286,711 27,366

Michel Burnier CS, R — 180 12 192 8,619 2,051

Romeo Cerutti VC, A, G,

R — 220 18 238 5,460 2,507

Sue Mahony (as of Annual Share-holder Meeting 2019) CR, CU 67 67 11 145 — 661

Kim Stratton (as of Annual Share-holder Meeting 2019) A, S, U 57 57 9 123 — 562

Jaques Theurillat CA, S 90 90 15 195 555 1,026

Gianni Zampieri G, S — 160 13 173 49,539 4 1,823

Daniela Bosshardt (until Annual Shareholder Meeting 2019) CR, S 75 — 6 81 n/a n/a

Sylvie Grégoire (until Annual Shareholder Meeting 2019) G, S 67 — 6 73 n/a n/a

Fritz Hirsbrunner (until Annual Shareholder Meeting 2019) A, R 67 — 4 71 n/a n/a

Non-executive members of the Board of Directors 423 774 94 5 1,291 64,173 8,630 6

Remuneration of the members of the Board of Directors 573 4,444 778 5,795 350,884 35,996


Within approval limit yes

1 All remuneration amounts are net amounts.2 Other remuneration includes the employer’s contribution to social security and pension fund. In addition, the employer pays the employee’s

amount for the social security costs amounting to TCHF 223.3 Includes TCHF 20.9 resulting from change in remuneration structure to maintain economic value despite change in payment structure and

TCHF 238.3 for holidays not taken and TCHF 120 to compensate for the allocation of the share-based remuneration in arrears introduced in 2016 and the introduction of a 5-year lock-up period on newly allocated shares.

4 Includes the share-based portion of Dr. Zampieri’s PSUs that were awarded during his tenure as a member of the Coporate Executive Committee and that were subsequently converted into shares.

5 To the extent that board members chose to elect remuneration in equity this amount is increased by 25%. 6 Allocated in February 2020.

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold. A: Membership in the Audit and Risk Committee; CA: Chair of the Audit and Risk Committee; CG: Chair of the Governance Committee; CR: Chair of the Remuneration Committee; CS: Chair of the Scientific Committee; CU: Chair of US Committee; G: Membership in the Governance Committee; R: Membership in the Remuneration Committee; S: Membership in the Scientific Committee; U: US Committee; VC: Vice-Chairperson

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5,512

C E O / C O O R E M U N E R A T I O N I N 2 0 1 9 A N D 2 0 2 0

in thousand CHF

E X E C U T I V E C O M M I T T E E R E M U N E R A T I O N I N 2 0 1 9 A N D 2 0 2 0

in thousand CHF

77.2%75%

59%78%

22.8%

25% 41%

22%3,621

1,427

701466

2,6342,764

7319361,7941,347

293285

5,078

876666

2019 (eight members) 2019 20202020 (eight members)

17,000

14,800

13,127

11,050

4,400

3,000

2,601

2,353

Per cent of maximum potential not paid or allocated

Per cent of maximum potential paid or allocated

LTI STI Social insurance and

other remuneration Annual base salary

Potential maximum

Potential maximum

Potential maximum

Potential maximum1

Paid or allocated

Paid or allocated

Paid or allocated

Paid or allocated1

1 Pro rata calculation for COO and CEO position.


O V E R V I E W O F E X E C U T I V E R E M U N E R A T I O N I N 2 0 2 0 A N D 2 0 1 9

In line with the Articles of Association, the maximum aggregate amount of remuneration for members of the Board and of the Executive Committee will be submitted to shareholders for approval prospectively for the business year following the Annual Shareholder Meet-ing. This approval process sets an upper limit to the maximum possible remuneration amount and accounts for all variable elements

including in particular the short-term bonus and the LTI (blocked shares and PSUs are valued at the grant date). The chart above shows a comparison between remuneration awarded and remuneration approved by shareholders for the Executive Committee and the COO/CEO for the years 2019 and 2020.


In 2020, the Remuneration Committee conducted its annual review of the compensa-tion system of the Executive Committee. The committee concluded that the compensation structure itself is fit-for-purpose and well aligned with the shareholders' interests and with market practice. However, it also estab-lished that that the performance measurement under the long-term incentive needed some further consideration: ROIC has been used as single performance metrics in the long-term incentive plan for several years, which has its roots in the history of the plan. Considering the performance conditions of the short-term bonus, which include Net Sales and EBITDA and are well-aligned with the business strategy of profitable growth, the Remuneration Committee decided to introduce a relative performance component in the long-term incentive in the form of relative Total Share-holder Return. The committee also decided to add at least one additional performance metric to the long-term incentive: This discussion is still ongoing and the perfor-mance concept is currently being finalized. Further details will be provided in the 2021 Remuneration Report.

O U T L O O K : C H A N G E S I N R E M U N E R A T I O N M O D E L F O R 2 0 2 1

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Ernst & Young Ltd Schanzenstrasse 4a P.O. Box CH-3001 Berne

Phone +41 58 286 61 11 Fax +41 58 286 68 18 www.ey.com/ch

To the General Meeting of Vifor Pharma Ltd., St. Gallen

Berne, 24 February 2021

Report of the statutory auditor on the remuneration report We have audited the remuneration report of Vifor Pharma Ltd. for the year ended

31 December 2020. The audit was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance) contained on pages 142 to 143 of the remuneration report.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance. The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility Our responsibility is to express an opinion on the remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the remuneration report for the year ended 31 December 2020 of Vifor Pharma Ltd. complies with Swiss law and articles 14–16 of the Ordinance.

Ernst & Young Ltd

Martin Mattes Pascal Solèr Licensed audit expert Licensed audit expert (Auditor in charge)


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REMUNERATION - Vifor Pharma · 2021. 3. 4. · Remuneration of the members of the Executive...

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