The Board of Directors and its committees

The Board of Directors consists of the Chairman, one or more Vice Chairpersons, and the other members. With the exception of Mr. Günter von Au, who was Chairman of the Board of Directors at Süd-Chemie AG until 31 March 2012, no non-executive member of the Board of Directors held a senior management position at Clariant Ltd or any current or former Clariant Group company between 2011 and 2015 or has any significant business relationship with Clariant Ltd or any other Clariant Group company. The members of the Board of Directors constitute the following committees:

• Chairman’s Committee
• Compensation Committee
• Audit Committee
• Technology and Innovation Committee

The Board of Directors appoints the members of the committees, except for the members of the Compensation Committee who are elected by the Annual General Meeting. The Board of Directors meets at least once a quarter. At the invitation of the Chairman, the CEO, the CFO, and other members of the Executive Committee and / or other employees and third parties attend the meetings of the Board of Directors for the purpose of reporting or imparting information. Each committee has a written charter outlining its duties and responsibilities. The committees’ charters are published on Clariant’s website. The committees report on their activities and results to the Board of Directors. They prepare the business of the Board of Directors in their respective areas.

The Chairman’s Committee (CC) comprises the Chairman, the Vice Chairman, and two other members of the Board of Directors. The CC prepares the meetings of the Board of Directors. The CC meets as needed. It makes decisions on financial and other matters delegated by the Board of Directors in accordance with the Bylaws of the Board of Directors. In addition, the CC passes resolutions for which the Board of Directors is responsible when matters cannot be postponed. The CC draws up principles for the selection of candidates for election and reelection to the Board of Directors and for the office of CEO, and prepares the corresponding recommendations. Furthermore, the CC considers and submits to the Board of Directors the CEO’s proposals concerning candidates for Executive Committee positions.

www.clariant.com/committees

The Compensation Committee (CoC) comprises three members of the Board of Directors as elected by the Annual General Meeting. The majority of the members shall be non-executive members of the Board of Directors. The CoC meets at least twice a year. It reviews and proposes to the Board of Directors the compensation and benefits policies and programs, reviews the performance criteria relevant to compensation and determines individual executive compensation and benefits of the members of the Board of Directors and the Executive Committee, subject to the approvals of the total compensations by the Annual General Meeting. Furthermore, the CoC reviews fringe benefit regulations and dismissal regulations with the CEO, members of the EC, Heads of Global Functions and Global Business Units, and Region Heads always in accordance with the Articles of Association and Ordinance Against Excessive Compensation in Stock Listed Corporations.

www.clariant.com/committees

The Audit Committee (AC) comprises three members of the Board of Directors. The Chairman must be an independent, non-executive member of the Board of Directors. A majority of the members of the AC must have financial and accounting experience.

The AC reviews the activities of the external auditors, their collaboration with the internal auditors, and their organizational adequacy. It also reviews the performance, compensation, and independence of the external auditors as well as the performance of the internal auditors and reports back to the Board of Directors. Furthermore, the AC reviews the company’s internal control and risk management systems, and reviews compliance with the law and internal regulations – in particular with the Code of Conduct. In collaboration with the Group’s external and internal auditors and financial and accounting management, the AC reviews the appropriateness, effectiveness, and the compliance of accounting policies and financial controls with applicable accounting standards. The AC meets at least six times a year. The AC reviews and recommends the Group’s financial statements for the first three quarters of each year, and the annual financial results to the Board of Directors for approval.

www.clariant.com/committees

The Technology and Innovation Committee (TIC) comprises four members of the Board of Directors with experience in research, innovation management, and technology. The TIC meets at least twice a year. The tasks of the TIC include assessing the company’s innovative activities on behalf of the Board of Directors. The TIC also reviews measures to stimulate research and development, and optimize innovative potential, as well as submitting appropriate recommendations to the Board of Directors.

www.clariant.com/committees

Definition of Working Methods and Areas of Responsibility

In accordance with the law and the Articles of Association, the Board of Directors is the ultimate decision-making authority for Clariant Ltd in all matters except those decisions reserved by law or the Articles of Association for the shareholders. In accordance with and supplementary to Article 716a of the Swiss Code of Obligations and Article 22 of the Articles of Association (www.clariant.com/corporate-governance) the Board of Directors has sole authority, particularly for the following, non-transferable and inalienable duties of the Board of Directors:

• Providing the strategic direction of the Group;
• Approving the basic outline of the Group’s organization and its corporate governance;
• Supervising the overall business operations;
• Evaluating the performance of the CEO and members of the Executive Committee;
• Appointing and dismissing the CEO and members of the Executive Committee, the Head of Corporate Auditing, and other key executives;
• Approving the basic accounting system and financial planning and control of the Group;
• Approving the Group’s annual budget;
• Reviewing and approving the quarterly financial statements and results release for Clariant Ltd and the Group;
• Approving the Group’s consolidated financial statements at the end of the fiscal year for submission to the Annual General Meeting;
• Approving major M&A transactions and financial transactions of considerable scope or those involving special risks, particularly capital market transactions and other financing transactions (e.g. large loans) as well as changes in conditions associated therewith;
• Ensuring a management and corporate culture that is appropriate for the company’s objectives;
• Ensuring an internal control system and adequate risk and compliance management, particularly with regard to financial, corporate governance and citizenship, personnel, and environmental protection matters;
• Ensuring succession planning and management development;
• Convening the Annual General Meeting (AGM), determining the items on the agenda and the proposals to be made to the AGM.

Working methods

In 2015 the Board of Directors held seven meetings in person at the Corporate Center in Pratteln or at other locations, mainly in Switzerland, and also two meetings by phone. The company’s strategy is reviewed and further developed once a year during a two-day meeting. Members of the Executive Committee are invited to attend the meetings of the Board of Directors. For the October meeting the Board of Directors met in Shanghai, China. The views of external and internal consultants are heard, if necessary, in the case of projects of considerable scope.

Management of the Group

The Board of Directors has delegated the executive management of the Clariant Group to the CEO and the other members of the Executive Committee. The Executive Committee is mainly responsible for implementing and monitoring the Group strategy, for the financial and operational management of the Group, and for the efficiency of the Group’s structure and organization. The members of the Executive Committee are appointed by the Board of Directors on the recommendation of the Chairman’s Committee. Subject to the responsibility of the Board of Directors and the Annual General Meeting the CEO and, under his supervision, the Executive Committee are responsible for:

• Drawing up strategic plans and policies for approval by the Board of Directors;
• Implementing Group strategies and policies as well as strategies and action programs for individual Business Units and subsidiaries;
• Managing the Business Units and functions to ensure efficient operations, including regularly assessing the achievement of goals;
• Regularly informing the Board of Directors and its committees of all matters of fundamental significance to the Group and its businesses;
• Ensuring compliance with legal requirements and internal regulations;
• Establishing a management and corporate culture in line with the company’s objectives;
• Promoting an active internal and external communications policy;
• Appointing and dismissing senior management, including appropriate succession planning.

The Executive Committee is supported by the Corporate Center that defines Group-wide policies and guidelines. Whilst reporting in the four Business Areas Care Chemicals (BU ICS), Catalysis (BU Catalysts)¹, Natural Resources (BU Oil & Mining Services, BU Functional Minerals) and Plastics & Coatings (BU Additives, BU Masterbatches, BU Pigments) the seven Business Units are the highest-level operating units within the Group. They have global responsibility for the activities assigned to them, particularly sales, marketing, product management, and production. The Business Units also have global responsibility for short- and long-term revenue and earnings generated from the operations and assets assigned to them. This includes fully exploiting existing business potential, identifying new business opportunities, and pursuing the active management of their products and services portfolio. The Business Units’ activities are complemented and supported by global Group functions (e.g. Procurement, Finance, Information Technology, Legal, Human Resources, and Group Technology & Innovation), which are organized as service centers.

Information and control instruments vis-à-vis the Executive Committee

The Board of Directors ensures that it receives sufficient information from the Executive Committee to perform its supervisory duties and make decisions that are reserved for the Board of Directors. The Board of Directors obtains the information required to perform its duties in various ways:

• The CEO and the CFO inform all directors regularly about current developments, including through the regular submission of written reports, such as key performance indicators for each business;
• The minutes of the meetings of the Executive Committee are made available to the directors;
• Informal meetings and teleconferences are held, as required, between the CEO and the members of the Chairman’s Committee;
• The members of the Executive Committee are invited to attend meetings of the Board of Directors to report on Business Units under their responsibility;
• The members of the Board of Directors are entitled to request information from members of the Executive Committee or any other Clariant senior manager.

Board committees

The Chairman’s Committee meets regularly with members of the Executive Committee and other members of senior management to review the business, better understand applicable laws and policies affecting the Group, and support the Executive Committee in meeting the requirements and expectations of stakeholders. The Technology and Innovation Committee invites members of the Executive Committee and members of senior management as necessary to discuss selected aspects of innovative activities. The CFO and representatives of the external auditor are invited to Audit Committee meetings. Furthermore, the Heads of Corporate Auditing and Risk Management, the Group Compliance Officer, and Clariant’s General Counsel report on a regular basis to the Audit Committee. The Audit Committee reviews the financial reporting processes on behalf of the Board of Directors. For each quarterly and annual reporting of financial information an internal team reviews the information for accuracy and completeness of disclosures, reporting to the Audit Committee before publication. The Compensation Committee generally meets at least twice per year to adjust the development of the compensation structures to changing conditions, as necessary. In this context, the long-term incentive program for the Executive Committee and the senior management team is also aligned with current market and business developments and corresponding adjustments are made, if required.

Internal audit (Corporate Auditing)

Corporate Auditing carries out operational and system audits in accordance with a plan adopted by the Audit Committee. By assisting organizational units in the accomplishment of objectives, it provides an independent approach for the evaluation, improvement, and effectiveness of the internal control framework. Corporate Auditing also prepares reports on the audits it has performed, and reports actual or suspected irregularities to the Audit Committee and the Chairman of the Board of Directors. The Audit Committee regularly reviews the scope, plans, and results of Corporate Auditing. The Group pursues a risk-oriented approach to auditing and coordinates internal audit activities with the external auditors on a regular basis. Detailed information on Clariant’s risk management system can be found in chapter Enterprise Risk Management (ERM) of this report.