7.1. The Board of Directors and its committees

The Board of Directors consists of the Chairman, one or more Vice-Chairpersons, and the other members. Except for Hariolf Kottmann, who held the position of CEO until 15 October 2018, none of the non-executive members of the Board of Directors held a senior management position at Clariant Ltd or any current or former Clariant Group company between 2017 and 2019 or has any significant business relationship with Clariant Ltd or any other Clariant Group company. Hariolf Kottmann has also held the position of Executive Chairman since 24 July 2019. The members of the Board of Directors constitute the following committees:

• Nomination Committee
• Compensation Committee
• Audit 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 Nomination Committee (NC) comprises the Chairman, the Vice-Chairman, and at least two other members of the Board of Directors. The NC meets as needed. The NC draws up principles for the selection of candidates for election and reelection to the Board of Directors and to the CEO and other members of the Executive Committee and prepares the corresponding recommendations. The NC 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 five 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 Executive Committee, Heads of Global Functions and Global Business Units, and Region Heads always in accordance with the Articles of Association and the Ordinance against Excessive Compensation in Listed Stock Corporations. More information can be found in the 2019 Compensation Report, section 1 and on www.clariant.com/committees.

The Audit Committee (AC) comprises two to five members of the Board of Directors who all must be independent, non-executive members 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 four 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

7.2. 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, the Board of Directors has sole authority particularly for the following nontransferable 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) and determining the items on the agenda and the proposals to be made to the AGM.

7.3. Working methods

In 2019, the Board of Directors held fifteen meetings in person at the Corporate Center in Pratteln or at other locations in Switzerland. The meeting in June took place in Wiesbaden, Germany, and the meeting in December was held in Munich, Germany. Three of the meetings lasted two days; one lasted three days. Two further meetings were held by phone. From the total of 17 Board meetings held in 2019, 13 were attended by all Board members. At two Board meetings, one Board member was excused, and at two meetings, two Board members were excused. The company’s strategy is reviewed and further developed once a year. Members of the Executive Committee and the General Counsel are invited to attend the meetings of the Board of Directors. The views of external and internal consultants are heard, if necessary, in the case of projects of considerable scope.

7.4. 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 Nomination 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, which defines Group-wide policies and guidelines. While reporting in the three Business Areas Care Chemicals (Business Unit Industrial & Consumer Specialties and New Business), Catalysis (Business Unit Catalysts and Business Line Biofuels & Derivatives), and Natural Resources (Business Units Oil and Mining Services, Functional Minerals, and Additives), including the Business Units Masterbatches and Pigments as discontinued operations, 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.

7.5. 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 Nomination 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.

7.6. Board committees

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.

7.7. 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. The quality of Corporate Auditing is regularly assessed in accordance with the requirements of The Institute of Internal Auditors (IIA). 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. More information on Clariant’s risk management system can be found in the chapter Enterprise Risk Management (ERM).