Letter to Stakeholders
Dear Stakeholders,
The year 2021 has been another challenging year due to the COVID-19 global pandemic. In spite of this, Clariant was able to live up to its aspiration to be the globally leading company for specialty chemicals and to deliver a strong set of results in 2021, showing increased sales volumes and profitability. The Compensation Committee has worked to support this vision through the lens of compensation, and I am pleased to present the Compensation Report 2021, in which you will find information on the compensation outcomes and key decisions taken in 2021.
2021 Performance
For the second consecutive year, the global business environment was impacted by the coronavirus pandemic. Nevertheless, thanks to the strong motivation and dedication of our employees, their customer focus, as well as the organization’s efforts to deliver on efficiency programs, Clariant managed to perform successfully in this highly challenging market environment. The Compensation Report outlines how these results impacted the variable incentive payments made to the members of Executive Management under the various compensation plans.
Compensation Committee activities
The Compensation Committee met four times and passed two decisions by circular resolution during 2021. It closely monitored market developments, company and employee needs, as well as the expectations of shareholders and other external stakeholders. Its activities focused on reviewing and defining changes to Clariant’s Long-term Incentive Plan (CLIP). Apart from that, the Compensation Committee performed its regular activities throughout the year. These included, for instance, determining CLIP targets for the 2021 grant, signing off on the fair market value of Performance Share Units (PSUs) under the CLIP, reviewing the vesting conditions under the Performance Share Unit Plan 2018 grant, and preparing the Compensation Report and the say-on-pay votes at the Annual General Meeting.
Changes to the compensation system in the reporting year
Following an extensive review of the CEO and EC compensation structure, the Compensation Committee decided to reduce the overall remuneration for the CEO and EC members. In addition, the pay mix was adjusted to strengthen the focus on long-term value creation. These changes have been in effect since 1 January 2021. To further underline Clariant’s commitment to sustainability, a Sustainability-related KPI was added to the Group Management Bonus Plan as a top priority, replacing the former Productivity KPI.
Outlook on changes to the compensation system
To further align the compensation design with the business strategy and the stakeholders’ interest, the Compensation Committee agreed to review Clariant’s Long-Term Incentive Plan (CLIP) in connection with the next grant in April 2022 and to introduce two ESG-related KPIs for the CLIP. These KPIs were chosen to recognize the company’s commitment to Sustainability and Employee Engagement as part of Clariant’s strategy and purpose. Further details on the CLIP changes are provided later in this report.
In 2022, the Compensation Committee will review the Short-Term Incentive Plans with potential changes to be introduced for the 2023 performance period.
Binding/nonbinding votes at the Annual General Meeting 2021
The Compensation Committee proactively considers stakeholders’ expectations in Clariant’s compensation framework. Shareholders’ support at the Annual General Meeting 2021 for Clariant’s compensation framework remained strong. Clariant’s shareholders approved all compensation-related motions, and the Compensation Report 2020 received a high approval rate in the consultative vote. These positive voting outcomes show that the company’s active dialogue with investors is fruitful, and that shareholders endorse the company’s compensation system. We would like to thank the investors for their continued trust and support.
Looking ahead, we will continue to assess and review our compensation programs to ensure that they are still fulfilling their purpose in the evolving context in which the company operates, and that they are aligned with the interests of our stakeholders. We will also continue to maintain an open dialogue with our stakeholders and their representatives. We would like to thank you for sharing your perspectives on executive compensation with us, and trust that you will find this report informative.
Sincerely,
Eveline Saupper
Chair Compensation Committee