7. Internal Organizational Structure

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 Executive Chairman ad interim from 24 July 2019 until 31 December 2020, 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 2019 and 2021 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:

• Nomination Committee
• Compensation Committee
• Audit Committee
• Innovation and Sustainability 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 (www.clariant.com/committees). 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.

BOARD OF DIRECTORS – COMMITTEE RESPONSIBILITIES AND MEETINGS

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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary and prepares the corresponding recommendations. The NC considers and submits to the Board of Directors the CEO’s proposals concerning candidates for Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary , 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary , 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 Compensation Report 2021, section 1, and at www.clariant.com/committees.

The Audit Committee (AC) comprises two to five members of the Board of Directors, all of whom must be independent and 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 EthicsCode of EthicsThe Code of Ethics is laying down Clariant’s commitments and is intended to be a guide with ethical principles and examples to enable all personnel and associated parties to act with the highest standards of integrity.View entire glossary . 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

The Innovation and Sustainability Committee (ISC) comprises two to four members of the Board of Directors, ideally with pro­fessional experience in the domains of technology and innovation management, research and development, and sustainability, including climate risk management and innovation management in general.

The Innovation and Sustainability Committee (ISC) acts as an advisory body to the Board of Directors and the Chief Executive Officer (CEO). It supports the Board of Directors and the CEO in matters of innovation and sustainability strategy, climate risk management, growth fields, innovation processes, innovation pipeline, enabling technology platforms, relevant intellectual property (IP), and capability-related decisions. The ISC meets as often as necessary for the company’s business, or upon request of any of its members, but in any case at least four times per year. The Chair of the ISC shall report regularly to the Board of Directors on the activities and findings of the ISC.

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 (www.clariant.com/en/Company/Corporate-Governance/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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary ;
• Appointing and dismissing the CEO and members of the Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary , 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 financial year for submission to the Annual General Meeting;
• Approval and review of ESG-related reporting;
• 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 2021, the Board of Directors held four meetings in person (one in Switzerland and three in Germany), and eight meetings were held by video conference/phone. While nine Board meetings held in 2021 were attended by all members of the Board, in three Board meetings, one member of the Board was excused (resulting in an attendance rate of 89.4 %). The company’s strategy is reviewed and further developed once a year. Members of the Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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.

BOARD OF DIRECTORS MEETINGS

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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary . The Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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), 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 Unit PigmentsPigmentsPigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. In 2020, Clariant launched the divestment process of its Pigments business, which was completed on 3 January 2022.View entire glossary as discontinued operation, the six business units (five business units since the closing of the divestment of the Business Unit PigmentsPigmentsPigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. In 2020, Clariant launched the divestment process of its Pigments business, which was completed on 3 January 2022.View entire glossary on 3 January 2022) 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 ComplianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors.View entire glossary and global Group functions (e.g., Procurement, Finance, Information Technology, Legal, Human Resources, and Group Innovation & Sustainability), 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members.View entire glossary and the senior management team is also aligned with current market and business developments, and corresponding adjustments are made, if required.

BOARD OF DIRECTORS – COMMITTEE MEETINGS

7.7. Internal audit (Corporate Audit)

The purpose of Corporate Audit is to provide independent, objective assurance and consulting services. It assists Clariant in accom­plishing its objectives by bringing a systematic, disciplined approach to evaluate and to improve the effectiveness and efficiency of the organization’s governance, risk management, and controls. Corporate Audit carries out its audits in accordance with a plan reviewed and approved by the Audit Committee. Corporate Audit prepares reports on the audits it has performed and reports actual or suspected irregularities to the Audit Committee and Management. The Audit Committee regularly reviews the scope, plans, and results of Corporate Audit. The Group pursues a risk-oriented approach to auditing and coordinates internal audit activities with the external auditors. The quality of Corporate Audit is regularly assessed in accordance with the requirements of The Institute of Internal Auditors (IIA). More information on Clariant’s risk management system can be found in chapter 14.