Compensation Governance

Clariant’s Articles of Association, in combination with the Bylaws of the BoD and the Charter of the Compensation Committee (CoC), include regulations on compensation principles and the governance framework for compensation-related decisions. These documents can be found here:

• Articles of Association and Bylaws of the Board of Directors: https://www.clariant.com/en/Company/Corporate-Governance/Articles-of-association
• Charter of the Compensation Committee: https://www.clariant.com/en/Company/Corporate-Governance/Committees
• The Articles of Association include, among others, the following compensation-related items:
• StakeholderStakeholderStakeholders are people or groups whose interests are linked in various ways with those of a company. They include shareholders, business partners, employees, neighbors, and the community.View entire glossary involvement: Articles 16 and 17 (see Stake­holder Involvement)
• Setup and responsibilities of the Compensation Committee: Article 24
• Compensation principles for the BoD and the ESC: Articles 26 and 27
• Additional amount payable due to ESC changes: Article 28
• No grant of loans, credits, or securities to members of the BoD or the ESC: Article 30
• Principles of performance-based compensation and allocation of shares: Articles 32 to 36
• Employment contracts of members of the ESC: Article 39

Compensation Committee

The roles and responsibilities of the Compensation Committee are defined in Article 24 of the Articles of Association and Article 3.2.2 of the Bylaws of the BoD, in combination with the Compensation Committee Charter.

According to Article 24 of the Articles of Association, the Compensation Committee comprises at least three members who are elected by the AGM. During the 2022 reporting year, the Compensation Committee comprised four non-executive members of the BoD:

• Until the AGM: Eveline Saupper (Chair), Nader Ibrahim Alwehibi, Claudia Suessmuth Dyckerhoff, and Konstantin Winterstein
• After the AGM: Eveline Saupper (Chair), Naveena Shastri, Claudia Suessmuth Dyckerhoff, and Konstantin Winterstein

The Compensation Committee’s main responsibilities are to

• Propose to the BoD the maximum total compensation for the BoD and the ESC to be submitted to the AGM for approval;
• Propose to the BoD the actual compensation to be paid to the BoD and the ESC members (including the performance under the company’s short- and long-term incentive plans), subject to the limits approved by the AGM;
• Review and propose to the BoD general compensation policies and programs;
• Propose employment contracts and compensation packages for newly appointed ESC members or any updates to employment contracts and compensation packages of existing ESC members;
• Propose the Compensation Report to the BoD.

The Compensation Committee convenes at least twice a year; however, it is regular practice to hold at least three meetings or more if required. In 2022, the Compensation Committee met six times and held one telephone conference.

In those meetings, among others, the following topics were discussed:

The Corporate Secretary acts as Secretary to the Compensation Committee. The Chief Human Resources Officer (CHRO) regularly attends the meetings to share information, present proposals, and consult on relevant compensation related topics. The Chairperson of the Compensation Committee may invite the CEO to attend the Compensation Committee meetings, except when her/his own compensation is discussed or when there are other conflicts of interest.

Where deemed appropriate, external compensation advisors are asked to provide consulting services and asked to join the committee meetings. In 2022, Mercer was asked to provide support for the design of the new short-term incentive plans, provide benchmarking support for the compensation packages of the ESC members, and provide benchmarking support for the BoD compensation. In addition to compensation-related matters, Mercer provides other HR-related consultancy services.

The following table summarizes the authority levels on compensation-related matters:

Stakeholder Involvement

According to Articles 16 and 17 of the Articles of Association, the AGM approves the maximum aggregate compensation to be paid to the members of the BoD for the period up to the next AGM. For the members of the ESC, the AGM approves the maximum aggregate amount to be paid for the business year following the AGM. Finally, the Compensation Report is submitted to the AGM for a consultative vote.

Benchmarking

The compensation structure and levels for the BoD as well as the ESC are reviewed against market practice and developments on a periodical basis. The basis for the evaluations are benchmarking information and support from well-known external compensation consultants as well as input from publicly available information such as annual reports, compensation reports, and other compensation disclosures. In 2022, benchmarking data was provided by Mercer. While the peer group may differ for each evaluation, the following principles apply to the peer group setting:

• Listed and globally operating companies,
• A mix of Swiss and international companies from within and outside of the chemical industry,
• All companies of the peer group have a similar size in terms of market capitalization, revenue, and number of employees

In 2022, benchmarks were conducted on the compensation mix and levels for the BoD as well as for the new roles in the ESC. Both benchmarks were based on market data from Mercer.

In 2022, the compensation structure and levels for the BoD members were reviewed with the support of Mercer against a peer group of 27 Swiss companies with a comparable size in terms of market capitalization, revenue, and number of employees. The Compensation Committee will continue to monitor the BoD compensation structures and levels.

Peer Group for BoD Compensation Benchmark 2022

Performance Management

Performance management for the ESC follows the same approach as for all Clariant employees. The performance management cycle starts in November of each year with discussions on objectives for the following business year, including financial KPIs on the Group and BU level, projects, and priorities. In December and January, these targets are cascaded down to managers and employees. These meetings also include the target setting for individual goals for each employee. The Chairman of the Board sets the individual goals for the CEO for the following business year, while the CEO sets the individual goals for the other ESC members.

Under the new performance management process rolled out as of 2023, the progress against the defined goals is measured on a continuous basis. The final performance evaluation takes place in December.

While individual performance so far has not been reflected in Clariant’s short-term incentive plans, the new design of the short-term incentive plans, applicable from 2023 onward, does include the element of individual performance as a modifier to the individual STI payout, depending on the results of the individual performance evaluation. Please refer to Compensation Principles and Structure/Executive Steering Committee/Changes to the Compensation System.