Compensation Report

The Compensation Report contains information on the compensation policy, compensation programs and processes for determining the compensation paid to the Board of Directors and Group Management of the Mikron Group. It also provides detailed information on compensation paid in 2020. The Compensation Report satisfies the transparency requirements set out in the Ordinance against Excessive Remuneration in Listed Companies Limited by Shares (ERCO).

Compensation Policy

Overall responsibility for defining the basic principles of compensation lies with the General Meeting. The Board of Directors determines compensation within the boundaries defined by the General Meeting. It approves the compensation paid to members of the Board of Directors, the Board Chairman and the entire Group Management.

The compensation policy applied to members of the Board of Directors is described in detail on pages 47 and 48 of the Corporate Governance Report. The table below sets out the principles of this compensation policy. There are no changes in the principles compared to the prior year.

Fair and transparent

The compensation models are simple, clearly structured and transparent. They guarantee fair remuneration that reflects responsibilities and competencies.

Results- and performance-based

Part of the remuneration paid is linked directly to the Mikron Group‘s results and to individual performance.

Long-term incentive

Part of the compensation can be paid in the form of shares subject to a lock-up period. This gives recipients a share in the company’s long-term performance and ensures alignment with shareholder interests, including retention of key personnel.

Geared to the labor market

Compensation is geared to the market ­environment so as to attract and retain talent managers and employees.

The Articles of Association define the following structure for Group Management:
Instrument Purpose Influencing factors Performance targets
Fixed annual basic salary (fixed compensation) Monthly cash compensation Remuneration for function Scope and responsibility,
individual qualifications and experience
Short-term incentive bonus in cash
(short-term incentive)
Annual cash compensation Remuneration for performance Company results, individual performance Order intake, EBIT, free
cash flow, quantitative and qualitative targets
Long-term incentive plan (long-term incentive) Locked-up shares (min. 3-year lock-up period) Share in long-term performance,
geared to shareholder interests
and retention of key personnel
Contribution to the Group’s
strategic development
Order intake and EBIT
Pension and benefits Pension and social security Other benefits Protection against risks Expenses covered Standard market practice and position
The compensation of the Board of Directors and Group Management decided on by the General Meeting refers to the following periods in time:
Governance

The General Meeting elects individually at least two but not more than four members of the Board of Directors as members of the Remuneration Committee. The term of office of the members of the Remuneration Committee is one year and ends at the next ordinary General Meeting. Re-election is possible.

The members of the Remuneration Committee in the year under review were the Board members Patrick Kilchmann (Chairman), Andreas Casutt and Paul Zumbühl.

Subject to and within the scope of the approved overall compensation by the General Meeting, the Remuneration Committee proposes to the Board of Directors the remuneration of its members and proposes or determines the remuneration of the members of Group Management.

Compensation for the year 2020
Compensation to members of the Board of Directors
In scope of audit opinion
in CHF 1,000 Base compensation Total
Compensation in shares Social security and other expenses
2020 2019 2020 2019 2020 2019 2020 2019
H. Spoerry, Chairman* 16 62 0 40 15 19 31 121
E. Rikli, Vice-Chairman 44 51 18 32 11 11 73 94
P. Kilchmann, Member** 35 42 18 32 5 4 58 78
A. Casutt, Member 38 46 18 32 9 9 65 87
H-M. Hauser, Member 38 46 18 32 9 9 65 87
P. Zumbühl, Member 38 46 18 32 9 9 65 87
Total 209 293 90 200 58 61 357 554

* Heinrich Spoerry waived his base compensation and the allocation of shares between the General Meetings 2020 and 2021.
** P. Kilchmann’s compensation is settled through Ammann Group.

Members of the Board of Directors receive a fixed compensation in cash and a fixed number of shares blocked for at least 3 years. Furthermore, a lump sum is paid out as compensation for expenses in accordance with the regulations, which have been approved by the tax authorities. In April 2020, the General Meeting approved a total remuneration payable to the Board of Directors for the period up to the next meeting of a maximum of CHF 540,000. The remuneration disclosed in the table above covers the respective fiscal year and is not equal to the period between the Annual General Meetings. In the period between the Annual General Meetings the total of CHF 540,000 was not exceeded.

Compensation to Group Management
In scope of audit opinion
CHF 1,000 B. Cathomen, CEO Total compensation of Group Management
2020 2019 2020 2019
Fixed compensation 399 399 993 993
Short-term incentive* 105 115 221 210
Pension and benefits 148 150 362 362
Total fixed compensation and short-term incentive 652 644 1,576 1,565
Total approved by previous General Meetings 1,850 1,800
Long-term incentive to be approved by General Meeting 2021 39 86 82 182
Pension and benefits 3 6 6 14
Total long-term incentive** 42 92 88 196
Total compensation 694 736 1,664 1,761

* Any difference between the variable compensation accrued in the previous year and the amount actually paid out is included in the current year’s variable compensation disclosure.
** The LTI compensation related to 2020 is subject to approval by the General Meeting 2021, while the one related to 2019 was approved at the
General Meeting in April 2020. The disclosed compensation 2019 is identical with the prior-year annual report. The value of the LTI compensation for the Group Management valuated as per the share transfer date is CHF 130,000 (CHF 61,000 for the CEO) instead of the disclosed CHF 196,000
(CHF 92,000 for the CEO).

Group Management is composed of the CEO, CFO and the Head of the Mikron Automation business segment. These persons are employed either at Mikron Management AG, Langenthal, Mikron SA Boudry, Boudry or Mikron SA Agno, Agno. The compensation is booked applying the Accrual principle.

Members of Group Management receive a fixed compensation paid in 13 instalments and a short-term incentive. The short-term incentive is set by the Board of Directors within the boundaries approved by the General Meeting. The target incentive is significantly below the maximum allowed by the Articles of Association. The table below shows the short-term incentive as a percentage of the fixed compensation for 2020:

Effective Maximum set by Board of Directors Maximum allowed as per Articles of Association
B. Cathomen, CEO
Short-term incentive 23% 44%
Total 23% 44% 100%
Other members
Short-term incentive 23% 28%
Total 23% 28% 75%

Furthermore, a lump sum is paid out as compensation for expenses in accordance with the regulations, which have been approved by the tax authorities. Expenses that are not covered by the lump sum compensation for expenses pursuant to the expense regulations of the Company are reimbursed against presentation of the relevant receipts. This additional compensation for expenses actually incurred does not need to be approved by the General Meeting. Payments are made in cash. Furthermore, members of Group Management are provided with company vehicles which may also be used for private travel. Expenditure for pension and social security includes employer contributions to social insurance and to the pension fund and senior management pension fund.

In April 2019, the General Meeting approved a total fixed compensation and short-term incentive which may be paid to Group Management during the 2020 financial year of maximum CHF 1,850,000, excluding the long-term incentive plan with separate approval. In April 2020, the amount of CHF 1,850,000, excluding the long-term incentive plan with separate approval, was approved and may be paid out during the 2021 financial year.

The individual targets of the short-term incentive plan for Group Management reflect the importance of the targets depending on the role of the individual. The achievement is measured against qualitative and quantitative targets. The targets are defined by the Board of Directors at the beginning of the performance period on an annual basis. In extraordinary circumstances, the targets may be modified within the period at the discretion of the Board of Directors or the Remuneration Committee. The targets for the year 2020 were as follows:

 B. CathomenJ. Perez FreijeR. Rihs
Order intake (Group and/or segment)10%5%
Sales (Group and/or segment)10%10%20%
EBIT (Group and/or segment)40%35%30%
Strategic programs and internal initiatives35%25%35%
Other group financial targets15%
Individual targets15%10%
Total100%100%100%

An additional long-term incentive in the form of shares in the company may be provided to the members of Group Management. A total of 20,610 shares were distributed during the year 2020 as approved by the 2020 General Meeting. For the target achievement of the long-term incentive plan, the order intake and operating profit (EBIT excluding the investment property) as a percentage of the sales of the year are compared with the expectations as per the medium-term plan. In addition to the points carried forward from the prior year, a maximum of 150 bonus points are awarded to the points basket if the upper threshold is reached, and a maximum -50 points are deducted from the points basket, if the lower threshold is reached. A target achievement of 100% represents 100 bonus points. At the end of each year, after the allocation or deduction of the yearly points, one third of the total is converted into a corresponding number of shares. The shares are transferred to the members after approval by the General Meeting and are blocked for a period of at least three years. The Board of Directors will propose to the next General Meeting to approve an allocation of 15,228 shares to the members of Group Management as long-term incentive compensation for 2020. The share price for the valuation at year-end was CHF 5.40. The remaining two thirds of the total are carried forward to the next year.

Shares held by members of the Board of Directors and by Group Management
In scope of audit opinion
31.12.2020 31.12.2019
Number of shares Voting power Number of shares Voting power
Board of Directors
H. Spoerry, Chairman 18,675 0.11% 18,675 0.11%
E. Rikli, Vice-Chairman 29,500 0.18% 25,500 0.15%
P. Zumbühl, Member 51,290 0.31% 47,290 0.28%
A. Casutt, Member 8,000 0.05% 4,000 0.02%
H.-M. Hauser, Member 8,000 0.05% 4,000 0.02%
Group Management
B. Cathomen, CEO 62,867 0.38% 50,241 0.30%
R. Rihs, COO 44,858 0.27% 36,441 0.22%
J. Perez Freije, CFO 15,900 0.10% 10,008 0.06%
These figures include shares held by related parties of these persons.

Report of the Statutory Auditor

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