Remuneration Report

Authority and definition process

The basic features of the remuneration policy are elaborated by the Compensation Committee (COC) and approved by the Board of Directors, which also approves the executive bonus plan and the long-term incentive plan (LTI). The Board of Directors fixes annually the remuneration of the Directors and of the members of the Group Executive Board, based on suggestions of the COC and within the limits approved by the shareholders. The Directors, whose remuneration is decided on, also participate in the meeting. The Board of Directors reviews annually the main features of the remuneration policy, approves the fixed portion of the remuneration of the Group Executive Board members and defines the targets for the executive bonus plan as well as the parameters for the LTI. The Board of Directors has not engaged third-party consultants for the elaboration of the salary policy or the compensation programs. The Board of Directors annually submits the proposal for the maximum aggregate total compensation of the members of the Board of Directors and the Group Executive Board to the Annual General Meeting for prospective approval by the shareholders. For a detailed description of the rules on the vote on pay at the Annual General Meeting, reference is made to §14 of the Articles of Association¹.

For the rules in the Articles of Association¹ on the principles applicable to performance-related pay and to the allocation of equity securities as well as the additional amount for payments to new members of the Group Executive Board appointed after the vote on pay at the Annual General Meeting as well as on loans, credit facilities and post-employment benefits for members of the Board of Directors and the Group Executive Board, reference is made to §24 and §25 of the Articles of Association¹.

¹ www.autoneum.com/investor-relations/corporate-governance

Remuneration of the Board of Directors

The remuneration of the Board of Directors consists of an annual fee. The remuneration is determined at the discretion of the Board of Directors, taking into consideration the remuneration at companies with comparable size, industry and globalization. In addition, the members of the Board of Directors receive an annual lump sum payment for representation expenses.

The members of the Board of Directors may opt to obtain all or part of their remuneration in cash or in Autoneum shares. The cash component is paid out in December of the related business year. The shares are delivered in the respective year and blocked for three years. The share price applicable for the conversion of the remuneration into shares is based on the average trading price of the ten trading days following the dividend payment, discounted to reflect a three-year blocking period.

Remuneration of the Group Executive Board

Remuneration of the Group Executive Board consists of a fixed component, a performance-related bonus and the participation in the long-term incentive plan (LTI). Remuneration is determined at the discretion of the Board of Directors, taking into consideration function, responsibility and experience, as well as remuneration at comparable industrial companies for which information is publicly available or known to the Directors from their experience or office at similar companies. Industrial companies are considered comparable with Autoneum if they are similar in terms of business sector, structure, size and international activity.

The Board of Directors may define an additional portion of the basic salary which shall be paid in Autoneum shares. The number of shares is calculated considering the average trading price of the first ten trading days of the respective year. The granted shares are delivered in December of the respective year and blocked for three years.

The members of the Group Executive Board may reach a performance-related remuneration of up to 80% of their basic salary, subject to the achievement or exceeding of defined minimum profitability and liquidity targets of the Group or of the Business Groups (BG), as well as to the achievement of agreed individual targets. The targets for the CEO and the CFO refer to the Group net profit margin (weighted with 52.5%), Group RONA (22.5%) and individual targets (25%). For the Heads of the BG the targets refer to the Group net profit margin (17.5%), Group RONA (7.5%), BG EBIT margin (35%), BG free cash flow (15%)¹ and individual targets (25%). Minimum and maximum limits are defined for the weighted targets. Achievement of the minimum limit is a condition for the bonus, while maximum bonus is achieved at the maximum limit. Bonus develops linearly between the two limits. Irrespective of the other targets, a bonus is only earned in case of a positive Group net profit. At least 40% of the bonus is paid in shares of Autoneum. Each member of the Group Executive Board can opt for receiving up to 100% of the bonus in shares and for receiving either restricted shares with a blocking period of three years or an entitlement to shares with a deferred transfer after a period of three years. The calculated bonus is multiplied by 1.4 and then converted into shares considering the average trading price of the first ten trading days in January of the following year.

¹ For 2018 and onwards, the Board of Directors has revised the BG free cash flow target. The calculation of the free cash flow for bonus target purposes is based on the monthly average net working capital instead of the net working capital of the year-end closing. The bonus plan is amended accordingly.

The long-term incentive plan (LTI) allows the Board of Directors to allocate part of the Group’s net profit to the beneficiaries defined in advance. Beneficiaries are the upper management of the Group, including the Group Executive Board. An allocation is only granted if Group net profit is positive and exceeds a defined threshold. The total amount of Group net profit dedicated to the LTI is converted into Autoneum shares and the shares are allocated to the beneficiaries at fixed percentage rates, corresponding to the internal function levels. The shares become property of the beneficiaries after a vesting period of 35 months, if the beneficiaries are then still employed by an Autoneum company. Due to the 35 month vesting period, the value of the LTI is in strong correlation to the Autoneum share price performance. Immediate vesting occurs in case of death or retirement of a beneficiary. In case of employment termination, shares not yet vested lapse without compensation. Exceptions are possible at the discretion of the COC. For the year 2017, 1% of Group net profit has been allocated (2016: 1%).

There are no share options or share purchase plans.

Remuneration to the members of the Board of Directors and Group Executive Board in 2017
	Fixed remuneration					Other2	Total
CHF	in cash	in shares1
Board of Directors
Hans-Peter SchwaldChairman	–	369 138				22 147	391 285
Rainer SchmückleVice Chairman	120 000	95 090				–	215 090
Norbert Indlekofer	66 000	37 307				7 267	110 574
Michael W. Pieper	–	118 932				5 479	124 411
This E. Schneider	–	178 398				11 300	189 698
Peter Spuhler	–	118 932				7 420	126 352
Ferdinand Stutz	120 000	83 309				14 151	217 460
Total	306 000	1 001 106				67 764	1 374 870

	Fixed remuneration		Variable remuneration		LTI5	Other6	Total
CHF	in cash	in shares3	in cash	in shares4
Group Executive Board
All members	2 627 877	57 191	529 791	1 730 268	261 692	1 008 739	6 215 557
Thereof Martin Hirzel, CEO	668 000	57 191	154 338	504 064	83 132	193 343	1 660 068

¹ The fixed remuneration in shares is calculated by the number of shares granted multiplied by the average trading price for the ten days following the dividend payment in 2017 (CHF 280.50). The transfer took place after deduction of applicable social security contributions and withholding taxes.
² Other remuneration includes the employer’s portion of social insurance contributions.
³ The applicable share price during the defined period was CHF 268.50.
⁴ The part of the bonus opted to be paid out in shares (at least 40%) is multiplied by the factor 1.4 and then converted into shares using the average trading price for the first ten days in January 2018 (CHF 292.72).
⁵ The rights allocated in April 2018 will vest end of February 2021.
⁶ Other remuneration includes the employer’s portion of social insurance contributions, the employer’s portion of contributions to pension funds and other fringe benefits.

At the Annual General Meeting 2016 a total remuneration to the Board of Directors of CHF 1 450 000 and a total remuneration to the Group Executive Board of CHF 7 000 000 was approved for the financial year 2017. The total remuneration to the Board of Directors and to the Group Executive Board for 2017 is within the approved limit.

Remuneration to former members of the Board of Directors and of the Group Executive Board

There has been no remuneration to former members of the Board of Directors or of the Group Executive Board.

Directorships at other companies

The Board of Directors decides on directorships of members of the Group Executive Board or senior management at other companies. When the directorship is exercised outside the contractual working time, the director’s remuneration received must not be surrendered to Autoneum.

Remuneration to the members of the Board of Directors and Group Executive Board in 2016
	Fixed remuneration					Other	Total
CHF	in cash	in shares adjusted1				adjusted2
Board of Directors
Hans-Peter SchwaldChairman	–	333 284				19 848	353 132
Rainer SchmückleVice Chairman	120 000	83 262				–	203 262
Michael W. Pieper	–	118 879				5 108	123 987
This E. Schneider	–	154 730				9 387	164 117
Peter Spuhler	100 000	–				7 371	107 371
Ferdinand Stutz	120 000	59 439				12 119	191 558
Total	340 000	749 594				53 833	1 143 427

	Fixed remuneration		Variable remuneration		LTI5	Other6	Total
CHF	in cash	in shares3	in cash	in shares4
Group Executive Board
All members	2 570 480	32 081	911 739	1 512 729	160 295	924 996	6 112 319
Thereof Martin Hirzel, CEO	668 000	32 081	163 800	535 121	70 079	150 551	1 619 630

¹ The fixed remuneration in shares is calculated by the number of shares granted multiplied by the average trading price for the ten days following the dividend payment in 2016 (CHF 235.87). The transfer took place after deduction of applicable social security contributions and withholding taxes. In the prior year Remuneration Report, the fixed remuneration in shares was valued based on tax values. The disclosure was adjusted accordingly.
² Other remuneration includes the employer’s portion of social insurance contributions. In the prior year Remuneration Report, Other remuneration included lump-sum remuneration for representation expenses. The disclosure was adjusted accordingly.
³ The applicable share price during the defined period was CHF 192.10.
⁴ The part of the bonus opted to be paid out in shares (at least 40%) is multiplied by the factor 1.4 and then converted into shares using the average trading price for the first ten days in January 2017 (CHF 268.50).
⁵ The rights allocated in April 2017 will vest end of February 2020.
⁶ Other remuneration includes the employer’s portion of social insurance contributions, the employer’s portion of contributions to pension funds and other fringe benefits.

Total remuneration to the Group Executive Board contains remuneration to Dr Uwe Trautmann, who resigned from the Group Executive Board in 2016 and had the bonus settled in cash.

Loans to directors or officers

No loans have been granted to members of the Board of Directors or the Group Executive Board.

Other remuneration and payments to related parties

There have been no further payments or remuneration to members of the Board of Directors or Group Executive Board in 2017 or in 2016. In 2017, CHF 44 040 (2016: CHF 67 415) of fees were paid to the law firm managed by the Chairman of the Board of Directors, for legal services provided.