Dear Stakeholders,
In my role as Chair of the Nomination and Compensation Committee (NCC) and on behalf of its fellow members, I am pleased to introduce our 2023 Remuneration Report, which was prepared in compliance with the Swiss Code of Obligations, the SIX Exchange Regulation, the Swiss Code of Best Practice and Lonza’s Articles of Association. In this report, we outline the current compensation policies and the decisions made in relation to 2023 compensation for the Executive Committee and Board of Directors of Lonza.
We are grateful for the active engagement and time with our shareholders, the investor community and proxy advisors in 2023. It helps to ensure we continue our open and transparent dialogue. Our discussions during 2023 covered matters relating to changes to the Executive Committee, Long-term Incentive Plan (LTIP) performance metrics for 2024 onwards, the simplification of our reporting and disclosures, as well as overall company developments.
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Pay for Performance - our compensation programs are performance-based linking employee reward with company and individual performance, both financial and non-financial. Non-financial targets focus on ESG measures to support the UN Sustainable Development Goals.
Drive Sustainability - our compensation programs are linked to our sustainability strategy. Strategic decisions that drive competitive advantage are encouraged but excessive risk taking is discouraged to avoid jeopardizing the financial health, reputation or sustainability of the Company. We believe in equal pay for equal work. Our compensation programs are simple, transparent and communicated internally and externally.
Create Shareholder Value - Our share-based compensation encourages long-term performance and alignment of interests of our management with those of our shareholders. Our Executives are required to hold a minimum level of shares to ensure they have a stake and interest in the long term success of the company.
Drive Strategy - A strong focus on growth, sustainability and individual contribution means our incentive programs support our strategic priorities including service (right first time), scope (breadth of offerings), solutions (scientific, manufacturing, regulatory) and speed. Our competitive compensation programs are designed to attract and retain diverse talent who drive these strategic priorities.
| Fixed pay and benefits | Performance related variable pay | ||||
| Base Salary | Pension and Benefits | Lonza Bonus | Long-term Incentive Plan (LTIP) | Lonza Restricted Share Plan (LRSP) | |
| Purpose | Attract Market aligned payment for role | Attract and retain Protection against risk | Reward for year-over-year performance | Attract and retain Reward for long-term performance Align with shareholder interests | Attract and retain Supports Appointment Policy |
| Form of payment | Cash | Pension contributions Benefits, allowances and insurances | 100% cash; or 50% cash and 50% equity until shareholding guidelines are met | Performance shares subject to a three-year vesting period | Restricted shares subject to a two to five year vesting period |
| Drivers | Role and responsibilities Skills and experience Market value | Market practice Role | Performance against annual Group financial and ESG objectives Individual goals Values and behaviors | Group performance over 3 years | Replacement award if on joining Lonza Executive forgoes certain compensation at their previous employer Level is set lower than forgone awards |
| Performance measures | Sales CORE1 EBITDA Free cash flow ESG KPIs
| CORE1 Earnings per share (EPS) Return on invested capital (ROIC) | Sustained performance in role Continued employment | ||
CORE results for incentive plans are adjusted for divestitures, acquisitions, restructuring and extraordinary one-time events, as well as rounding and as approved by the NCC
2023 Annual Bonus
2021 – 2023 Long-term Incentive Plan
Highest Paid Member of the Executive Committee
All Executive Committee
Lonza Restricted Share Unit Plan (LRSP) awards are separate from typical total compensation and are awarded at appointment and only in cases where a new Executive Committee member forgoes cash or equity at their previous employer. No awards were made in 2023.
Cash payment (including base salary, other benefits, short–term incentive and social security) and shares (LTIP) received by departed members of the Executive Committee during 2023
Compensation of Board of Directors from Annual General Meeting (AGM) 2023 to 2024 excluding social security contributions.
| In CHF | Base annual fee | Committee membership fee | Committee Chairperson fee |
|---|---|---|---|
| Chair of the Board of Directors 1 | 750,000 | - | - |
| Member of the Board of Directors 2 | 200,000 | 40,000 | 80,000 |
| The additional responsibilities of Vice-Chairperson and Lead Independent Director3 do not attract any additional fees | |||
| Form of payout | 50% in Lonza Group shares (with 3-year blocking period) and 50% in cash and paid in arrears in quarterly installments | ||
The compensation of the Chair of the Board of Directors includes compensation as a member of the Innovation and Technology Committee of the Board of Directors
In the case of multiple committee memberships, the committee fees are cumulated
The roles and responsibilities of the Lead Independent Director are in line with sect. 19 para. 2 of the Swiss Code of Best Practice for Corporate Governance, requiring adequate control mechanisms, and commensurate to such position
