Remuneration report and disclosure of payment to the Board of Directors and the Group Executive Committee in terms of Art. 663bbis, Swiss Code of Obligations
Content and process for specifying remuneration and equity participation programs
The basic features of salary policy are elaborated by the personnel committee and adopted by the Board of Directors as a whole, which also approves the bonus program, the share purchase plan and the option plan. The Board of Directors approves the remuneration of the members of the Board of Directors and the Group Executive Committee on the basis of proposals submitted by the personnel committee.
The Board of Directors reviews the main features of salary policy annually. It rules on the adjustment of the basic salary of the members of the Group Executive Committee annually and stipulates the targets for performance-related payments and the key data for the share purchase plan and the option plan. The Board of Directors has not engaged independent consultants for elaborating salary policy and the compensation programs.
Remuneration of the Board of Directors
Remuneration of the Board of Directors consists of a payment in cash and a further fixed sum which is disbursed in the form of shares. The number of shares is calculated on the basis of the average price of Rieter shares 20 trading days prior to the meeting of the Board of Directors, at which the annual accounts are approved, less a discount. The level of discount depends upon the extent to which predefined targets for consolidated net profit, return on net assets (RONA) and growth have been achieved. These shares cannot be sold for three years as of the date of their allocation.
Total 2008 compensation to the members of the Board of Directors
1. For the purpose of inclusion in the total compensation, the shares are valued at 349 CHF (average trading price 20 days prior to the March 2008 Board meeting [= 415 CHF] less a 16% discount for the three-year restriction on sale).
Remuneration of former members of the Board of Directors
No remuneration was disbursed to former directors and officers.
Remuneration of the Group Executive Committee
The Group Executive Committee is remunerated according to the principle of flexible, performance-related compensation. This remuneration consists of a basic salary, a performance-related component in the context of the bonus plan, the opportunity to participate in the share purchase plan and the allocation of options. The basic salary is derived from salaries paid for comparable positions in the market relevant for Rieter (machine manufacturing and automotive component suppliers). The performance-related component for the CEO and CFO is based on consolidated net profit in absolute and percentage terms. For the heads of the divisions the operating profit (EBIT) achieved by their division is applicable in absolute and percentage terms instead of consolidated net profit. The performance-related component amounts to no more than 80% of the basic salary.
In the context of the share purchase plan the members of the Group Executive Committee can purchase Rieter shares up to the amount of their bonus at a variable discount. The number of shares is calculated on the basis of the average price of Rieter shares 20 trading days prior to the meeting of the Board of Directors, at which the annual accounts are approved, less a discount. The level of discount depends upon the extent to which predefined targets for consolidated net profit, return on net assets (RONA) and growth have been achieved. In order to foster long-term ties between management and the company, at least two-thirds of the shares acquired in this way cannot be sold for three years.
The members of the Group Executive Committee receive an option to purchase one Rieter registered share for each share purchased under the share purchase plan and subject to the three-year restriction on sale. The options have a duration of five years and can be exercised for the first time after the end of the second year following their allocation. The exercise price is calculated on the basis of the average price on the ten trading days immediately preceding the allocation of the option.
Total 2008 compensation to the members of the Group Executive Committee
1. For the purpose of inclusion in the total compensation, the shares are valued at 99 CHF (difference between the preferred purchase price [= 249 CHF] and the average trading price 20 days prior the March 2008 Board meeting less a 16% discount for the three-year restriction on sale [= 348 CHF]).
2. One option entitles the holder to purchase one Rieter share at the exercise price of 359 CHF. The awarded options are valued according to the Black-Scholes formula at 36 CHF per option.
Additional fees and payments
No additional fees or other payments were disbursed to the members of the Board of Directors or the Group Executive Committee in 2008, nor were severance payments disbursed to any member of the Board of Directors or the Group Executive Committee in 2008.
Directorships with other companies
The Board of Directors rules on whether members of the Group Executive Committee or senior management may hold directorships with other companies. As a rule, only one directorship may be held in order to limit demands on time. If the directorship is exercised outside contractually agreed working hours, there is no obligation to surrender to Rieter the director’s fees received.
Loans to directors and officers
No loans have been made to members of the Board of Directors or the Group Executive Committee.
