Tecan

Compensation Report

This Compensation Report sets out the compensation system and the compensation paid to the members of the Board of Directors and the Management Board of Tecan Group Ltd. It will be put to the Annual General Meeting on April 17, 2013, for an advisory vote. The report is based on Section 5 of the Annex to the SIX Swiss Exchange Directive on Information Relating to Corporate Governance.

Policies

The Tecan Group has a set of uniform compensation policies, which are systematic, transparent and have a long-term focus. Compensation is determined on the basis of four factors: the Company’s success, individual performance, function and the labor market. The ultimate goal of the compensation system is to attract highly qualified and motivated specialists and managers to join the Company and commit to it for the long term, and to reconcile the interests of employees and shareholders. The variable performance component is a complementary management tool designed to promote the achievement of overriding objectives. In addition, the Performance Share Matching Plan (PSMP) – the share plan in place for all members of the Board of Directors (since 2011) and the Management Board (since 2010) – guarantees direct financial participation in the long-term performance of Tecan shares. The amount and composition of the compensation paid to both the Board of Directors and the Management Board is assessed and determined by the Compensation Committee. In the year under review, the Committee, whose members are appointed by the Board of Directors, comprised Oliver Fetzer (Chairman) and Dominique F. Baly (member). The Chairman of the Board of Directors, Rolf Classon, attends the Committee’s meetings whenever possible but does not have voting rights. The CEO, CFO and Corporate Head of Human Resources participate in the meetings regularly in an advisory capacity. They do not take part in discussions on agenda items concerning the Board of Directors or themselves. Minutes are kept of the meetings. The Compensation Committee proposes motions to the Board of Directors, which in turn must approve the HR and salary policies for the entire Group as well as the general conditions of employment for the members of the Management Board. 

The Board of Directors reviews the target achievement of the CEO and of all members of the Management Board and defines the actual bonus to be paid. The Compensation Committee defines the compensation amounts to be paid to the members of the Management Board. The amount and type of remuneration to be paid to the Board of Directors are reviewed annually by the Compensation Committee and must be approved by the full Board of Directors. All employees of Tecan Group go through a formalized target and performance review process, which generally takes place at least once a year shortly after the end of the fiscal year. This process forms the basis for the calculation of individual employees’ performance-based remuneration for the previous year. It also ensures consistent objectives are set across the Group for the fiscal year which has just begun, and promotes the development of both individual employees and the Group. Personal objectives are defined in the performance review process as part of an individual meeting with the employee’s supervisor.

In 2012, a comparison was made of the salaries of the Management Board members. This included, for example, a comparison of the compensation paid at Tecan with that of other Swiss companies with sales figures ranging from half to twice those of Tecan. Overall, the total compensation paid to the Management Board members is in line with that of the Swiss reference companies. Looking at the composition of total compensation, the results also show that long-term remuneration at Tecan is above the average and the cash component below the average in comparison with the reference companies. 

The system

The remuneration system for the Management Board of Tecan Group Ltd. is based on three central pillars: a fixed cash component (fixed or base salary), a variable cash component (bonus) and a variable long-term share plan (Performance Share Matching Plan). For senior management (excluding members of the Management Board) at the Tecan Group, the third pillar consists not of a share plan but a performance-based option plan. The remuneration system for middle management is composed of two pillars: a base salary (fixed or base salary) and a variable component (bonus) based on the performance review. In addition, exceptional achievements may be rewarded with single premiums in the form of options. Employees are paid a fixed salary and individual, performance-based, single premiums paid out periodically in cash.

Cash compensation

The management compensation structure is based on the Variable Pay Regulations, which have been approved by the Board of Directors. These provide for the definition of a target salary. For the members of the Management Board, this consists of a fixed or basic salary (70 % of the target salary) and a variable component (30 % of the target salary). In the case of the CEO, the fixed or basic salary accounts for 60 % and the variable component 40 % of the target salary. The amount of the variable component is based on the degree to which the following targets are met: firstly, the Company’s financial targets and secondly, individual quantitative and qualitative targets. The financial targets (sales and EBIT) are set annually by the Board of Directors in December for the following year. The distribution of the variable component differs depending on function and management responsibility. For senior management, Group targets account for the majority of the variable component (up to 80 %), whereas at lower management levels the percentage share falls to 20 %. If the target achievement for the quantitative objectives defined by the Board of Directors in the previous year is less than 80 %, no variable component is paid for these objectives. If the targets are exceeded, the maximum amount of the variable component is 200%. In 2012, results at Group level fell short of the financial targets.

Employee participation plans

In addition to cash compensation, the members of the Board of Directors and the Management Board participated in the Performance Share Matching Plan in the year under review. This share plan is a long-term incentive program which involves the allotment of registered shares in Tecan Group Ltd. to the members of the Board of Directors, the Management Board and the extended Management Board. When the share plan was launched, the previous allotment value under the option plans in place until 2009 was taken as the basis for the initial grant of shares. The shares are blocked for three years from the allotment date, and must be returned on a pro rata basis in the event of termination by the employee before expiration of the three-year period. The variable cash component is also tied to this long-term incentive program: If the variable component of the bonus paid to the Management Board and the extended Management Board exceeds 100 % of the target bonus based on the achievement of the Company’s financial objectives, then the portion in excess of 100 % is also allocated in the form of shares (the number of shares allocated to the Board of Directors remains unchanged). In addition, a claim for allotment of additional shares (called matching shares) will exist if specific financial targets based on an economic profit of the Tecan Group are reached three years after the allotment of shares. This ensures that the Company’s shareholders also benefit as the value of the Company increases. The economic profit target is based on sales growth and EBIT targets that were compared with companies in the life science sector that are also active globally in the instrument business. The factor used to calculate this matching share portion for the Management Board is between 0 and 2.5, depending on the degree to which the economic profit target is attained. For the Board of Directors, the matching factor has been set at 50 % of that applied for the Management Board (i.e. between 0 and 1.25). This means that a member of the Management Board will be able to claim a maximum of 2.5 matching shares per originally allotted share. Under the same conditions, the maximum matching share factor for a member of the Board of Directors will be 1.25. A matrix formula incorporating the two components of sales growth in Swiss francs and EBIT margin has been devised for the calculation of the matching share factor provided that a certain capital turnover is reached. The two parameters are linked, i.e. in order to achieve a specific factor in the case of low growth, the EBIT margin has to be higher. Likewise, if the EBIT margin is low then high growth must be generated. The sales growth component has been given a higher weighting, and accounts for two-thirds for the purposes of calculating the matching share factor.

The size of the initial allotment of PSMP shares is approved annually by the Board of Directors based on a proposal by the Compensation Committee. In 2012, the members of the Management Board on average received an initial allotment of 17 % of the total remuneration. 

Termination benefits

Members of the Board of Directors and the Management Board have no contractual entitlement to termination benefits.

Compensation and loans granted to members of the Board of Directors and Management Board

Compensation to the Board of Directors



CHF 1,000

Year

Fixed
fee

Committee
fee

Total
cash compen­sation

Social 
benefits
1

PSMP:
Initial shares granted (number)
2

Fair value of initial shares3

PSMP: Total matching shares granted (number)4

Fair value of matching shares PSMP 2011 earned in period5/6

Fair value of matching shares PSMP 2012 earned in period5/7

Total compen­sation

Rolf Classon
(Chairman)

2011

 150 

 18 

 168 

 13 

 808 

 45 

 1,010 

 13 

  

 239 

2012

 150 

 18 

 168 

 – 

 739 

 44 

 924 

 4 

 16 

 232 

Heinrich Fischer
(Vice Chairman)

2011

 85 

 20 

 105 

 8 

 404 

 23 

 505 

 6 

  

 142 

2012

 85 

 20 

 105 

 8 

 370 

 22 

 463 

 2 

 8 

 145 

Dominique F. Baly

2011

 75 

 20 

 95 

 8 

 404 

 23 

 505 

 6 

  

 132 

2012

 75 

 20 

 95 

 9 

 370 

 22 

 463 

 2 

 8 

 136 

Dr. Oliver S. Fetzer
(since April 2011)

2011

 50 

 13 

 63 

 6 

 404 

 23 

 505 

 6 

  

 98 

2012

 75 

 27 

 102 

 – 

 370 

 22 

 463 

 2 

 8 

 134 

Dr. Karen Hübscher (since April 2012)

2011

 – 

 – 

  

 – 

 – 

  

 – 

  

  

  

2012

 50 

 7 

 57 

 5 

 370 

 22 

 463 

  

 8 

 92 

Gérard Vaillant

2011

 75 

 20 

 95 

 7 

 404 

 23 

 505 

 6 

  

 131 

2012

 75 

 13 

 88 

 8 

 370 

 22 

 463 

 2 

 8 

 128 

Erik Walldén
(since April 2011)

2011

 50 

 7 

 57 

 5 

 404 

 23 

 505 

 6 

  

 91 

2012

 75 

 10 

 85 

 8 

 370 

 22 

 463 

 2 

 8 

 125 

Dr. Lukas
Braunschweiler
(until April 2012)

2011

 75 

 20 

 95 

 8 

 404 

 23 

 505 

 6 

 – 

 132 

2012

 25 

 7 

 32 

 2 

 – 

  

 – 

 2 

  

 36 

Dr. Jürg Meier
(until April 2011)

2011

 25 

 3 

 28 

 2 

 – 

  

 – 

  

  

 30 

2012

 – 

 – 

  

 – 

 – 

  

 – 

  

  

  

Prof. Dr. Peter Ryser
(until April 2011)

2011

 25 

 3 

 28 

 2 

 – 

  

 – 

  

  

 30 

2012

 – 

 – 

  

 – 

 – 

  

 – 

  

  

  

 

 

 

 

 

 

 

 

 

 

 

Total 

2011

 610 

 124 

 734 

 59 

 3,232 

 183 

 4,040 

 49 

 – 

 1,025 

2012

 610 

 122 

 732 

 40 

 2,959 

 176 

 3,702 

 16 

 64 

 1,028 

1 Employer’s contribution to social security including social security on share options exercised and shares transferred during the reporting period.

2 Vesting conditions: Graded vesting from May 1, 2011 to April 30, 2014 (PSMP 2011) and May 1, 2012 to April 30, 2015 (PSMP 2012). Vested shares are blocked until the end of the performance period (April 30, 2014 and 2015 respectively). The shares are fully included in the amount of fair value of initial shares.

3 Formula for 2011: Shares granted in 2011 * fair value at grant (CHF 61.95) * [1 - estimated labor turnover rate (10%)] and formula for 2012: Shares granted in 2012 * fair value at grant (CHF 65.75) * [1 - estimated labor turnover rate (10%)]

4 Vesting conditions: Three years of service and performance target. The terms and conditions are disclosed in note 14.4.2 of the consolidated financial statements.

5 The matching shares granted represent the maximum of potential shares granted in connection with Performance Share Matching Plans (PSMP). Due to the performance target, only a pro rata amount of the potential matching shares granted is included in the fair value of matching shares earned in the period. Fair values of matching shares earned in future periods will be reported in future total compensation amounts with true-ups for fluctuation, matching share factor and share price.

6 Formula for 2011: {initial shares granted in 2011, that qualify for matching shares [total 3,232 shares] * estimated matching share factor of 1.12} * individual service period pro rata * share price at year-end 2011 [CHF 63.50] = fair value of matching shares PSMP 2011 earned in period 2011; and formula for 2012: {initial shares granted in 2011, that qualify for matching shares [total 3,232 shares] * estimated matching share factor of 0.18} * individual service period pro rata * share price at year-end 2012 [CHF 76.50] = fair value of matching shares PSMP 2011 earned in period 2012.

7 Formula for 2012: {initial shares granted in 2012, that qualify for matching shares [total 2,959 shares] * estimated matching share factor of 1.25} * individual service period pro rata * share price at year-end 2012 [CHF 76.50] = fair value of matching shares PSMP 2012 earned in period 2012.

Gérard Vaillant held the function of an interim CEO during the period from February to October 2012. The corresponding compensation is reported in the table of note 10.2 “Compensation to the Management Board”. His total compensation in 2012 was kCHF 1,139.

Compensation to the Management Board



CHF 1,000

Year

Fixed salary

Variable salary1

Taxable fringe benefits

Total
cash
compensation

Social benefits2

PSMP: Initial shares granted (number)3

Fair value
of initial shares
4

PSMP: Total matching shares granted (number)5

Fair value of matching shares PSMP 2010 earned in period6/7

Fair value of matching shares PSMP 2011 earned in period6/8

Fair value of matching shares PSMP 2012 earned in period6/9

Total
compen-
sation

Dr. David Martyr
(CEO)10

2011

 – 

 – 

 – 

  

  

 – 

  

 – 

  

 –

  

  

2012

 139 

 120

 10 

 269

 57

 1,774 

 105 

 4,435 

  

  

 113 

 544

Gérard Vaillant
(interim CEO)11

2011

 – 

 – 

 – 

  

  

 – 

  

 – 

  

  

  

 – 

2012

 952 

 – 

 – 

 952 

 59 

 – 

  

 – 

  

  

  

 1,011 

Thomas Bachmann
(former CEO)12/13

2011

 550 

 340 

 11 

 901 

 226 

 5,378 

 382 

 13,445 

  

 255 

  

 1,764 

2012

 458 

 275 

 9 

 742 

 160 

 4,929 

 292 

 18,853 

  

 42 

 401 

 1,637 

Dr. Rudolf Eugster
(CFO)

2011

 345 

 157 

 – 

 502 

 120 

 3,361 

 239 

 8,663 

  

 164 

  

 1,025 

2012

 345 

 131

 – 

 476

 108 

 3,697 

 219 

 12,350 

  

 32 

 315 

 1,150

Other members of the
Management Board14/15

2011

 1,062 

 455 

 5 

 1,522 

 366 

 8,536 

 606 

 23,713 

  

 450 

  

 2,944 

2012

 1,349 

 397

 19 

 1,765

 455

 13,776 

 815 

 36,162 

  

 52 

 781 

 3,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

2011

 1,957 

 952 

 16 

 2,925 

 712 

 17,275 

 1,227 

 45,821 

 – 

 869 

  

 5,733 

2012

 3,243 

 923

 38 

 4,204

 839

 24,176 

 1,431 

 71,800 

  

 126 

 1,610 

 8,210

1 Payment will be made in following year.

2 Employer’s contribution to social security, including social security on share options exercised and shares transferred during the reporting period, and contributions to post-employment benefit plans.

3 Vesting conditions: Graded vesting from January 1, 2011 to December 31, 2013 (PSMP 2011) and from January 1, 2012 to December 31, 2014 (PSMP 2012). Vested shares are blocked until the end of the performance period (December 31, 2013 and 2014 respectively). The shares are fully included in the amount of fair value of initial shares.

4 Formula for 2011: Shares granted in 2011 * fair value at grant (CHF 78.95) * [1 - estimated labor turnover rate (10 %)] and formula for 2012:Shares granted in 2012 * fair value at grant (CHF 65.75) * [1 - estimated labor turnover rate (10 %)].

5 Vesting conditions: Three years of service and performance target. The terms and conditions are disclosed in note 14.4.2 of the consolidated financial statements.

6 The matching shares granted represent the maximum of potential shares granted in connection with Performance Share Matching Plans (PSMP). Due to the performance target, only a pro rata amount of the potential matching shares granted is included in the fair value of matching shares earned in the period. Fair values of matching shares earned in future periods will be reported in future total compensation amounts with true-ups for fluctuation, matching share factor and share price.

7 Formula for 2011: {initial shares granted 2010 plus mandatory and voluntary investments that qualify for matching shares [total 17,314 shares]) * estimated matching share factor of 0.00} * individual service period pro rata * share price at year-end 2011 [CHF 63.50] = fair value of matching shares PSMP 2010 earned in period 2011; formula for 2012: {(initial shares granted 2010 plus mandatory and voluntary investments that qualify for matching shares [total 12,448 shares]) * estimated matching share factor of 0.00} * individual service period pro rata * share price at year-end 2012 [CHF 76.50] = fair value of matching shares PSMP 2010 earned in period 2012.

8 Formula for 2011: {initial shares granted 2011 plus mandatory and voluntary investments that qualify for matching shares [total 18,328 shares]) * estimated matching share factor of 2.24} * individual service period pro rata * share price at year-end 2011 [CHF 63.50] = fair value of matching shares PSMP 2011 earned in period 2011; formula for 2012: {(initial shares granted 2011 plus mandatory and voluntary investments that qualify for matching shares [total 14,428 shares]) * estimated matching share factor of 0.36} * individual service period pro rata * share price at year-end 2012 [CHF 76.50] = fair value of matching shares PSMP 2011 earned in period 2012.

9 Formula for 2012: {initial shares granted 2012 plus mandatory and voluntary investments that qualify for matching shares [total 26,502 shares]) * estimated matching share factor of 2.50 * individual service period pro rata * share price at year-end 2012 [CHF 76.50] = fair value of matching shares PSMP 2012 earned in period 2012.

10 The employment started on October 10, 2012.

11 Gérard Vaillant was interim CEO during the period from February to October 2012. His total compensation is reported in note 10.1.

12 Thomas Bachmann was released from work on February 13, 2012, whereas the formal employment ended on October 31, 2012.

13 Member of the Management Board with the highest compensation in 2011 and 2012.

14 2011: Total five members, including two members who joined the Management Board during the year.

15 2012: Total six members, including two members who left and one member who joined the Management Board during the year.

 No termination benefits were paid in 2011 and 2012. 

Loans granted to the Management Board

The following loans were granted to the management at year-end:

CHF 1,000

2011

2012

Thomas Bachmann (former CEO)

 267 

 – 

Dr. Rudolf Eugster (CFO)

 133 

 – 

Other member of the Management Board

 133 

 – 

 

 

 

Balance at December 31

 533 

 – 

In 2007, 2008 and 2009, members of the management were offered the possibility to purchase American-type call options on Tecan shares issued by a bank at market rates. The number purchased by each individual was restricted. At the same time, the members of the Management Board who participated in this transaction received advance facilities from Tecan Group Ltd. to finance the purchase of these share options. The advance facilities in the form of interest-free and unsecured loans are part of a long-term retention bonus to mature in 2010, 2011 and 2012 respectively, and are limited to two-thirds of the purchase price of the share options. One-third was paid privately by the members of the Management Board. At December 31, 2012, all advance facilities were paid back.

Share and option ownership of the Board of Directors and Management Board

For details of the employee participation plans please refer to note 14.4 of the consolidated financial statements.

 

Share and option ownership of the Board of Directors

Number

Year

Share plans1

Other shares

Total shares

Employee share option plans2

Total options

 

 

 

 

 

2007

2008

2009

2010

2011

 

Strike price in CHF

 

 

 

 

70.00

69.00

39.70

70.00

69.00

 

Expiring in

 

 

 

 

2013

2014

2015

2016

2017

 

 

 

 

 

 

 

 

 

 

 

 

Rolf Classon 
(Chairman)

2011

 808 

 – 

 808 

 – 

 – 

 – 

 1,132 

 814 

 1,946 

2012

 1,547 

 2,800 

 4,347 

 – 

 – 

 – 

 1,700 

 1,628 

 3,328 

Heinrich Fischer
(Vice Chairman)

2011

 404 

 10,000 

 10,404 

 – 

 864 

 1,551 

 566 

 407 

 3,388 

2012

 774 

 10,000 

 10,774 

 – 

 864 

 1,551 

 850 

 814 

 4,079 

Dominique F. Baly

2011

 404 

 – 

 404 

 – 

 – 

 – 

 566 

 407 

 973 

2012

 774 

 

 774 

 – 

 – 

 – 

 850 

 814 

 1,664 

Oliver S. Fetzer

2011

 404 

 – 

 404 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 774 

 

 774 

 – 

 – 

 – 

 – 

 – 

 – 

Dr. Karen Hübscher
(since April 2012)

2011

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 370 

 

 370 

 – 

 – 

 – 

 – 

 – 

 – 

Gérard Vaillant 

2011

 404 

 – 

 404 

 234 

 864 

 – 

 566 

 407 

 2,071 

2012

 774 

 

 774 

 234 

 864 

 – 

 850 

 814 

 2,762 

Erik Walldén

2011

 404 

 – 

 404 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 774 

 

 774 

 – 

 – 

 – 

 – 

 – 

 – 

Dr. Lukas Braunschweiler
(until April 2012)3

2011

 404 

 2,500 

 2,904 

 – 

 – 

 – 

 – 

 407 

 407 

2012

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 

 

 

 

 

 

 

 

 

 

 

Balance at 
December 31, 2011

 

 3,232 

 12,500 

 15,732 

 234 

 1,728 

 1,551 

 2,830 

 2,442 

 8,785 

Balance at 
December 31, 2012

 

 5,787 

 12,800 

 18,587 

 234 

 1,728 

 1,551 

 4,250 

 4,070 

 11,833 

1 Members are entitled to vote, but only 2,229 shares (2011: 718 shares) are vested.

2 Only vested options.

3 Shares and share options in 2012 are not disclosed, because the member of the Board stepped down before year-end 2012.

Share and option ownership of the Management Board

Number

Year

Share plans1

Other shares

Total shares

Employee share option plans2

Total options

 

 

 

 

 

2002

2007

2008

2009

2010

 

Strike price in CHF

 

 

 

 

99.00

70.00

69.00

39.70

70.00

 

Expiring in

 

 

 

 

2012

2013

2014

2015

2016

 

 

 

 

 

 

 

 

 

 

 

 

Dr. David Martyr (CEO)

(since 2012)

2011

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 1,774 

 

 1,774 

 – 

 – 

 – 

 – 

 – 

 – 

Dr. Rudolf Eugster (CFO)

2011

 6,991 

 – 

 6,991 

 300 

 1,280 

 1,113 

 1,386 

 1,562 

 5,641 

2012

 11,931 

 

 11,931 

 – 

 1,280 

 1,113 

 1,386 

 2,345 

 6,124 

Dr. Martin Brusdeilins

2011

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 4,650 

 

 4,650 

 – 

 – 

 – 

 – 

 – 

 – 

Dr. Bernhard Grob

2011

 2,830 

 – 

 2,830 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 6,047 

 

 6,047 

 – 

 – 

 – 

 – 

 – 

 – 

Markus Schmid

2011

 1,142 

 – 

 1,142 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 3,656 

 

 3,656 

 – 

 – 

 – 

 – 

 – 

 – 

Andreas Wilhelm

(since 2012)3

2011

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

2012

 5,078 

 

 5,078 

 – 

 707 

 459 

 – 

 971 

 2,137 

Thomas Bachmann (former CEO) (until October 2012)4

2011

 12,701 

 5,041 

 17,742 

 – 

 871 

 1,380 

 2,484 

 2,266 

 7,001 

2012

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

Dr. Jürg Dübendorfer
(until May 2012)4

2011

 6,851 

 – 

 6,851 

 160 

 1,071 

 726 

 455 

 1,096 

 3,508 

2012

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

Frederic Vanderhaegen
(until October 2012)4

2011

 5,127 

 – 

 5,127 

 – 

 – 

 – 

 1,776 

 1,340 

 3,116 

2012

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 – 

 

 

 

 

 

 

 

 

 

 

 

Balance at
December 31, 2011

 

 35,642 

 5,041 

 40,683 

 460 

 3,222 

 3,219 

 6,101 

 6,264 

 19,266 

Balance at
December 31, 2012

 

 33,136 

 – 

 33,136 

 – 

 1,987 

 1,572 

 1,386 

 3,316 

 8,261 

1 Members are entitled to vote, but only 17,054 shares (2011: 19,534 shares) are vested.

2 Only vested options.

3 Shares and share options in 2011 are not disclosed, because the member of the Board joined after year-end 2011.

4 Shares and share options in 2012 are not disclosed, because the member of the Board stepped down before year-end 2012.

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