Annual Report 2010/11 - Sonova

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Executive Equity Award Plan
The Executive Equity Award Plan (EEAP) serves as a long-term incentive and is offered annually to the Board of Directors,
the management Board, as well as other management levels of the Sonova Group. A total of approximately 400 people
are participating in the 2011 plan. The plan entitles them to receive shares, options, warrants, warrant appreciation rights
(WARs), and/or restricted share units (RSUs). The number of shares, options, warrants, WARs, and RSUs granted varies
depending on the respective management level and on individual performance. The shares, options, warrants, WARs, and
RSUs granted as part of the EEAP are split into four equal tranches. The options, warrants and WARs have terms of five
years. Each tranche vests each year, starting one year after the grant date. The strike price on which the options, warrants
and WARs are based corresponds to the closing price for the shares on the Swiss stock exchange (SIX Swiss Exchange)
on the date on which the options, warrants, and WARs were granted. The fair value of the options, warrants and WARs is
calculated on the grant date using an option pricing model. The shares/RSUs have a blocking period of up to four years.
One of the four equal tranches vests each year, starting one year after the grant date. Additional information can be found
in Note 30 to the consolidated financial statements.
Determination of the compensation to members of the Board of Directors
The compensation policies for the Board of Directors differ from those for Sonova Group employees. The members of the
Board of Directors receive a retainer and no variable cash compensation. The members of the Board of Directors also
participate in the Executive Equity Award Plan. The compensation for the members of the Board of Directors is defined by
the Nomination and Compensation Committee, periodically reviewed and set by the Board of Directors.
Determination of the compensation to members of the management Board
The compensation policies and the Executive Equity Award Plan (EEAP) described above apply to the CEO and the
management Board. In management Board compensation, the variable salary component has a stronger weighting with
respect to the target income than for other employees of the Sonova Group. The variable cash compensation varies
between 30%–40% of the target salary for members of the management Board and 50% of the target salary for the former
CEO. If a member of the management Board achieves less than 80% of the stipulated target, no variable salary component
is paid out. If the target is exceeded, the variable cash compensation may be granted to a maximum of double the original
amount, or for the former CEO, a maximum of 174%, depending on the actual level of achievement. The variable cash
compensation is a function of company performance, based on sales, operating profit (EBITA) and individual achievement
of objectives. The sales and EBITA targets are not interlinked. The Board of Directors can also award further cash components
for exceptional achievements that do not fall under the annual objectives. The former CEO’s incentive plan differed
in that the EEAP options were not granted to the former CEO annually in the last few years. The granting of options,
including the period for exercising, was part of his employment contract.