Annual Report 2010/11 - Sonova

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The amount of compensation received by the members
of the Management Board is also reviewed every year. Comparable
companies similar in size and structure or
working in the healthcare industry equally serve as benchmarks.
Several studies of top-level executives and
corporate headquarters that show the compensation of
relevant management positions are used as a basis.
Compensation benchmarks that compare Swiss companies
with a similar size and structure from industries such
as pharmaceuticals, chemicals, and medical technology
are used as a basis to define compensation for the
Board of Directors.
Compensation elements
Three elements are relevant for Sonova: a fixed base salary,
a variable compensation component that revolves around
the respective financial year, and, for selected executive
managers and employees, a long-term variable compensation
component.
fixed salary component
The fixed base salary gives each employee a regular and
predictable salary that does not depend on the development
of the Sonova Group’s business. The salary level is
based on the functional profile, the market situation,
and the employee’s skills. In its turn, salary progression
depends primarily on the employee’s individual performance,
the market value, and the economic climate.
Variable salary component
The variable salary is an integral element of the target
income. The split between the fixed and variable salary components
is a function of the job profile and respective management
level. The targets for achieving the variable salary
TOTAL rEMunErATIOn MODEL
reward elements Base salary Variable compensation
Def: base pay & allowances
that depend upon the job level
and the job market and are
paid out regularly
Target cash compensation
Total compensation
Target remuneration
Def: variable compensation
depending upon the personal,
team and company performance
component are mutually defined and agreed upon in consultation
with the employees at the beginning of the financial
year. The variable salary component is generally 10% of the
target salary for employees and 10–30% for managers. If
the employee actually reaches less than 80% of the stipulated
target, no variable salary component is paid out. If
the targets are exceeded, the variable salary component may
be a maximum of double the original amount. The amount
paid out depends on the employee’s actual achievement of
objectives by the end of the financial year and also on the
overall performance of the Sonova Group or the respective
unit.
Executive Equity Award Plan
The Executive Equity Award Plan (EEAP) serves as a longterm
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.
Long-term Incentives Benefits
Def: variable components as
blocked cash/equity
Def: mandatory and voluntary
benefits granted by the
employer