ZURICH, 5 April 2016 - The remuneration of CEOs in SLI companies, which is mainly tied to business performance, increased slightly in 2015 in comparison with the previous year, on average by 1% to reach CHF 5.83 million (2014: CHF 5.75 million). However, there are considerable differences among the SLI companies. This was the conclusion of the study 'CEO remuneration in the SLI in 2015' carried out by the advisory firm Willis Towers Watson. The analyses are based on the annual reports published by 4 April 2016.

The typical remuneration components for an SLI CEO - known as direct remuneration - comprise the fixed basic remuneration, the bonus (deferred or paid immediately) and long-term variable remuneration. 'It is in the interests of shareholders for a company to enjoy sustained, long-term success. We therefore recommend a three-pronged approach relying on fixed, short-term and long-term variable remuneration as 'pay for performance',' says Olaf Lang, head of the 'Talent & Rewards' advisory unit at Willis Towers Watson.

In 2015, the average anticipated direct remuneration for the CEOs of companies in the Swiss Leader Index (SLI) amounted to CHF 5.83 million, representing a slight increase of 1% in comparison with the previous year (2014: CHF 5.75 million). The SLI companies show clear differences here, as the companies with the highest market capitalization do not always feature the top earners. In the past financial year, similar to 2014, the CEOs of UBS (CHF 14.0 million), Roche (CHF 11.4 million) and Novartis (CHF 11.3 million) were again at the top in terms of anticipated direct remuneration. Richemont, who's CEO was ranked first in 2014, has not published its annual report 2015 yet. The CEO of the Swisscom earned the least, at CHF 1.6 million.

Slight decline in business results

In comparison with 2014, the EBIT declined in total by an average of 3%, to CHF 3.08 billion (2014: CHF 3.16 billion). However, there are also major differences among the SLI companies in this respect. UBS was the leader, with an increase of 123%, while the travel retailer Dufry recorded an EBIT that was 50% lower in 2015. The averages used in the study did not include companies with CEOs who had occupied their posts for less than a year. Among others, the study thus excluded Credit Suisse, which recorded an even larger EBIT decline of 167%.

Overall, in comparison with the previous year, the business results for 2015 were in line with the amount of remuneration. Good business performance should in principle lead to higher remuneration and vice versa. For one third of the SLI companies, both the EBIT and direct remuneration increased, while performance and remuneration decreased for 24%. This also shows that, for the majority of SLI companies, performance and remuneration are as closely aligned as possible, or only feature slight discrepancies. However, there are also outliers in this regard.

'The CEO is crucially responsible for the company's success, which should also be reflected in monetary terms. This is why variable remuneration components should develop in alignment with business results,' says Stephanie Schmelter, Manager of Board & Executive Compensation at Willis Towers Watson.

Key importance of remuneration based on long-term success

In comparison with the rest of Europe, Swiss CEOs receive a relatively large proportion of their compensation through long-term variable remuneration. A third of the total package is granted in the form of 'long-term incentives', whose payment depends on long-term performance following a period of at least three to four years. The deferred payment of bonuses also contributes to the long-term orientation of variable remuneration, with the result that over 50% of direct remuneration is of a long-term nature overall, with this high level remaining the same as in the previous year.

Figure 2: Direct remuneration structures at SLI companies

Trend in Europe

The CEOs of SLI companies earn less on average than CEOs in other European countries or the US. In 2015, the CEOs of non-Swiss companies on the Dow Jones STOXX Europe 50 received direct remuneration averaging CHF 7.3 million. In comparison to the previous year, this represents a slight decrease of 4% (2014: CHF 7.6 million). However, the picture changes if one only considers the 'big players' from Switzerland as listed on the Dow Jones STOXX Europe 50. In 2015, the CEOs of these companies received an average of CHF 9.9 million - representing an increase from the previous year (2014: CHF 9.5 million). 'In the US, it is common and culturally accepted for CEOs to receive much higher remuneration than they do in Switzerland or Europe,' explains Lang.

A uniform regulatory trend is noted throughout Europe. There is increasing pressure on the design and scope of variable remuneration due to new regulatory developments and investor requirements. The influence of shareholders is growing considerably, along with the requirements for information to be published.

Impact of the initiative against excessive pay ('Abzocker-Initiative')

This is also evident in Switzerland, where the Ordinance against excessive pay in stock exchange listed companies ('Verordnung gegen übermässige Vergütungen in börsenkotierten Aktiengesellschaften' - VegüV) entered into force on 1 January 2014. At the latest by the general meetings of companies in 2015, shareholders are to vote annually on the compensation of executives in the form of prospective fixed remuneration and retrospective variable remuneration.

Background information to the study

The study by Willis Towers Watson examined CEO remuneration in 27 of the 30 companies included in the SLI (Swiss Leader Index) in 2015. The analyses are based on the annual reports of the companies published by 4 April 2016. The study excluded five companies with CEOs who had occupied their post for less than a year. Galenica was also excluded from evaluation due to its special governance structure and the splitting of its CEO function into divisions.

SLI: The Swiss Leader Index comprises the stocks of the SMI and the 10 largest stocks of the SMIM. It thus encompasses the 30 largest and most liquid equities on the Swiss equity market.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. In Switzerland Willis Towers Watson is based with offices in Zurich and Lausanne.

Willis Towers Watson plc issued this content on 05 April 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 18 April 2016 13:57:06 UTC

Original Document: https://www.willistowerswatson.com/en/press/2016/04/Remuneration-for-Swiss-CEOs-increased-slightly-in-2015