The remuneration system for the members of the Board of Directors is designed to attract and retain experienced and motivated people for the board of directors’ function. It also seeks to align the interests of the members of the Board of Directors with those of the shareholders. The remuneration reflects the level of responsibility and scope of activities performed by each member and is commensurate with the normal market remuneration for comparable functions.
The remuneration is made up of a Director’s fee related to the member’s function, which consists of a basic emolument and a functional allowance and meeting attendance fees. No variable profit-related emoluments are paid. The members of the Board of Directors are obligated to draw a portion of their fee in the form of equity shares and to comply with the new requirements on minimum shareholdings which were introduced during the reporting year, so they directly participate financially in the performance of Swisscom’s shares.
The remuneration is reviewed every December for the following year to ensure it is still appropriate. In December 2012, the Board of Directors opted not to adjust its remuneration for the 2013 financial year. The Board of Directors judged the remuneration to be appropriate, taking into consideration the following benchmarks: the study on remuneration for the 30 listed companies in the Swiss Leader Index (SLI) for the 2011 business year, which was conducted by Towers Watson, a consulting firm specialised in the field of top management remuneration, and the publicly accessible study by ethos on management compensation at the 48 largest exchange-listed companies in Switzerland (SMI and SMIM) in the 2011 business year.
Function-dependent Director’s fee
The basic emolument for the Chairman of the Board of Directors is CHF 385,000 net, and CHF 120,000 net for the other Board members. Additional fees are paid for specific duties (functional allowances). Accordingly, each member of the standing Finance, Audit and Compensation Committees is entitled to an allowance of CHF 10,000 net. In addition, the Vice Chairman and the Chairman of the Finance and Compensation Committees are each entitled to an allowance of CHF 20,000 net. The Chairman of the Audit Committee receives a net amount of CHF 50,000. The representative of the Swiss Confederation receives a net amount of CHF 40,000 for the special duties related to his function. The members of ad-hoc committees do not receive a functional allowance, but meeting attendance fees.
Under the Management Incentive Plan, the members of the Board of Directors are obligated to draw 25% of their basic emoluments including functional allowances in the form of shares, whereby Swisscom increases the amount to be invested in shares by 50%. Two thirds of the remuneration (excluding meeting attendance fees) thus take the form of cash and one third shares. The amount of the share purchase obligation can vary in the case of members who join, leave, assume or give up a function during the year. The shares are allocated on the basis of the tax value, rounded up to whole numbers of shares, and are subject to a three-year blocking period. The shares which are allocated in April of each reporting year are recorded at market value on the date of allocation. Further information on the Management Incentive Plan can be found in Note 11 to the consolidated financial statements. In April 2013, a total of 1,667 shares was allocated to the members of the Board of Directors (prior year: 1,927 shares) with a tax value of CHF 371 per share (prior year: CHF 310). The market value was CHF 442 per share (prior year: CHF 361).
Meeting attendance fees
For meetings, attendance fees of CHF 1,250 net are paid for each full day and CHF 750 net for each half-day.
Pension fund and other benefits
Swisscom assumes the full costs of social insurance, in particular old-age and survivors’ insurance and unemployment insurance, for the members of the Board of Directors. The reported Board of Directors remuneration includes the employee contributions to social insurance that are paid by Swisscom. The employer contributions are reported separately, but are factored into the total compensation sum.
With regards to the disclosure of service related and non-cash benefits and expenses, these are dealt with from a tax point of view. No significant service-related and non-cash benefits are paid. Out-of-pocket expenses are reimbursed on the basis of actual costs incurred. Accordingly, neither service-related or non-cash benefits nor expenses are included in reported compensation.
Total remuneration paid to the individual members of the Board of Directors for the financial years 2013 and 2012 is presented in the tables below, broken down into individual components. The increase in remuneration in 2013 was due to changes in the assigned functions within committees in 2012 and a higher number of meetings in 2013.