Remuneration paid to the Board of Directors

Principles

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.

Remuneration components

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).

See Report
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

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.

  Base salary
and functional allowances
   
   
   

2013, in CHF thousand
 
Cash
compensation
 
Share-based
payment
 
Meeting
attendance fees
  Employer
contributions
to social security
 

Total 2013
Hansueli Loosli   330   195   43   30   598
Barbara Frei   104   61   28   11   204
Hugo Gerber 1   104   61   30   11   206
Michel Gobet   104   61   28   11   204
Torsten G. Kreindl   127   75   33   13   248
Catherine Mühlemann   104   61   27   11   203
Richard Roy   144   85   33   15   277
Theophil Schlatter   152   90   31   16   289
Hans Werder   142   84   34   12   272
Total compensation to members of the Board of Directors   1,311   773   287   130   2,501
1 In addition, a cash compensation (including meeting attendance fees) of CHF 9,000 was paid as member of the Board of Directors of Worklink AG.
  Base salary
and functional allowances
   
   
   

2012, in CHF thousand
 
Cash
compensation
 
Share-based
payment
 
Meeting
attendance fees
  Employer
contributions
to social security
 

Total 2012
Hansueli Loosli   330   195   38   30   593
Barbara Frei 1   69   59   23   9   160
Hugo Gerber 2   104   61   24   11   200
Michel Gobet   104   61   26   11   202
Torsten G. Kreindl   128   75   32   13   248
Catherine Mühlemann   104   61   25   11   201
Richard Roy   144   85   26   14   269
Theophil Schlatter   136   61   31   13   241
Othmar Vock 3   50   4   7   3   64
Hans Werder   142   84   32   12   270
Total compensation to members of the Board of Directors   1,311   746   264   127   2,448
1 Resigned as of 4 April 2012.
2 In addition, a cash compensation (including meeting attendance fees) of CHF 9,500 was paid as member of the Board of Directors of Worklink AG.
3 Resigned as of 4 April 2012.

Shareholding requirement

Starting in 2013, the members of the Board of Directors are required to maintain a minimum shareholding equivalent to one annual emolument (basic emolument plus functional allowance). The members of the Board of Directors have four years to build up the required minimum shareholding, in the form of the blocked shares paid as part of remuneration and, if necessary, through share purchases on the open market. Compliance with the shareholding requirement is reviewed annually by the Compensation Committee. If a member’s shareholding falls below the minimum requirement due to a drop in the share price, the difference must be compensated for by no later than the time the Compensation Committee performs its next review. The Chairman of the Board can approve exceptions in an individual case for justified reasons such as personal hardship or the fulfilment of legal obligations.

Shareholdings of the members of the Board of Directors

Blocked and non-blocked shares held by members of the Board of Directors and/or related parties as at 31 December 2013 and 2012 are listed in the table below:

Number   31.12.2013   31.12.2012
Hansueli Loosli   1,335   915
Barbara Frei 1   283   151
Hugo Gerber   1,020   888
Michel Gobet   1,387   1,255
Torsten G. Kreindl   1,061   899
Catherine Mühlemann   1,010   878
Richard Roy   1,269   1,087
Theophil Schlatter   711   518
Hans Werder   688   506
Total shares of the members of the Group Executive Board   8,764   7,097
1 Resigned as of 4 April 2012.

The voting rights of any person subject to the disclosure obligation do not exceed 0.1% of the share capital.