1.1Articles of Association

Our Articles of Association⁶ include the principles governing remuneration. The key provisions are summarized below.

In addition, our Organizational Regulations¹⁰, including the Charter of the Remuneration and Nomination Committee, further describe and define the roles and responsibilities of the Remuneration and Nomination Committee and the Board of Directors.

1.2Role and activities of the Board of Directors and shareholders

As provided for in the OaEC and our Articles of Association, our shareholders have significant influence on the compensation of PolyPeptide’s governing bodies and annually approve the maximum aggregate compensation for the members of our Board of Directors and Executive Committee for the applicable periods.

At PolyPeptide, the approach to remuneration is mainly structured by the Remuneration and Nomination Committee, with our Board of Directors being ultimately responsible for ensuring that we comply with and implement our shareholders’ resolutions on compensation matters as well as adhere to statutory compensation provisions and the compensation principles set out in our Articles of Association.

The decision-making relationship between our shareholders, the Board of Directors and the Remuneration and Nomination Committee is illustrated below.

Table 2:

Responsibilities regarding compensation decisions

The Board of Directors will submit three separate compensation-related resolutions for shareholder approval at the upcoming general meeting 2023 (“AGM 2023”):

• The maximum aggregate amount of compensation of the Board of Directors for the term of office ending at the conclusion of the next general meeting (i.e., until the next general meeting in 2024);
• The maximum overall compensation of the Executive Committee (fixed and variable components) for the financial year 2024; and
• The aggregate amount of compensation to members of the Board of Directors for consulting services to PolyPeptide in a function other than as members of the Board of Directors for the term of office ending at the conclusion of the next general (i.e., until the next general meeting in 2024).

In addition, the Board of Directors will submit this Remuneration Report to shareholders for a separate consultative vote.

Table 3:

Structure of shareholder voting on compensation at the AGM 2023

The Board of Directors may divide the maximum overall compensation of the Executive Committee to be proposed for approval into a maximum fixed and maximum variable compensation and submit the respective proposals for separate approval by the general meeting. Further, the Board of Directors may present to the general meeting deviating or additional proposals for approval in relation to the same or different time periods.

If the general meeting does not approve the amount of the proposed fixed and variable compensation, as the case may be, the Board of Directors may either submit new proposals at the same general meeting, convene a new extraordinary general meeting and make new proposals for approval or may submit the proposals regarding compensation for retrospective approval at the next general meeting.

At the general meeting 2022 (“AGM 2022”), the Board of Directors submitted three separate compensation-related proposals, which were all approved by the shareholders:

• The maximum aggregate amount of compensation of the Board of Directors for the term of office ending at the conclusion of the next general meeting (i.e., until the next general meeting in 2023) in the amount of CHF 1,600,000 (including all employee and employer social security contributions);
• The maximum overall compensation of the Executive Committee (fixed and variable components) for the financial year 2023 in the amount of CHF 7,000,000 (including all employee and employer social security and pension contributions); and
• The aggregate amount of compensation to members of the Board of Directors for consulting services to PolyPeptide in a function other than as members of the Board of Directors for the term of office ending at the conclusion of the next general (i.e., until the next general meeting in 2023) in the amount of CHF 200,000.

In addition, shareholders approved the Remuneration Report 2021 in a consultative vote. For a reconciliation of approved compensation for the Board of Directors versus the estimated awarded amounts until the AGM 2023, see section 4.2 “Compensation of the Board of Directors” of this Remuneration Report. For a reconciliation of approved compensation for the Executive Committee versus awarded amounts for the year ended 31 December 2022, see section 5.2.2 “Aggregate compensation of the Executive Committee” of this Remuneration Report.

1.3Role and activities of the Remuneration and Nomination Committee

The Remuneration and Nomination Committee is entrusted with preparing and periodically reviewing PolyPeptide’s compensation policy, compensation strategy and principles as well as the performance criteria related to compensation and the accompanying review of their implementation. The Remuneration and Nomination Committee is also responsible for submitting proposals and recommendations to the Board of Directors regarding compensation matters. The Remuneration and Nomination Committee further supports the Board of Directors in preparing the compensation proposals for the general meeting. In addition, the Remuneration and Nomination Committee assists the Board of Directors in relation to the succession planning for and nomination of the members of the Board of Directors and the Executive Committee as well as the corporate governance of the Company and the Group. In furtherance of this, the Remuneration and Nomination Committee, for example, regularly assesses the set of competencies as well as each Director’s contributions to ensure that an appropriate mix of skills, expertise and diversity is represented on the Board of Directors and its Committees. The specific responsibilities and competencies of the Remuneration and Nomination Committee are set forth in art. 19 of the Articles of Association, section 5.3 of the Organizational Regulations as well as the Remuneration and Nomination Committee Charter.

The Remuneration and Nomination Committee consists of at least two members of the Board of Directors who are elected individually and annually by the general meeting. The term of office of the members of the Remuneration and Nomination Committee is one year. In this context, one year means the time period between one general meeting and the next or, if a member is elected at an extraordinary shareholders’ meeting between such extraordinary shareholders’ meeting and the next general meeting. Re-election is possible. The chairman of the Remuneration and Nomination Committee is independent and is appointed by the Board of Directors. As of 31 December 2022, the Remuneration and Nomination Committee consisted of two members: Philippe Weber (chairman) and Peter Wilden.¹¹

The Remuneration and Nomination Committee meets at such frequency as it deems necessary to fulfill its duties, normally ahead of ordinary Board meetings, which are expected to take place at least four (4) times per year. Additional meetings may be held and may be convened at the request of either the Board of Directors or any Remuneration and Nomination Committee member. Since 1 January 2022, the Remuneration and Nomination Committee met six (6) times, in a combination of in-person sessions and video conferences, for an average duration of approximately two (2) hours.

The Remuneration and Nomination Committee keeps the Board of Directors informed on a regular basis about all important strategic issues, transactions as well as any business situations and / or developments within its scope of responsibilities and duties. In addition, the chairman of the Remuneration and Nomination Committee provides the full Board of Directors at their meeting with an overview of key topics discussed at the most recent Remuneration and Nomination Committee meeting. The signed minutes (together with all presentation and background materials) from each Remuneration and Nomination Committee meeting are also circulated or otherwise made available to the full Board for their review.

The Remuneration and Nomination Committee may invite to meetings and communicates periodically with the CEO, the CFO and the Chief Human Resources Officer, as well as such other persons (including external specialist advisors) as the Remuneration and Nomination Committee deems appropriate. Such individuals may attend meetings without the right to vote as guests, except where not appropriate (e.g., if particular matters relating to their performance or remuneration are discussed).

In 2021, the Remuneration and Nomination Committee worked with HCM International Ltd., Zurich (“HCM International”) as external independent advisor on remuneration matters, in particular with regards to the development of the long-term incentive program. HCM International did / does not have any additional mandates at PolyPeptide. The Remuneration and Nomination Committee did not work with HCM International in 2022.

In 2022, the Remuneration and Nomination Committee engaged Willis Towers Watson (“WTW”) for quantitative compensation benchmark services for PolyPeptide’s management, including the Board of Directors and Executive Committee (see section 2 “Remuneration philosophy and principles” of this Remuneration Report). WTW provides additional advisory services to the Group, specifically actuarial valuations at two of our European sites. We believe that these standard and comparatively minor additional mandates at two of our local PolyPeptide sites do not impact their objectivity or independence.

In accordance with art. 19 of the Articles of Association and the Remuneration and Nomination Committee Charter, the Remuneration and Nomination Committee discussed the following topics at its meetings in 2022:

• Review of the Group’s remuneration principles, strategy and structure
• Review and proposal of 2021 variable short-term incentive for the members of the Executive Committee, including individual performance appraisal
• Review and proposal of compensation proposals for AGM 2022
• Review and proposal of individual performance targets and weighting for the 2022 variable short-term incentive for the members of the Executive Committee
• Review of shareholders’ and proxy advisors’ feedback on the Remuneration Report 2021
• Succession planning at PolyPeptide
• Assessments of the Board of Directors and its Committees
• Review and consideration of the expansion of PolyPeptide’s long-term incentive program (LTIP)
• Review and discussion of the results of the benchmarking study for the Board of Directors and Executive Committee
• General update on corporate governance trends and best practices as well as upcoming Swiss corporate law changes
• Update on human capital management, including the Group’s human resources mid- and long-term plan and an overview of key people analytics
• Discussion of the structure and approach to the Remuneration Report 2022, including analysis on remuneration disclosure
• Review of ESG material topics assigned to the Remuneration and Nomination Committee
• Review of the Remuneration and Nomination Committee Charter

For more information, see also section 3.5.3.1 “Remuneration and Nomination Committee” of the Corporate Governance Report 2022.