We believe that a corporate culture offering employees dynamic and stimulating working conditions with great opportunities to grow and contribute to the shared objective of creating customer satisfaction and fostering long-term customer loyalty through excellence in peptide and oligonucleotide technology, quality, value, service and customer support is key for safeguarding PolyPeptide’s long-standing success.

In order to attract, motivate and retain talented individuals who drive performance, the Remuneration and Nomination Committee gives careful consideration to PolyPeptide’s remuneration framework, which aims to be simple, clear and transparent. The Remuneration and Nomination Committee is guided by the following key principles:

• the remuneration framework should be competitive, commensurate with market conditions and drive sustainable long-term value creation
• the remuneration framework should reward individual performance and align the interests of the Board of Directors and Executive Committee with the interests of PolyPeptide and its shareholders
• the remuneration framework should be traceable
• the remuneration framework should contain a balance of both fixed and variable components to create sustainable value
• short-term variable components should be based on clear criteria and performance targets tied to PolyPeptide’s strategic objectives and values, with consideration given to qualitative factors, including the individual’s commitment to PolyPeptide’s values through demonstrated behaviors
• long-term variable components should be evaluated and only awarded on the basis of PolyPeptide’s long-term performance to promote the creation of shareholder value
• the remuneration framework should avoid creating unintended, undesirable or conflicting incentives or behaviors

As a basis for this work in 2022 and to support compensation recommendations to the Board of Directors, the Remuneration and Nomination Committee decided to undertake a comprehensive benchmark review of the compensation of the Board of Directors and the Executive Committee.

For the Board of Directors, the Remuneration and Nomination Committee initially conducted an internal desktop review of the board compensation of thirteen similarly sized Swiss SIX-listed peers (e.g., considering employee base, revenue and market capitalization).¹² Within this Swiss peer group at the time of the internal review, PolyPeptide was positioned between the twenty-fifth and fiftieth percentile. This internal review was complemented by an analysis from Willis Towers Watson (“WTW”), which analyzed the board compensation of companies listed in the SMIM.¹³ Within the SMIM peer group at the time of the analysis, PolyPeptide was positioned between the tenth and twenty-fifth percentile. The combined benchmarking analyses showed that PolyPeptide is positioned comparably to its peers with regards to level and structure of the Board of Directors’ compensation package. Thus, the Remuneration and Nomination Committee concluded that no proposed changes to the remuneration of the Board of Directors were currently warranted.

To ensure competitiveness with the market, the compensation of the Executive Committee was also benchmarked in 2022. The Remuneration and Nomination Committee engaged WTW, which reviewed the compensation practices of an agreed peer group of twenty-two European health science companies.¹⁴ This peer group was selected by considering factors such as industry, revenue, employee base, geographic footprint, etc. The benchmark focused on appropriate functions within the peer group by applying the WTW grading. WTW uses a position evaluation methodology to size each role so that in all cases positions were compared with similar positions in terms of scope. Within this European health science peer group at the time of the analysis and based on data from WTW’s existing database, PolyPeptide was positioned around the twenty-fifth percentile. In general, the benchmarking analysis for the Executive Committee revealed that our fixed compensation levels were commensurate with the identified peer universe. The Remuneration and Nomination Committee did obverse differences in the approach to variable compensation, as all peers included a long-term incentive component alongside short-term incentive remuneration. Consequently, the Remuneration and Nomination Committee considered the expansion of the LTIP to the full Executive Committee. However, in light of PolyPeptide’s weak financial and operational performance, the Remuneration and Nomination Committee ultimately recommended that the Board of Directors not grant long-term incentive awards for the financial year 2022. The Remuneration and Nomination Committee plans to revisit this topic during the course of 2023.

Going forward, the Remuneration and Nomination Committee will conduct benchmark assessments for the compensation of the members of the Board of Directors and the Executive Committee every two or three years (or more often as required) against the compensation of comparable companies to ensure that PolyPeptide’s remuneration continues to be guided by its established principles and that remuneration levels remain competitive to support the retention and attraction of talent. For these purposes, the Remuneration and Nomination Committee will consider whether it is appropriate or necessary to continue engaging external advisors as well as whether the identified peer groups from the most recent benchmark studies remain valid. The Remuneration and Nomination Committee will also consider PolyPeptide’s overall internal compensation structure, the individual’s profile (e.g., skill set, experience, seniority), PolyPeptide’s global activities, the growing complexity of its industry as well as the Group’s expanding human capital management responsibilities in light of an increasing number of employees. Following such assessments, the Remuneration and Nomination Committee may propose to the Board of Directors compensation adjustments (e.g., increases / decreases in base salaries or changes in the proportion of the compensation components) for proposal to the general meeting.