4.1 Remuneration approach

Pursuant to art. 25 of the Articles of Association, the compensation of the members of the Board of Directors (including the Chair) is determined by the entire Board of Directors based on the proposal of the Remuneration and Nomination Committee and subject to and within the limits of the aggregate amounts approved by the general meeting. According to section 4(b) of the Organizational Regulations, the Chair is required to abstain from the deliberation and decision-making about his / her own compensation. The compensation consists of fixed compensation elements and may comprise variable compensation elements. The fixed compensation includes a fixed base fee and fixed fees for chair positions and memberships in Board committees or for roles of the Board of Directors as well as potentially a lump sum compensation for expenses (if applicable) which are determined by the full Board of Directors based on the proposal of the Remuneration and Nomination Committee, subject to and within the limits of the aggregate maximum amounts approved by the general meeting.

Any variable compensation comprises performance-related compensation elements and financial instruments (e.g., performance stock units (PSU)) and depends on the achievement of strategic and / or financial targets set in advance by the Board of Directors over the course of a performance period defined by the Board of Directors. The compensation is awarded in cash, in the form of shares in the Company and other benefits. Where the compensation is paid in whole or in part in shares or financial instruments, the Board of Directors determines the grant conditions as well as any restriction periods and forfeit conditions.

Currently, members of the Board of Directors only receive fixed compensation elements, of which at least half are payable in shares and the remainder in cash. Board members have the option of electing to be paid up to 100% of their fixed fee in shares. For Board members electing to receive more than 50% of their fixed fee in shares, the shares exceeding the 50% portion will be granted at a discount of 20% to market price.¹¹ All shares received as part of the Board’s remuneration are subject to a three-year blocking period from the date of grant. We believe that the share-based component strengthens the alignment of the Board of Directors’ interests with those of our shareholders as well as further incentivizes the members of the Board of Directors to drive PolyPeptide’s success. During the period under review, there were no payments to pension funds or similar institutions for the members of the Board of Directors.

Below is an overview of the current remuneration framework for the Board of Directors.

Table 4:

Remuneration framework for the Board of Directors(in CHF)

The cash and share compensation are paid out on a quarterly basis. The number of shares is determined by dividing each Board member’s respective share-based compensation by the volume-weighted average closing share price over the last five trading days prior to the quarterly payment date (and with a discount of 20% on the shares exceeding 50% of the fixed fee, if applicable) and rounded up to the next whole number of shares. Any shares delivered to Board members in connection with their compensation are / will be blocked for a period of three years from the date of grant. In 2023, the allocated shares were sourced from the Company’s treasury shares.

If a Board member resigns before completion of the respective term of office (i.e., mid-term), such member is entitled to the respective pro-rata compensation earned up to and including the resignation date, and any compensation already received in excess of the pro-rata entitlement is to be transferred back to the Company.

In addition, in accordance with art. 25 para. 3 of the Articles of Association, the members of the Board of Directors who provide consulting services to PolyPeptide in a function other than as members of the Board of Directors may be compensated in cash according to standard market rates, subject to approval by the general meeting (for further information on such compensation paid in the year ended 31 December 2023, see section 4.2 “Compensation of the Board of Directors” of this Remuneration Report). Furthermore, pursuant to art. 27 of the Articles of Association, expenses that are not covered by the lump sum compensation for expenses (if applicable) pursuant to PolyPeptide’s expense regulations are reimbursed against presentation of the relevant receipts. Amounts paid for expenses actually incurred do not need to be approved by the general meeting.

During the course of 2023, Dr. Peter Wilden, the Chair of the Board, received a fixed executive chair fee of CHF 25,000 per month for his role as Executive Chair (as announced on 30 January 2023) for the period 1 February 2023 to 30 September 2023. The executive chair fee was commensurate with the substantial additional duties and responsibilities during the interim period prior to the appointment of the new CEO as well as during the new CEO’s induction to PolyPeptide. This remuneration is included in Table 5, see section 4.2 “Compensation of the Board of Directors” of this Remuneration Report.

4.2Compensation of the Board of Directors

The structure and remuneration components of the members of the Board of Directors has not changed in 2023 compared to 2022. However, the total compensation of the Board of Directors increased by 29.7% for the year ended 31 December 2023 as compared to 31 December 2022 due to (i) the fixed executive chair fee of CHF 25,000 per month awarded to Dr. Peter Wilden in his role as Executive Chair for the period 1 February 2023 to 30 September 2023 and (ii) the election of an additional member to the Board of Directors at AGM 2023.

The following tables show the compensation of the Board of Directors for the period from 1 January 2023 to 31 December 2023 (Table 5) and from 1 January 2022 to 31 December 2022 (Table 6). In each of these periods, the Board did not receive a lump sum for expenses; rather any expenses incurred were reimbursed against the presentation of the relevant receipts.

Reconciliation of compensation to shareholder resolutions
For the term to the AGM 2024, the AGM 2023 approved a maximum aggregate amount of fixed compensation for the Board of Directors of CHF 1,600,000 (including all employee and employer social security contributions). For the term to the AGM 2023, the AGM 2022 approved a maximum aggregate amount of fixed compensation for the Board of Directors of CHF 1,600,000 (including all employee and employer social security contributions).

Table 7 shows the reconciliation between the compensation that has been / will be paid / granted for the respective term of office and the maximum aggregate amount approved by the general meeting:

In addition, with reference to art. 25 para. 3 of the Articles of Association, for the period from the AGM 2022 until AGM 2023, the Group paid CHF 101,130 to Niederer Kraft Frey AG (NKF), where Philippe Weber (Director) is a Partner, for legal services in relation to ongoing corporate legal matters (e.g., securities, employment, tax, bank finance and corporate law matters), within the CHF 200,000 limit approved by the AGM 2022.

For the period from the AGM 2023 until 31 December 2023, the Group paid CHF 185,892 to NKF for legal services in relation to ongoing corporate legal matters (e.g., securities, employment, tax, bank finance and corporate law matters), of which CHF 6,720 was directly attributable to legal services provided by Philippe Weber. In addition, NKF provided legal assistance in connection with the signing of a revolving credit facility agreement (as announced by the Company on 2 October 2023). The revolving credit facility agreement enabled the Company to refinance its then existing borrowings as well as to continue to finance its working capital and capital expenditure requirements to support its planned business growth. The amount paid to NKF is currently within the CHF 200,000 limit approved by the AGM 2023. In the event that the amount of fees paid to NKF between the period from AGM 2023 until AGM 2024 exceeds the CHF 200,000 limit, the shareholders will be asked to approve the excess amount, any such excess amount will be set out in the AGM 2024 invitation.

4.3Loans, credits and related-party compensation

In accordance with art. 28 of the Articles of Association, no loans or credits were directly or indirectly granted or outstanding as at 31 December 2023 or 31 December 2022, respectively, to current members of the Board of Directors. In addition, no granted loans or credits were still outstanding as at 31 December 2023 or 31 December 2022, respectively, to former members of the Board of Directors.

For the years ended 31 December 2023 and 31 December 2022, respectively, no compensation was directly or indirectly paid or granted to persons closely associated with current or former members of the Board of Directors. In addition, no loans or credits were directly or indirectly granted or outstanding as at 31 December 2023 or 31 December 2022, respectively, to persons closely associated with current or former members of Board of Directors.

For the related party transactions, refer to note 22 “Related parties” of the consolidated financial statements in the Financial Report 2023.