Executive Board Compensation

Elements of compensation

The following section outlines SoftwareONE’s compensation framework for 2020. It was amended after extensive review by the NCC and its external advisors following the IPO.

As at 2020, the compensation framework for members of the EB consists of fixed and variable compensation elements. The fixed compensation element comprises a base salary as well as pension and other benefits (eg car allowances). The variable compensation element consists of an STI and an LTI plan. The variable compensation elements are mainly dependent on the achievement of performance which includes financial performance and performance relative to the market. In addition, individual objectives are considered to a smaller extent. The EB compensation elements are summarized in the following table:

Fixed compensation elements

Base salary

The base salary for members of the EB is typically paid in cash on a monthly basis unless local laws require otherwise. The base salary amount is defined based on market practice and the responsibility, experience and achievements of each member. The base salaries of the EB members are reviewed every other year based on the abovementioned factors, whereby adjustments are made in line with market developments.

Pension and other benefits

Pension benefits are provided through SoftwareONE’s regular pension plan. As the EB members reside in different international locations, some EB members are under a foreign employment contract and receive benefits in line with local current market practice. In addition to pension coverage, other benefits such as health care plans, insurances, car allowances or equivalent contributions are additionally covered. These allowances are paid together with the EB members’ base salary and are in line with the company policy in the local jurisdiction.

Variable compensation elements

Short-Term Incentive plan

The STI compensation elements of the EB reward the overall company performance and the EB members’ individual performance in line with the compensation principle of pay-for-performance. The plan is determined based on the achievement of three performance metrics; two metrics are financial measures and one is a non-financial metric.

The table below illustrates the details on the STI performance metrics in terms of definition, weighting, and payout range for the CEO and the other EB members:

At the beginning of the one-year performance period, the NCC proposes and the BoD approves the minimum, target and maximum achievement for the respective performance metrics. The financial performance metrics are derived from the company’s strategic business plan and aligned with a robust budget for the respective year. The personal goals are defined for each EB individually and in accordance with the expectation of their performance by way of considering the role and responsibilities. At the end of the performance period, the NCC proposes and the BoD approves the financial performance achievements against the original targets set. In terms of achievement of personal goals, the CEO proposes, the NCC reviews and the BoD approves the outcome for EB members, while the individual performance of the CEO is proposed by the NCC and approved by the BoD. Under certain circumstances, the BoD may apply discretion in the recommendation of the NCC when determining the final STI payout. For performance below or at the minimum, 0% is paid out, whereby on-target performance is awarded with a 100% payout. In case of overperformance, up to 150% can be achieved. The payout of the STI is fully in cash.

Long-Term Incentive plan

As at 2020, the LTI plan was finalized and implemented as an equity-based element to complete SoftwareONE’s compensation framework by offering executives and selected senior managers the opportunity to participate in the long-term success of the group. The development of this plan was driven by the intention to provide eligible participants with rewards in line with the new positioning of SoftwareONE as a public company. The introduction of the LTI plan further strengthens management’s interest alignment with those of shareholders, and encourages sustainable long-term value creation for shareholders and the company.

At the beginning of each three-year performance period (ie at grant date), eligible participants are granted an individual number of performance share units (PSUs) derived by dividing the individual LTI award (in CHF) by the fair value at grant (in CHF). After conclusion of the three-year performance period, the PSUs vest as follows:

The vesting multiple depends on the performance achievement of each metric – gross profit and relative total shareholder return (TSR). The vesting range lies between 0.0 and 2.0 times the PSUs granted at the outset. While low performance in one performance metric can be balanced by a higher performance in the other metric, the combined vesting multiple can never exceed 2.0. Contrarily, if performance of both metrics remains below the respective minimum performance thresholds, the resulting combined vesting multiple would be 0.0 and consequently no PSUs would vest.

At the beginning of each performance period the BoD determines the minimum, target and cap for each LTI performance metric upon the NCCs recommendation. In 2020, the NCC discussed different minimum, target and cap achievement level alternatives for each performance metric and submitted a recommendation to the BoD, who ultimately approved the respective vesting curves for the LTI grant in 2020. The following illustration outlines the minimum, target and cap for the respective metrics:

The overall vesting factor is the sum of the weighted vesting factor metrics and determined at the end of the three-year performance period. The NCC proposes and the BoD approves the performance achievement of each metric against the targets originally set as well as the overall vesting factor. Other circumstances under which no PSUs vest include various forfeiture clauses relating to termination of employment during the performance period of the LTI.

Peer group and benchmarking

Information on peer company compensation is an important point of reference considered in order to assess the market competitiveness of the compensation awarded to members of the EB. The NCC believes that benchmarking against a consistent and relevant set of peer companies that are similar to SoftwareONE in scope, products and services offered and geographical presence, enables the company to set pay levels towards the middle of the respective market range. This reinforces the talent attraction, motivation and retention efforts needed to support the company’s long-term success.

In this regard, the NCC adopted a comprehensive approach to the peer group construction in March 2020, which led to the compilation of two complementary peer groups: the Swiss Market Index Mid (SMIM) and a peer group of selected European technology companies. The blend of the peer companies selected provides a good balance between the industries and geographies from which key talents are sourced. The following companies were included in the analysis: Accenture, Adyen, Amadeus IT Group, ATOS, Bechtle, Cancom SE, Capgemini, Computacenter, Dassault Systems, Indra Sistemas, Micro Focus, SAGE, Software Aktiengesellschaft, Sopra Steria, Wirecard. When setting the EB’s pay levels, an orientation towards the middle of the respective market ranges was targeted.

These constructed peer groups – compiled together with Willis Towers Watson - provide one of the references for periodic review of EB member compensation in terms of both level and structure.

Compensation mix

In 2020, the total target compensation of the CEO was split into around 73% variable compensation and 27% fixed compensation. Of the 73% variable target compensation portion, 29% consisted of the target STI and 44% of the target LTI portion. For other EB members excluding the CEO, the fixed compensation was on average around 39% and the variable compensation 61%. 27% of the variable target compensation accounted for the target STI and 34% for the target LTI.

Compensation awarded to the EB in 2020

The following table outlines details concerning the compensation awarded to the CEO as the highest paid member of the EB and to the other EB members from 1 January to 31 December 2020. The total compensation awarded in 2019 is also listed.

Outcome of the 2020 STI performance achievement

For 2020, the STI performance metrics consisted of the following three performance metrics: EBITDA, synergies and personal goals. While the EBITDA performance achievement was below the target level initially set, the synergies and personal goals performance achievements were slightly above targets, as illustrated below. The overall performance achievement by all EB members (including the CEO) resulted in a final STI payout factor of 70%.

Approved versus total compensation awarded to the EB

The total compensation for the EB for 2020 of CHF 6.4 million (including social security contributions) is below the total maximum aggregate compensation amount of CHF 12 million, which was approved by the EGM on 10 October 2019 of CHF 11.0 million and by the AGM on 14 May 2020 of an additional CHF 1.0 million.

Share ownership

The table below shows the shareholdings of each EB member as of 31 December 2020, considering the number of directly held shares and restricted shares. The total shareholdings as of 31 December 2019 are also listed:

Further compensation information

Employment agreements

All members of the EB have employment agreements with a six-month notice period, which are governed by the applicable law. They are not entitled to severance payments.

Their employment agreements also prohibit the EB members from competing against SoftwareONE for a period of up to 12 months after termination of the employment agreement. For the specified non-compete period, SoftwareONE agrees to pay or cause the payment of a compensation to the EB member for their compliance with this non-compete undertaking in an amount equal to 80% of the last base salary of the member (excluding any ancillary benefits and subject to deduction of any social security and further deductions). This is payable in monthly instalments in arrears, until and for as long as the EB member complies with such non-compete undertaking. SoftwareONE may, however, at any time until two months prior to the last day of employment waive compliance with the non-compete undertaking whereupon such payments will no longer be due.

In case a change of control occurs, the LTI plan will terminate with effect as of the date of the change of control unless otherwise decided by the BoD in its discretion before or after the date of the change of control.

Payments to current or former members of the Executive Board

In relation to 2019, no payments other than those set out in the compensation table for EB members were made to current or former EB members or 'closely related persons'.

Discontinued compensation

Management Equity Plan (MEP)

On 1 July 2017, an equity participation arrangement was established between the company’s major shareholders and selected members of the company’s senior management, including all of the members of the Executive Board (MEP Participants).

The MEP was established with a view to incentivize MEP Participants’ performance and to increase their efforts on behalf and in the best interest of the Group as well as to align the MEP Participants with the goals of the company and its major shareholders. This was achieved by offering the MEP Participants the opportunity to participate in the event of a successful completion of certain liquidity events, including an IPO.

Under the MEP, MEP Participants were granted a special one-time consideration subject to the occurrence of a liquidity event and depending on the proceeds or equity valuation of the company reached in such a liquidity event. The MEP was funded entirely by the major shareholders of the company (founders, estate of Patrick Winter, Raiffeisen Group at the time through “PERUNI” Holding GmbH (meanwhile merged into Raiffeisen Informatik GmbH & CO KG) and KKR through Westminster Bidco S.àr.l) and as a consequence, there has been no cash outflow for SoftwareONE. The IPO, which occurred in October 2019, served as such a liquidity event.

In 2019 prior to the IPO, additional lock up and service conditions were introduced. Specifically, these were staggered restriction periods with a term of three years and early leaver conditions designed to enhance retention of the management team and ensure stability and success of the business beyond the liquidity event.

Upon the IPO, 33% of the MEP was paid in cash to MEP Participants and 67% of the MEP was awarded in shares. Some of the shares awarded to members of the Executive Board and to certain other members of the company’s senior management team (MEP Restricted Shares) are subject to staggered restriction periods with a term of three years and subject to early leaver conditions. As disclosed in the 2019 Compensation Report, the total of the MEP awarded to the EB members was CHF 46,951,309.

The table outlining the share ownership of the EB members on 31 December 2020 encompasses the equity issued under the MEP, whereby no further grant was or will be made under the MEP following the IPO of SoftwareONE.

Loans to members of the Executive Board

Article 23 of SoftwareONE’s Articles of Incorporation allow for loans and credits of up to CHF 1,000,000 at market-based conditions to be granted to EB members. In 2020, no loans or credits were made to EB members.