Executive Board Compensation

Elements of compensation

The following section outlines SoftwareONE’s compensation framework for 2021. It was amended after extensive review by the NCC and its external advisors following the IPO in 2019 and further refined during the years thereafter. We are convinced that a continuous review of this framework by the NCC enables a proper fit to the corporate culture, goals and strategic ambitions of SoftwareONE in an ongoing volatile environment.

As of 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 (e.g. car allowances). The variable compensation element consists of an STI and an LTI plan. The variable compensation elements are mainly dependent on performance achievements which include financial performance and market-related performance. In addition, and to a lesser extent, ESG goals and individual objectives are also part of the Short-Term Incentive plan. 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 according to market practice and the responsibility, experience and achievements of each member.

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 employed under a foreign employment contract and receive benefits in line with current local market practice. In addition to pension coverage, other benefits such as health care plans, insurance, car allowances or equivalent contributions are also covered. These allowances are paid together with the EB members’ base salary and are in line with the company policy in the local jurisdiction.

Further, pursuant to Article 20 of the Articles of Incorporation, new members joining the EB may receive compensation for the loss of their remuneration or for financial disadvantages incurred as a result of changing their jobs. If applicable, such lost compensation is replaced on a like-for-like basis (i.e. no increase in replacement value) and reported in the compensation table for the relevant reporting period under "Other benefits".

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 by the achievement of three performance metrics; two metrics are financial measures and one can be a mix of financial and non-financial metrics.

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 required achievement levels for the financial performance metrics are derived from the company’s strategic business plan and aligned with a robust budget for the respective year. The individual goals and the relevant ambition levels are defined for each EB member individually and in accordance with the expectation of their performance according to their role and responsibilities. At the end of the performance period, the NCC proposes and the BoD approves the financial performance achievements against the original set targets. In terms of achievement of individual 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 specific 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 made entirely in cash.

Long-Term Incentive plan

SoftwareONE’s compensation framework is completed by an equity-based element which was introduced in 2020. It offers  executives and selected senior managers the opportunity to participate in the long-term success of the group. The goal of this plan is to provide eligible participants with attractive, market-aligned rewards to strengthen management’s interest alignment with those of shareholders, and to encourage sustainable long-term value creation for shareholders and the company.

At the beginning of each three-year performance period (i.e. 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 the 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. On the contrary, 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 2021, 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 2021. We deem absolute targets for the gross profit metric, commercially sensitive and confidential strategic information and hence disclose these on a relative basis to avoid unfair competitive disadvantage for SoftwareONE. 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 can include various forfeiture clauses relating to termination of employment during the performance period of the LTI.

As of 2021, we have further implemented a claw back provision to protect the interests of the shareholders and the company, which allows for a partial or full recovery of equity allocated to EB members under the Long-Term Incentive plan. This provision applies in specific situations which may cause damage to the group or otherwise negatively affect the legitimate interests of SoftwareONE.

Peer group and benchmarking

Information on peer company compensation is an important point of reference 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 selected peer companies provides a good balance between the industries and geographies from which key talents are sourced. The following companies were included in the analysis: Alcon, Arzyta, Bâloise, Barry Callebaut, BB Biotech, Bucher Industries, DKSH, Dormakaba, EMS-Chemie, Flughafen Zürich, Georg Fischer, Givaudan, Helvetia, Logitech, OC Oerlikon, Partners Group, Schindler, Sika, Straumann, Sulzer, Swisscom, Temenos, VAT, Accenture, Adyen, Amadeus IT Group, ATOS, Bechtle, Cancom SE, Capgemini, Computacenter, Dassault Systems, Indra Sistemas, Micro Focus, Nemetschek, SAGE, Softcat, Software Aktiengesellschaft and Sopra Steria. When setting the EB’s pay levels,  the NCC targeted the middle of the respective market ranges.

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

Compensation mix

In 2021, the total target compensation of the CEO was split into around 71% variable compensation and 29% fixed compensation. Of the 71% variable target compensation portion, 29% consisted of the target STI and 42% of the target LTI portion. For other EB members excluding the CEO, the fixed compensation was on average 39% (29% - 44%) and the variable compensation 61% (56% - 71%). 24% (19% - 27%) of the variable target compensation consisted of the target STI and 37% (31% - 52%) consisted of the target LTI.

Compensation awarded to the EB in 2021

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 2021. The total compensation awarded in 2020 is also listed.

Approved versus total compensation awarded to the EB

The total compensation for the EB for 2021 of CHF 7 million (including social security contributions) is below the total maximum aggregate compensation amount of CHF 12 million, which was approved by the AGM on 14 May 2020.

Outcome of the 2021 STI performance achievement

For 2021, the STI performance metrics consisted of the following three: EBITDA, EBITDA margin and individual goals. In the context of our continuous assessment of the compensation framework, the robustness of the link between performance achievement in % and STI payout factor is reviewed annually and adapted if necessary to better reflect a changing business environment and to avoid excessive risk taking.

While the EBITDA and EBITDA margin performance achievement was below the target level, the individual performance goals achievements were slightly above target, as illustrated below. The overall performance achievement by all EB members (including the CEO) resulted in a final STI payout factor of 25% for the CEO and 27% - 33% for other full year EB members.

For one member of the EB who joined in July 2021, the STI performance achievement covers pro rata the time period since joining SoftwareONE and, in light of the short tenure, is an abbreviated assessment focusing on individual goals.

Outcome of the LTI performance achievement going forward

The first vesting under the current LTI will occur in 2023. Respectively, information regarding the LTI performance achievements and vesting factors will be provided in the Compensation Report 2023 as such information is not available prior to the actual 2023 vesting date.

Share ownership

In 2021, we introduced ownership requirements for the EB members with a five-year build-up period. The minimum shareholding requirement level has been set at 300% and 200% of base salary respectively for the CEO and EB members. We are pleased to report that all EB members present throughout the whole of 2021 have already met their build-up commitment.

The table below shows the shareholdings of each EB member as of 31 December 2021, considering the number of directly held shares and restricted shares. The total shareholdings as of 31 December 2020 are also listed:

Further compensation information

Employment agreements

All members of the EB have employment contract agreements with a six-month notice period, which are governed by the applicable laws. 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 their employment contract. For the specified non-competitive period, SoftwareONE agrees to pay a compensation to the EB member for their compliance with this non-competitive undertaking to an amount equal to 80% of their last base salary (excluding any ancillary benefits and subject to deduction of any social security and further deductions). This is payable in arrears in monthly installments, for as long as the EB member complies with the non-competitive agreement. However, SoftwareONE may at any time up to two months prior to the last day of employment, waive compliance with the non-competitive agreement whereupon such payments will no longer be due.

In case of a change of control, the LTI plan will terminate with effect from the date of the change of control unless otherwise decided at the discretion of the BoD.

Payments to current or former members of the Executive Board

In relation to 2021, 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'.

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 2021, no loans or credits were made to EB members.