" alt="Alpiq Banner Interim Report" />Principles and objectives
In the interests of good corporate governance, Alpiq motivates senior management by providing competitive remuneration and a performance- and value-based bonus system with a view to the sustainable enhancement of shareholder value.
Alpiq's remuneration guidelines and bonus systems provide for management salaries appropriate to the tasks and responsibilities, taking into account the economic situation, results of operations and the future outlook for the company. Accordingly, the total remuneration packages for members of the Executive Board and heads of business and functional units consist of:
1. fixed, non-performance-related components,
2. short-term performance related bonus payments based on a financial year, and
3. long-term performance related bonus payments spread over several reporting years.
Market-compliant remuneration
To ensure that the remuneration of members of the Executive Board, heads of business and functional units, and Directors is commensurate with standard market rates, Alpiq regularly commissions an independent external consultancy to review the total pay packages relative to the market environment. This includes an analysis of the level and structure of salaries. The last such review was conducted in August/September 2009.
Disclosure
As required by Section IV of the Swiss Code and Section 5 of the SIX Swiss Exchange Corporate Governance Disclosure Guidelines, Alpiq discloses the following information:
• Content and method of determining remuneration
• Remuneration to acting members of governing bodies
• Remuneration to former members of governing bodies
• Additional fees and remuneration
• Loans to members of governing bodies
No share award or share option schemes are provided for members of Alpiq's governing bodies.
A. Executive Board members' remuneration
Principles
Employment contracts, terms and conditions of employment and remuneration of members of the Executive Board are approved by the Nomination and Remuneration Committee (NRC) appointed by the Alpiq Board of Directors and reviewed at regular intervals. The NRC defines the objectives of the Chief Executive Officer (CEO) and approves those of the Executive Board as proposed by the CEO. Details of bonus payments are set down in the bonus regulations, which the NRC approves at the request of the CEO. In 2009, members of the Executive Board received remuneration in accordance with the bonus regulations that have been in force since 24 April 2008.
Bonus entitlement
Under the terms of the bonus regulations, the CEO and the heads of business and functional divisions are entitled to a bonus. If a member of the Executive Board performs a dual function, the bonus is based on the higher function only. At Executive Board level, Herbert Nicklaus performed a dual function as Head of Energy Services and General Manager of the Alpiq Anlagentechnik business unit, and Peter Heydecker performed a dual function as Head of Trading & Services and General Manager ad interim of the Middle Office & Operations business unit.
Structure of remuneration
In 2009, Executive Board members were paid remuneration consisting of a fixed, non-performance-related base salary and a variable, performance-related salary. The variable salary, in turn, is divided into a short-term performance-related component (Short-Term Bonus, STB) and a long-term performance-related component (Long-Term Incentive, LTI). While payment of the STB is based on personal and financial objectives, payment of the LTI is indexed to the long-term increase in shareholder value.
Short-Term Bonus (STB)
The aim of this short-term bonus component is to motivate management and provide rewards for business performance on the basis of annual results.
Payment of 30 % of the nominal value of the STB is based on the achievement of up to six personal performance objectives (qualitative components). These concern, for example, the fulfilment of clearly defined, measurable project targets, efficiency goals and the achievement of milestones, but not financial targets.
70 % of the payment is dependent on achieving the EBIT (profit before interest and tax) targets defined by the NRC at the beginning of the financial year (quantitative/financial component).
The quantitative component is calculated by factoring in the target EBIT (100 %) defined by the NRC. If the target EBIT is achieved, the financial component amounts to 100 % of the defined proportion of the nominal value. No additional payment of the quantitative components is made if EBIT exceeds the EBIT cap set by the NRC. The quantitative component of the STB is also subject to a benchmark coefficient which can increase or reduce the amount paid out. To this end, the EBIT achieved is compared with the levels of Alpiq's competitors. If EBIT is below the EBIT floor defined by the NRC, no quantitative component of the STB is paid out.
Long-Term Incentive (LTI)
The aim of the LTI is to motivate members of the Executive Board to contribute to enhancing Alpiq's medium- to long-term shareholder value in the interests of sustainable corporate management. Actual payment is therefore made only three years after the LTI has been granted. Economic Value Added (EVA) is applied as an indicator of sustainable growth in shareholder value. The LTI is paid in cash.
The nominal value of the LTI is defined by the NRC at the beginning of the financial year. Payment of the LTI is based on reaching the defined EVA targets after three years. Every year the NRC determines the target EVA figures on the basis of Alpiq's corporate plans approved by the Board of Directors. If the sum of the defined EVA targets is reached after three years, 100 % of the nominal value is paid out as an LTI. No additional payment is made if EVA exceeds the EVA cap set by the NRC. The amount paid out as LTI can be additionally increased or reduced by applying the EBIT benchmark coefficient. To this end, the EBIT achieved in the year in question is compared with the levels of Alpiq's competitors (see also STB).
Capping and other regulations
The amount of the base salary and the two bonus components, STB and LTI, may not exceed three times the base salary of any Executive Board member. Remuneration in excess of this ceiling is not paid out.
Irrespective of this rule, however, the NRC is authorised to grant special bonuses to individuals in exceptional cases.
In justifiable exceptional cases, the NRC may also decide that the CEO (at the request of the Chairman of the Board) or the head of a business or functional division (at the request of the CEO) should be paid no bonus (STB and/or LTI).
The bonus payment constitutes taxable income and is therefore subject to all social security deductions and contributions (AHV/IV/ALV/EO) paid by Alpiq.
Amount of remuneration
In 2009, remuneration paid to the Executive Board totalled CHF 9.3 million (CHF 8.3 million), of which current remuneration payments accounted for CHF 7.7 million (CHF 7.2 million) and pension benefits for CHF 1.6 million (CHF 1.1 million). The amounts in brackets refer to the prior year. Details of remuneration are provided on page 160 of the Financial Report.
B. Directors' remuneration
In 2009, remuneration paid to Alpiq Directors totalled CHF 4.2 million (CHF 2.4 million), of which current remuneration payments accounted for CHF 4.0 million (CHF2.3 million) and pension benefits for CHF 0.2 million (CHF 0.1 million). The amounts in brackets refer to the prior year.
Directors' remuneration comprises fees, expenses and ancillary payments. These components are non-performance-related. In spring 2009, the Directors received a bonus for 2008, but it was decided to stop paying bonuses from the 2009 financial year. Details of payments made to Directors are provided on pages 158 to 159 of the Financial Report.