Compensation governance

Shareholders have a say in compensation matters, with their formal approval being required for the aggregate maximum amounts of compensation for the Board and for the IEC through binding votes at each AGM, and with their informal approval being sought for the company’s remuneration policy through the non-binding, consultative vote on the Compensation Report. In addition, the principles of compensation for the Board and for the IEC are governed by the Articles of Association, which are also approved by the shareholders. The Articles of Association are available at www.idorsia.com/AoA. The compensation provisions in the Articles of Association include the principles of compensation applicable to the Board and the IEC, the structure of the shareholders’ vote on compensation, and provisions on credit and loans, as summarized in the table:

As specified in the Charter of the NGCC, which can be found in the company’s By-Laws, the NGCC consists of at least three, but no more than five, Non Executive Directors (NEDs). The NGCC members are individually elected for a one-year term by the shareholders at the AGM. Current members of the NGCC are John J. Greisch (Committee Chair), Jean-Pierre Garnier, Viviane Monges and David Stout.

The NGCC supports the Board in questions relating to nomination and governance as well as compensation. With regard to compensation-related matters, the duties of the NGCC include:

• determining the compensation strategy of the company;
• recommending and reviewing compensation policies and plans for approval by the full Board;
• reviewing and assessing the adequacy of the provisions in the Articles of Association relating to compensation, as well as the adequacy of the NGCC Charter;
• proposing and recommending to the Board for approval by the AGM the aggregate maximum compensation of the Board for the term of office until the next ordinary AGM and the aggregate maximum compensation of the IEC for the next financial year;
• recommending to the Board for approval the compensation of the Board members within the limits approved by the AGM;
• recommending to the Board for approval the compensation of the CEO, as well as setting the annual performance targets and determining target achievement of the CEO under the relevant compensation schemes;
• approving, upon recommendation of the CEO, the compensation of the CEO’s direct reports and their annual performance targets and target achievement within the framework of the compensation schemes;
• preparing the Compensation Report for approval by the Board.

Additional information on the responsibilities of the NGCC is provided in the “Board of Contents Directors” section of the Governance Report.

The responsibilities of the various bodies involved in compensation matters are summarized below:

* Proposals related to CEO compensation are prepared by the NGCC Chair and approved by the Board.

- Recommending body
/ Reviewing body
+ Approving body

The NGCC meets as often as business requires, but at least four times a year. In 2018, the NGCC held three meetings and one video conference, with all members being present in each case. The NGCC Chair may decide to invite executives to attend meetings as appropriate. Executives do not attend meetings when their own compensation and/or performance is being discussed.

The NGCC Chair reports to the Board on the activities of the committee after each meeting. The NGCC meeting minutes are available to the Board.

The NGCC may decide to consult external advisors for specific compensation matters. In 2018, Aon was mandated to provide services on compensation matters and related topics and did not provide any other services to Idorsia.