Internal organization of the Board

The Board of Directors has adopted the By-Laws (including Charters for the Nominating, Governance & Compensation Committee and the Finance & Audit Committee) which define the essential roles and responsibilities of the Board of Directors, the Chairman, the CEO and the Executive Committee, and the standing Committees of the Board.

The allocation of tasks within the Board of Directors is determined annually by the Board, following the General Meeting, in accordance with the By-Laws.

Tasks and Area of Responsibility for Each Committee of the Board of Directors

The powers and responsibilities of each Committee are established in the applicable Committee Charter, which is approved by the Board of Directors. The Charters are available as appendices to the By-Laws.

The composition of the various Committees is as follows:

Finance & Audit Committee
Robert J. Bertolini (Chairman)
David Stout
Vivienne Monges

Nominating, Governance & Compensation Committee
John J. Greisch (Chairman)
Jean-Pierre Garnier
David Stout
Vivienne Monges

• Board of Directors

The Nominating, Governance & Compensation Committee reviews considerations relating to Board composition, including size of the Board and criteria for membership of the Board of Directors; it identifies, reviews, considers and recommends to the Board qualified candidates to serve as Board members and members of the various Committees of the Board. It further reviews directorships and consulting agreements of Board members for conflicts of interest. In addition, this Committee reviews and recommends Corporate Governance policies and principles for the company, reviews compliance issues, provides support for Corporate Sustainability projects, oversees an evaluation of the Board of Directors, maintains an orientation program for new Board members and an ongoing education program for existing Board members, and makes related recommendations to the Board. Moreover, the Committee makes such recommendations to the Board of Directors as it may consider appropriate and consistent with its purpose, and takes such other actions and performs such services as may be referred to it from time to time by the Board of Directors, including the engagement of any outside advisor it may deem necessary or appropriate, at the company’s expense.

The Nominating, Governance & Compensation Committee further supports the Board of Directors in reviewing and establishing the company’s compensation strategy and policy. It also monitors Board and Executive compensation to ensure that it remains competitive within the applicable law and company compensation schemes. Within this framework, the Committee is responsible for defining the Group’s compensation strategy, designing compensation plans, making proposals for the compensation of members of the Board and the CEO, and approving the compensation of the latter’s direct reports.

The Committee has appointed Aon Hewitt as its independent external advisors to provide guidance on compensation practices and benchmarking.

Board compensation
The Nominating, Governance & Compensation Committee makes proposals for the compensation of the company’s Chairman. In determining these recommendations, the Committee takes account of benchmarking and a review of market practice within companies with a similar market capitalization to Idorsia, carried out by an independent external advisor. The recommendation is approved by the Board of Directors. The Chairman is not present when any decisions are taken regarding his compensation.

The compensation of other non-executive directors is approved by the Board of Directors. In determining these recommendations, the Board of Directors takes account of benchmarking and a review of market practice within companies with a similar market capitalization to Idorsia, carried out by an independent external advisor.

Executive compensation
The CEO’s compensation is approved by the Board of Directors based on the proposal of the Nominating, Governance & Compensation Committee. This proposal takes into account market practice within Idorsia’s peer group of companies (as determined by an independent external advisor) and performance against predetermined targets during the relevant year. The CEO is not present when any decisions are taken regarding his compensation package.

The compensation of the CEO’s direct reports is approved by the Nominating, Governance & Compensation Committee based on the CEO’s recommendations. These take into account market practice within Idorsia’s peer group of companies (as determined by an independent external advisor) and performance against predetermined targets during the relevant year. Targets used to determine payout levels for variable compensation elements such as short-term incentives (STIs) and long-term incentives (LTIs) are set by the Committee on an annual basis, prior to the start of the year in which performance is measured.

The Committee Chairman at his discretion can invite any person to attend the meetings.

In 2017, the Nominating, Governance & Compensation Committee met twice in person and held one teleconference. Each meeting took on average 1.25 hours.

• Compensation governance
• Compensation principles

The Finance & Audit Committee assists the Board in the oversight of the integrity of the financial statements of the company, the qualifications and independence of the External Auditor (EA), the performance of the company’s Internal Audit (IA) function, and the company’s policies and practices with respect to major financial risk exposures.

The Finance & Audit Committee is directly responsible for compensation and oversight of the work of the EA, including: (1) having the authority (subject to shareholder approval) to appoint or replace the EA; (2) approving the compensation of the EA; (3) reviewing the audit scope and audit plan of the EA; (4) reviewing the scope and plan for the EA’s audit of the company’s internal controls over financial reporting; and (5) pre-approving all permitted non-audit services to be performed by the EA, and establishing policies and procedures for the engagement of the EA to provide permitted audit and non-audit services.

The Finance & Audit Committee also oversees the company’s IA function, including: (1) reviewing and approving the internal audit plan, including the plan for testing of internal controls over financial reporting; (2) reviewing significant reports to management prepared by IA (and management’s responses); (3) reviewing the results of the internal controls testing, including any significant deficiencies or material weaknesses identified in the testing (and management’s responses); and (4) discussing the responsibilities, budget and staffing of the IA function.

The Finance & Audit Committee further performs the following tasks related to financial reporting: (1) reviewing key accounting policies, significant accounting estimates and significant related-party transactions, and recommending changes in key accounting policies to the Board of Directors; (2) monitoring the financial reporting process, reviewing the adequacy and effectiveness of the systems of internal controls over financial reporting (including deficiencies and significant changes in internal controls reported to the Finance & Audit Committee) and approving significant changes therein; (3) monitoring the effectiveness of the risk management systems in relation to financial reporting; (4) reviewing, with management and the EA, the annual and quarterly financial results; and (5) reviewing financial reporting press releases and financial guidance.

Moreover, the Finance & Audit Committee oversees in material respects the company’s compliance with applicable financial and securities laws and supervises procedures implemented to ensure compliance with these laws.

The Finance & Audit Committee reports to the full Board of Directors at regular intervals and submits proposals for Board resolutions, if necessary.

The Committee Chairman at his discretion can invite any person to attend the meetings.

In 2017, the Finance & Audit Committee met twice in person and held four teleconferences. Each physical meeting took on average 1.5 hours.

In 2017, the Board of Directors met twice in person, and held three teleconferences, with an attendance record of 100%. Physical Board meetings take approximately 4.5 hours. When the situation so warrants, the Board of Directors holds additional ad hoc meetings or telephone conferences to discuss specific issues. Any member can request a meeting. The CEO is entitled to attend every meeting of the Board of Directors and to participate in its debates and deliberations, with the exception of executive sessions.

The management presents reports and the Board then takes decisions by majority vote on the relevant issues, except where the Board has delegated specific decisions to a Committee.

In the case of Committees, after the presentation of the issue by the management, the Committee takes a preliminary decision for approval by the full Board, which will be reported along with the details of the issue to the entire Board, who will take the final decision, except where the Board has delegated specific decisions to a Committee.