Extensive renewal process carried out
Our compensation system is subject to review on an ongoing basis and adapted to current condi-tions. Swiss Prime Site’s entire Board of Directors and particularly the Chairman of the Nomination and Compensation Committee, Mario F. Seris, affirm their commitment to good corporate govern-ance, taking into account the various relevant aspects therein.
Mario F. Seris, you’re a member of the Board of Directors as well as Chairman of the Nomination and Compensation Committee of Swiss Prime Site. What precisely are your responsibilities on the board?
My primary responsibility involves ensuring development of the requisite key competencies for the sustainable success of the Company at the Board of Directors, Executive Board and employee levels. In addition, the members of the Compensation Committee are responsible for aligning Swiss Prime Site’s remuneration policy with the interests of the Company and shareholders.
How does Swiss Prime Site’s Board of Directors function?
We are a body comprising six experienced personalities. Our strengths are of course the years of extensive management experience and equilibrium that we collectively have. Our dialogue culture is transparent, open and honest.
«Our dialogue cul-
ture is transparent,
open and honest.»
Approval for Board of Directors members at the Annual General Meetings has diminished in recent years. What improvements could the Board of Directors make at present and in the future?
In contrast to the past, today’s shareholders are no longer willing to give the green light to just anything. Companies have justifiably granted more rights to shareholders and investors. With these rights, shareholders and investors demand that their interests are better safeguarded and represented. In my view, a high level of transparency relative to all interest groups plays the most significant role, in the reporting process as well as in general communications with all stakeholders. Trust can only be established in this way.
How do you build such trust?
We critically scrutinise not just the Company but also our conduct and adjust the process where necessary. For instance, we have strengthened communications with stakeholders. The reporting process has been totally restructured. Roadshows and conferences are carried out in order to provide investors, shareholders and proxy advisors with the opportunity to meet the Board of Directors and the management. Panel discussions are held in order to learn about the needs of various interest groups and subsequently define measures where necessary and sensible.
How do you view the role of proxy advisors?
History shows that proxy advisors are becoming an increasingly more important stakeholder, due to the increasingly emerging criticism of excessive salaries, on the one hand. On the other hand, this is also attributable to the new rules with which the entire Swiss economy has been confronted in past years. Since institutional investors today must vote, they require support to be able to efficiently cast their vote. In this context, transparently operating proxy advisors certainly play a key role.
By implication, what does this mean for you as Swiss Prime Site Board of Directors member?
High degrees of transparency and open-mindedness are requisite for proxy advisors to provide recommendations based on a good foundation. It serves no purpose when a company pursues a simple and fair compensation system that is nonetheless cryptically or insufficiently explained in the reporting process.
Have you met and conversed with the various proxy advisors?
As Chairman of the Compensation Committee, I met with the major proxy advisors last autumn. The conversations were very good, open and worthwhile for both sides.
What are the consequences that you now perceive for yourself from these talks?
Certain points of criticism are definitely understandable. The most significant criticism with which we indeed have to cope is that we have not explained our position quite so clearly and comprehensibly.
Swiss Prime Site was criticised by proxy advisors in the past regarding its compensation system. What lessons have you learned as a result?
Our compensation system comprises three elements: fixed base salary, short-term and long-term variable compensation. We revised the compensation structure and particularly the variable compensation components in 2017 in order to more closely take into account the performance-based orientation.
In very specific terms, what’s the maximum bonus that an Executive Board member can receive?
The short-term and long-term share of variable compensation for Executive Board members can reach the level of their fixed base salary overall and in the best case scenario. Noteworthy also is that just 75% of the maximum bonus is reached with 100% achievement of all targets. In order to achieve the maximum bonus (100%), the already very ambitious targets must be significantly surpassed. Another aspect is the fact that the lion’s share of target achievement is not based on the individual performance, but rather on the financial results realised by the Company or group companies.
What’s the rule for long-term compensation, when the shares are blocked for three years?
Regarding long-term variable compensation, the management is awarded entitlements at a specific point in time – i.e. so-called performance share units (PSUs). This time frame incidentally corresponds to our successive internal business plan. The payout factor is assessed retroactively after three years and converted into shares. We therefore ensure that the interests of the Executive Board members are aligned with those of the shareholders. All these measures correspond to the performance-based compensation approach according to the maxim: «Pay for Performance».
What are the key criteria for assessing the achievement of targets under the long-term variable compensation (LTI)?
The factor for us as a real estate company is 100% earnings per share (EPS) before revaluations and deferred taxes.
Why is this key figure the right basis for assessment for the Company?
EPS before revaluations and deferred taxes constitutes the most important key figure for a Swiss real estate company for assessing its operating success, which reflects the firm’s performance: i.e. operating profitability. In addition, Swiss Prime Site’s dividend policy is based on this key figure as well. The objective is aimed at achieving a long-term distribution of 80% of profit before revaluations and deferred taxes, with concurrently stable or growing absolute dividend payments.
Another point of criticism was the term of office of Board of Directors members. What’s the progress of the restructuring process?
We commenced an extensive restructuring process within the management and Board of Directors two years ago. We were able to initiate the rejuvenation process of Swiss Prime Site’s Executive Board with René Zahnd and Markus Meier two years ago. In addition, we created an advisory board system for the group companies. Each advisory board comprises a member of the Board of Directors of Swiss Prime Site and external top managers, among others. We have also forged ahead with the rejuvenation process on the Group’s Board of Directors with Elisabeth Bourqui. At the same time, we have restructured the compensation system – subject to criticism in the past as previously stated – upgrading the process to a modern standard.
Could you already be more specific here with re-gard to the Board of Directors?
Yes. We aim to achieve an improved intermix on the Board of Directors and the related committees in the medium term. Greater significance will be attributed to expertise, experience, age and gender in the future. In this context, we are oriented toward the guidelines provided by the Swiss federal government, according to which females should account for 30% of the mem-bers of a board of directors. Incidentally, we aim to achieve this proportion in the aforementioned advisory boards of the group companies too. This is already the case at present with Tertianum and Jelmoli. At the same time, we are initiating a transition process within the committees. We are starting with the Compensa-tion and Nomination Committee: Indeed, I am relin-quishing the Chairman role at the Annual General Meeting of 2018. Thereafter, we will pursue the reju-venation process for the chairmanships of the other committees.
«History shows
that proxy advisors
are increasingly
important stake-
holders.»
You currently have two vacancies on the Board of Directors. How will these new Board of Directors members be chosen?
Optimising the intermix in the aforementioned issues is a significant concern, in our view. Consequently, we are proposing to the Annual General Meeting of 2018 the election of Barbara Frei-Spreiter and Thomas Studhalter as new Board of Directors members. Both personalities excellently complement the Board of Directors and will strongly contribute to the previously referred to rejuvenation process.
The Compensation Report is written in accordance with the provisions of the Swiss Ordinance Against Exces-sive Compensation in Listed Companies (hereinafter referred to as «Ordinance»), the standard relating to information on corporate governance of the SIX Swiss Exchange and the principles of the «Swiss Code of Best Practice for Corporate Governance» of econo-miesuisse.
The Compensation Report describes governance framework, the compensation principles and pro-grammes as well as the compensation awarded to the members of the Board of Directors and of the Execu-tive Board in the financial year 2017.