Compensation report

Letter from the Nomination, Compensation and Governance Committee Chairman

Dear Shareholders,

The year 2015 has seen the creation of a new global leader. As a result of the merger between Holcim Ltd and Lafarge S.A., a number of former members of the Holcim Nomination and Compensation Committee and the Lafarge Compensation Committee now form LafargeHolcim’s Nomination, Compensation and Governance Committee (NCGC, hereafter referred to as “the Committee”)

Paul Desmarais, Jr., Chairman of the Nomination, Compensation and Governance Committee (photo)

Paul Desmarais, Jr.

The Committee believes that employees create value and are at the heart of the success of the company. LafargeHolcim therefore wants to be an attractive employer in the competitive employment market worldwide.

During the course of 2015, the Committee undertook an in-depth review of all Lafarge and Holcim board and executive compensation policies and formulated a new policy supporting the achievement of LafargeHolcim’s short- and long-term strategic objectives. The Holcim Ltd 2015 AGM resolutions on executive and non-executive director compensation reflected this policy and the Committee would like to acknowledge the support received from shareholders.

Defining the LafargeHolcim compensation policy

The historical executive compensation systems of Lafarge and Holcim were different in a number of ways. The Committee first agreed on a number of essential guiding principles:

  • Pay for performance: LafargeHolcim’s incentive plans provide the opportunity to achieve a higher level of overall remuneration, when delivering strong short- and long-term performance which is directly linked to the Group’s strategy.
  • Consistency and transparency: The Group rewards employees consistently across the business in a fair and transparent way; differentiating only by performance, value creation and market demands.

The Committee then harmonized the remuneration structures:

  • Base salaries for new Executive Committee members were harmonized to reflect Swiss practice,
  • Annual incentives at Holcim were delivered in cash, shares (held for five years) and stock options, while paid entirely in cash at Lafarge. The LafargeHolcim annual incentives will be delivered half in cash and half in shares held for three years,
  • In the past few years, Lafarge operated a variety of performance shares, stock options and cash long term inventive plans, while Holcim did not have a long-term incentive plan. The Committee agreed on a performance share plan, which rewards Company performance over a 3-year performance period.

In addition to this framework, it was decided to provide a strong incentive for the delivery of the synergies committed to shareholders, with an exceptional, fair market value stock option award, subject to synergies and free cash flow performance conditions. These options were granted to the CEO, Executive Committee and a limited number of senior executives with a significant influence on integration and synergies.

In the following pages you will find more information about compensation at LafargeHolcim in 2015. We will seek your support on compensation matters at our AGM on May 12, 2016.

Respectfully,

Paul Desmarais, Jr.

Chairman of the Nomination,
Compensation and Governance
Committee