Compensation governance

Rules relating to Compensation in the LafargeHolcim Articles of Incorporation

The Articles of Incorporation contain provisions regarding the approval of compensation of the Board of Directors and the Executive Management (Art. 23), the supplementary amount for new members of the Executive Management (Art. 24), the general compensation principles (Art. 25) as well as provisions regarding the agreements with members of the Board of Directors and the Executive Management (Art. 26). Moreover, the Articles of Incorporation contain provisions regarding the roles of the Board of Directors and the Nomination, Compensation & Governance Committee (Art. 17 and Art. 5). The articles of Incorporation are available at: www.lafargeholcim.com/articles-association.

Board of Directors

The Board of Directors has according to Article 17 of the Articles of Incorporation the responsibility for preparing the compensation report.

Nomination, Compensation & Governance Committee

The Nomination, Compensation & Governance Committee supports the Board of Directors according to Article 21 of the Articles of Incorporation in establishing and reviewing LafargeHolcim’s nomination, compensation and governance strategy and guidelines as well as in preparing the motions to the Annual General Meeting regarding the nomination and compensation of the members of the Board of Directors and of the Executive Management.

For predefined positions of the Board of Directors and of the Executive Management, the Committee proposes the applicable performance criteria, targets and compensation levels for the Board of Directors while the Committee itself determines, in accordance with the compensation guidelines established by the Board of Directors, the above metrics for other predefined positions.

The Committee holds ordinary meetings at least three to five times a year: at the beginning of the year, in the middle of the year and in autumn. The Committee Chairman may invite members of the Executive Committee, other officers of the Group or third parties to attend the meetings. After each Committee meeting, the Board of Directors is informed of the topics discussed, decisions taken and recommendations made.

In 2015, the Committee retained Kepler (a brand of Mercer Ltd) as its independent compensation advisor. The Committee is satisfied with their performance and the independence of their advice since its appointment. It will reassess regularly the quality of the consulting service and the opportunity of rotating advisors.

Annual General Meeting (AGM)

According to Art. 23 of the Articles of Incorporation, the Annual General Meeting approves annually the compensation of the Board of Directors for the period from the Annual General Meeting to the next Annual General Meeting as well as the compensation of the Executive Management for the following financial year. Art. 24 of the Articles of Incorporation provides for a supplementary amount for Executive Management members who become members of, or who are promoted to the Executive Management during a compensation period for which the Annual General Meeting has already approved the compensation of the Executive Management if the compensation already approved is not sufficient to cover this compensation. The supplementary amount per compensation period for each such member shall not exceed 40 percent of the aggregate amount of compensation last approved by the Annual General Meeting. In addition to this prospective compensation approval process, the Compensation Report is submitted to the Annual General Meeting for an advisory vote on a yearly basis.

The roles of the Committee, the Board of Directors, and the AGM

The table below summarizes the roles of the Committee, the Board of Directors, and the Annual General Meeting:

 

Nomination, Compensation & Governance Committee

Board of Directors

Annual General Meeting (AGM)

Compensation Report

Proposes

Approves

Advisory vote

Maximum compensation amount for the Board of Directors from AGM to AGM

Proposes

Reviews and proposes to AGM

Binding vote

Maximum compensation for the Executive Management for the next financial year

Proposes

Reviews and proposes to AGM

Binding vote

Individual compensation of members of the Board of Directors

Proposes

Approves (subject to approval by AGM)

 

Individual compensation of members of the Executive Management

Approves (subject to approval by AGM)