Compensation framework for the Group Executive Board

Compensation overview for the Group Executive Board

Compensation for the members of the Group Executive Board is provided through the following main components: an annual base salary and pension benefits/other benefits, which together form the fixed compensation component; a Short-Term Incentive Plan (“STIP”) and a Long-Term Incentive Plan (“LTIP”), which together form the variable compensation component (see Figure 10).

Figure 10: Illustrative overview of the compensation framework of the Group Executive Board in 2024.

Fixed compensation components:

Annual base salary

The base salary is the main fixed compensation component paid to the members of the Group Executive Board at SIG. It is paid in cash in 12 equal monthly installments unless local law requires otherwise. The level of base salary is determined by the Board of Directors taking into account the specific role performed and the responsibilities accepted within that role. It rewards the experience, expertise and know-how necessary to fulfil the demands of a specific position. In addition, the market value of the role in the location where the Company competes for talent is considered.

Pension benefits and other benefits

As the Group Executive Board is international in its nature, the members participate in the benefit plans available in the country of their employment. Benefits mainly include insurance and health care plans as well as pension coverage, where applicable. SIG’s pension benefits for members of the Group Executive Board employed under a Swiss employment contract exceed the legal requirements of the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) and are in line with the benefits offered by other international companies. Members of the Group Executive Board who are under a foreign employment contract are insured commensurately with market conditions and with their positions. The plans vary in accordance with the local competitive and legal environment and are structured in accordance with local practice and in line with local legal requirements.

In line with general market practice and Swiss law, new members joining the SIG Group Executive Board may be granted replacement awards to compensate for any resulting forfeited compensation at prior employers. Such replacement awards are structured on a “like-for-like” basis regarding instrument and performance conditions and never exceed the forfeited amount at the prior employer, which is verified based on written documentation provided by the recipient and, where needed, a third-party validation of the forfeiting value. If applicable, replacement awards are reported accordingly in the compensation table for the relevant financial year.

In addition, the Group Executive Board members receive certain executive perquisites and benefits in kind according to competitive market practice in the country of their employment (e.g. company cars) as well as cash premiums on share-based payments according to local law. The fair value of these benefits is disclosed in Table 3.

Variable compensation components:

The variable compensation consists of a short-term incentive and a long-term incentive component.

Short-Term Incentive Plan (“STIP”)

Under the STIP, the members of the Group Executive Board are rewarded for the achievement of pre-defined annual targets for multiple key performance indicators (“KPIs”), including financial aspects (for details see Figure 11) as well as an ESG element. For 2024, the Board of Directors increased the weighting of the Group free cash flow (FCF) KPI by 5% while decreasing the weighting of Group adjusted earnings before interest, tax and depreciation (EBITDA) by 5% in comparison with 2023. In addition, the operating net working capital (ONWC) target at the regional level was replaced by a regional FCF KPI.

The ESG KPI criteria in the STIP underpins the ongoing commitment to sustainability rooted in SIG’s business strategy and activities. The assessment of achievements relating to the ESG element is based on the Company’s EcoVadis score¹, enabling an objective and independent measurement approach. Essentially, EcoVadis assesses the quality of a company’s sustainability management system through its policies, actions and results.

Every year and for each Group Executive Board member the Board of Directors determines, based on a proposal by the Compensation Committee, an individual target amount under the STIP as a percentage of each member’s base salary, which is paid out if the targets for the KPIs are achieved to 100%. To determine the actual payout under the STIP, the performance of each KPI is assessed individually against pre-determined targets and is expressed as a target achievement rate in a range from 0% to 200% and then combined according to the assigned weightings (see Figure 11). The overall payout is capped at 200% of the target amount and can fall to zero should the minimum performance achievement level for each KPI not be attained. Detailed information regarding the target amounts, KPI targets and achievements of those targets is provided in the section “Short-Term Incentive Plan 2024” further below.

Group Executive Board members with regional responsibilities have KPIs reflecting their regional as well as Group performance. To strengthen the focus of members with regional responsibility on their region’s KPIs, the weighting of regional targets is set at 60%, while the weighting of Group KPIs is 40%.

For other Group Executive Board members with a primary Group Function focus, including the CEO and the CFO, performance is assessed based on Group performance only. The framework is illustrated in Figure 11.

Figure 11: Overview of the Group Executive Board STIP compensation framework in 2024.

The Chief Markets Officer also acts as President of Bag-in-Box and Spouted Pouch. To take account of this responsibility, the short-term incentive compensation for this position is calculated on 60% Group targets and 40% Bag-in-Box and Spouted Pouch targets, as an exception to the framework illustrated in Figure 11.

Long-Term Incentive Plan (“LTIP”)

The LTIP offers eligible employees the opportunity to participate in the long-term success of SIG, thereby reinforcing their focus on longer-term performance and aligning their interests with those of shareholders. The following provides an outline of the plan specifics.

The mechanics behind the LTIP are illustrated in Figure 12. At the beginning of each three-year vesting period, a certain number of performance share units (“PSUs”) is granted to each participant, which represents a contingent entitlement to receive SIG shares in the future. The number of granted PSUs depends on (i) the individual LTIP grant level in CHF, determined by the Board each year but never exceeding 204% of the base salary of any member of the Group Executive Board, including the CEO, and (ii) the reference price of one PSU. The reference price reflects the 20-day volume-weighted share price before the grant date.

Figure 12: Overview of the principles of the LTIP.

After the three-year vesting period, a certain number of the granted PSUs vest, depending on the performance of SIG during that period. The number of PSUs vested in SIG shares may vary between 0% and 200% of the granted PSUs and is based on the achievement of the following three weighted KPIs.

To determine the multiple of the granted PSUs ultimately vesting into SIG shares, the performance against each KPI is assessed individually in a range from 0% to 200% and then combined according to the assigned weightings. This means that a low performance on one performance measure can be balanced by a higher performance on another performance measure. Overall, the combined vesting multiple will never exceed 200%. If the performance on each of the three KPIs lies below the respective minimum performance requirement, the resulting combined vesting multiple is 0% and consequently no granted PSUs vest. Furthermore, if the absolute TSR falls below zero over the relevant performance period, the vesting factor of the relative TSR metric would be capped at 100%. Detailed information about the grants, targets and their achievements are provided in the section “Long-Term Incentive Plan 2024” further below.

Since the introduction of the LTIP in 2019, PSUs have been granted to the members of the Group Executive Board and selected other members of management on a yearly basis. For an overview of the annual PSU allocations and the outstanding PSUs, see note 30 of the consolidated financial statements for the year ended December 31, 2024 as well as the respective shareholding overview in this report.

In addition to a failure to meet the threshold performance level, other circumstances under which no PSUs vest include various forfeiture clauses relating to termination of employment during the vesting period of the LTIP.

The LTIP awards are subject to a clawback provision. In the event of a financial restatement due to a material non-compliance of the Company with applicable financial reporting requirements, or in the event of fraudulent behavior or other willful misconduct by a plan participant, the Board of Directors may review the specific facts and circumstances and take clawback actions.

The Board has the right to allocate other, potentially non-recurring, equity-based awards to employees. Any such awards allocated to members of the Group Executive Board are reported accordingly in the compensation table for the relevant financial year.

Compensation mix

Figure 13 illustrates the compensation mix for the CEO and the Group Executive Board at target level in 2024. This compensation mix reflects SIG’s high-performance orientation and represents the Company’s strong emphasis on aligning the interests of the Group Executive Board and shareholders to create long-term shareholder value, by making a large part of compensation dependent on the achievement of long-term goals.

Figure 13: Overview of the compensation mix for the CEO and the Group Executive Board (excl. CEO) at target level in 2024.

For the Group Executive Board members excluding the CEO, the fixed components (annual base salary and pension benefits/other benefits) vary between 37% and 49% (43% on average) of the total target compensation and the variable components vary between 51% and 63% (57% on average) of total target compensation in 2024.

Holistic approach to align performance and long-term orientation of the compensation structure

SIG’s compensation framework is designed to align with its values of accountability, long-term growth and ethical leadership. Accordingly, the higher portion of compensation for the members of the Group Executive Board is variable and performance-based, with 71% for the CEO and 57% of total target compensation for other members of the Group Executive Board on average. This ensures that remuneration is closely linked to delivery of tangible results that drive sustainable growth without promoting excessive risk-taking. SIG believes that this approach encourages performance differentiation and excellence among the members of the Group Executive Board for the benefit of the Company and its stakeholders.

The compensation design principles at SIG are long-term oriented with a substantial portion of the overall compensation based on the LTIP. The share-based variable compensation is deferred for three years which is in line with the long-term horizon of the business strategies. The Company believes that this underpins the strong focus on long-term orientation. By integrating these perspectives into the compensation framework, the Company aims to establish alignment and foster a culture of responsible leadership and shared success. The design principles demonstrate the Company’s commitment to delivering consistent and enduring value to its shareholders.

Employment conditions for the Group Executive Board

All members of the Group Executive Board have employment contracts of unlimited duration and a notice period of 12 months, ensuring compliance with applicable laws and regulations. The employment contracts may provide, for a period of up to one year, post-termination compensation for adherence to non-compete clauses. Payment for the non-compete period, if any, amounts to a maximum of one year’s compensation, but in any event no more than the average compensation of the respective member during the three preceding financial years, unless otherwise required by local law. Such contracts do not include any contractual severance payments or any change of control provisions other than accelerated vesting and/or unblocking of unvested share awards from the LTIP.

In the event of a change of control, the LTIP will be terminated while settling contractual claims as of the date of the change of control (which will be defined by the Board if unclear). There are generally no special arrangements in place from which Group Executive Board members (as well as Board members) could benefit in divergence from other plan participants.

Compensation awarded to the Group Executive Board (audited)

Table 3 summarizes the total compensation for the nine members of the Group Executive Board active during 2024, with one new member joining in November 2024. The total regular compensation for the Group Executive Board amounted to CHF 11.0 million.

Table 3: Total compensation of the Group Executive Board in 2024, including figures for the prior year.icon check pink

Approved versus total regular compensation for the Group Executive Board

The total compensation for the Group Executive Board for 2024 is CHF 11.3 million (including social security contributions), which is below the maximum aggregate compensation amount of CHF 18.0 million approved for 2024 at the Annual General Meeting on April 21, 2023. This amount includes CHF 0.2 million relating to payments to one former member of the Group Executive Board.

Short-Term Incentive Plan (“STIP”) 2024

In 2024, the individual short-term incentive target amount equals 100% of the base salary for the CEO and lies between 60% and 84% of the respective base salaries for other members of the Group Executive Board.

The threshold, target and cap (together the “targets”) for both the financial KPIs and the ESG KPI are determined by the Board, based on the recommendation of the Compensation Committee each year following a well-established process. To calibrate the achievement curve for financial KPIs, a financial target achievement level is identified based on the budget of the respective year. Minimum and maximum performance achievement levels are defined taking various factors into consideration, including the previous year’s performance level as well as the notion that higher payouts should require proportionally higher levels of performance achievement. This leads to more ambitious target curves to achieve the maximum payout. In line with this, achieving the target payout for the ESG KPI requires an improvement in the Company’s EcoVadis score, thereby aligning compensation with the Company’s ambition to remain a leader in ESG matters.

Figure 14 illustrates the targets set for the financial year 2024, including threshold and cap for the payout.

Figure 14: Target setting for the Short-Term Incentive Plan for the financial year 2024.

For the Group as a whole, as illustrated in Figure 15 below, the overall STIP plan for 2024 was partially achieved. In terms of financial KPI’s, the carton business achieved a strong result for revenue growth, while the bag-in-box and spouted pouch business suffered in a challenging market environment and did not achieve the revenue target set. The Group’s adjusted EBITDA achievement was slightly below 100% while the target for free cash flow was not met, even though the Group achieved a 32% increase in free cash flow generation compared with 2023. This emphasizes the challenging nature of the targets set. Lastly, SIG achieved a record EcoVadis score in 2024 compared with 2023.

Figure 15: 2024 performance at Group level relevant for STIP performance assessment.

In line with the Company’s revenue guidance, target revenue is reported at constant currency, i.e. target revenue of the Group is calculated at the applied exchange rate used for the Group’s 2024 consolidated financial statements. For the Group’s constant currency definition please refer to the following link https://www.sig.biz/en/investors/financial-definitions. The revenue targets have been decreased or increased respectively based on these definitions.

The result achieved can be adjusted as proposed by the Compensation Committee and approval by the Board.

The achievement for the 2024 STIP was 86.2% for the CEO (21.1% in 2023) and between 41.9% and 148.8% for the other members of the Group Executive Board (14.4% to 107.8% in 2023).

Long-Term Incentive Plan (“LTIP”) 2024

In 2024, the LTIP grant in CHF amounted to 204% of the base salary for the CEO and was between 75% and 149% of the respective base salaries for other members of the Group Executive Board.

The threshold, target and cap (together the “targets”) performance levels for the three LTIP performance measures for the 2024 grant are illustrated in Figure 16 and were set by the Board, based on the recommendation of the Compensation Committee applying a robust, stringent approach supported by HCM International Ltd. The vesting curves for each KPI under the LTIP are defined to support balanced performance and payout situations below and above the target and allow for a realistic performance-related chance to realize vesting.

Figure 16: Overview of the vesting curve of the LTIP 2024.

Given the market sensitivity of the diluted adjusted earnings per share (EPS) and FCF targets, and the fact that the plan runs until 2027, the targets for these measures are disclosed on a relative basis. Investors’ return expectations on market value, stock risk profile, investment projections and current profitability levels were taken as a starting point and translated into EPS and FCF targets, using multifactor valuation models and statistical analyses in order to establish an appropriate link between LTIP payouts and the value created for investors. The results of the outside-in approach were assessed against historical company performance, as well as equity analysts’ expectations and the strategic plan as approved by the Board, in order to reinforce the Compensation Committee’s and Board’s confidence in the overall quality and robustness of the EPS and FCF targets. The Compensation Committee discussed different options for target setting and the corresponding vesting curves for each performance measure and submitted a recommendation to the Board, which approved the respective vesting curves for the LTIP 2024 grant.

The 2021 LTIP grant vested on April 1, 2024 with a 46% payout. This reflects below-target achievement of all three performance measures. The composition of the total vesting multiple is illustrated in Figure 17.

Figure 17: Vesting multiple of the performance share unit grant 2021 for the period 2021 to 2024.

The Compensation Committee has defined a robust process to assess the materiality of major events, such as acquisitions completed during the three-year performance period of the plan. Based on the assessment, results achieved are adjusted to consider the influence of these events.

For an overview of the annual PSUs granted and outstanding PSUs, please refer to note 30 of the consolidated financial statements for the year ended December 31, 2024 as well as the respective shareholding overview in this report.

Assessment of actual compensation paid/granted to the Group Executive Board

In comparison with the previous year, the total regular compensation of the entire Group Executive Board decreased by 3.6%. While the performance-related aspects of the STIP payout, as previously described, increased, the overall movement is mainly driven by the personnel change to the Group Executive Board, and as well as exchange rate movements.

Personnel changes in the Group Executive Board during 2024:

• Fabio Grazioli joined the Group Executive Board on November 15, 2024 as Chief Supply Chain Officer replacing Ian Wood, who resigned effective December 31, 2023.

Impact of currency exchange rates:

Four members of the Group Executive Board were paid in foreign currencies during 2024. Their compensation is converted into Swiss francs for the disclosures in this Report and has changed due to shifts in currency exchange rates, while the compensation amount in local currency has just slightly increased to cover inflation. This leads to slightly different compensation levels in comparison with the previous reporting period.

Figure 18 illustrates the actual compensation mixes for the CEO and the Group Executive Board in 2024, highlighting the strong focus on short- and long-term variable compensation elements.

Figure 18: Overview of the actual compensation mix in 2024 for the CEO and the Group Executive Board excl. CEO (reflects the amount granted under the LTIP).

For the Group Executive Board members excluding the CEO, the fixed components (annual base salary and pension benefits/other benefits) vary between 43% and 51% (45% on average) of the total compensation paid and the variable components vary between 49% and 57% (55% on average) of total compensation paid in 2024.