Georg Fischer : Compensation Report 2023

Corporate Reports 2023

Compensation Report

157

Compensation

Report

Introduction	158
Compensation at a glance	159
Contents	162
Compensation governance	163
Compensation structure	166
Compensation for the financial year 2023	175
Outlook	185
Report of the statutory auditor	186

Corporate Reports 2023

Introduction by the Chairwoman of the Compensation Committee

Dear Shareholders,

At the beginning of the current strategy cycle, which runs from 2021 to 2025, GF adjusted and aligned its compensation system to support the implementation of the Strategy 2025. Three years into this strategic cycle, the Compensation Committee is convinced that the current compensation system is working well and will continue to focus on further improving it as needed.

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In 2023, the most notable extraordinary event was GF's acquisition of Uponor. The Compensation Committee will continue to oversee the integration of Uponor and ensure it proceeds swiftly and seam- lessly as per shareholders' expectations. The following are some of the most important developments arising from the acquisition:

Uponor's CEO Michael Rauterkus joined GF's Executive Committee as of 1 January 2024. This development is addressed in more detail in GF's 2024 Annual Report.

An impact is seen on GF's earnings per share (EPS), being one of the performance metrics in the long-term incentive (LTI) plan for awards to vest. For the awards with a performance period ending in 2023, the direct impact of the acquisitions has been excluded from the EPS performance measure. For 2024 onwards, the Board of Directors will ensure a like-for-like comparison as the Uponor organization will be fully integrated as of 2024. The Board of Directors has engaged with major investors and proxy advisors to align on the most suitable approach to this end. The details thereof are set out in this report, and we will continue to explain any ongoing effects in the coming years and reports.

As announced in the outlook of the 2022 Compensation Report, the Board of Directors approved and implemented a slightly adjusted compensation structure for members of the Board, effective as of the 2023 Annual Shareholders' Meeting. While the total package remains unchanged, the split between cash and shares was adjusted to more closely align with market practice and to mitigate undue exposure to short-term share price volatility.

For 2023, total compensation for the Executive Committee was lower compared with 2022. This was mainly due to the lower STI target achievement of the Corporation and the divisions in 2023: While profitability, thanks to our increased portfolio resilience, remained strong, geostatic and macroeconomic challenges limited the achievement of organic sales growth targets, resulting in a lower overall STI payout.

This Compensation Report includes all relevant information concerning the compensation policy and programs, the governance in place for decisions relating to compensation and the compensation awarded in the reporting year. At the upcoming Annual Sharehold- ers' Meeting, our shareholders will again be asked to approve the maximum compensation amount for the Board of Directors for the period until the next Annual Shareholders' Meeting, and the maximum compensation amount for the Executive Committee for the next financial year (prospective binding votes). Our shareholders' valued opinion will also be sought with regard to the Compensation Report through a consultative retrospective vote.

On behalf of the Board of Directors, I would like to thank you for your valuable feedback and support. We look forward to continuing our constructive dialogue with our shareholders and stakeholders. We remain convinced that GF's compensation system rewards performance in a balanced and sustainable way, and that it is therefore well aligned with the interests of our shareholders.

Sincerely,

Eveline Saupper

Chairwoman of the Compensation Committee

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Compensation at a glance

Compensation for the Board of Directors

Compensation model

In order to ensure independence in their supervisory function, the members of the Board of Directors receive fixed compensation only, paid out in cash and shares that are blocked for five years.

Responsibility	Fee	Restricted shares
Basis fee
Board membership	CHF 100'000	2'500 shares
Additional fees
Board chairmanship1	CHF 260'000	3'500 shares
Independent Lead Director	CHF   22'500
Audit Committee chairmanship	CHF   80'000
Audit Committee membership	CHF   30'000
Compensation Committee chairmanship	CHF   60'000
Compensation Committee membership	CHF   20'000
Nomination and Sustainability Committee chairmanship	CHF   60'000
Nomination and Sustainability Committee membership	CHF   20'000

1 The Chairman of the Board of Directors is not eligible for additional committee fees.

The compensation system for the Board of Directors does not contain any performance-related components.

Compensation awarded for 2023

The compensation awarded to the Board of Directors for the period from the Annual Shareholders' Meeting 2022 to the Annual Share- holders' Meeting 2023 is within the limits approved by the share- holders:

Compensation period	Amount approved	Effective amount
2022-2023	CHF 3'600'0001	CHF 2'846'0002
2023-2024	CHF 3'600'0001	n/a3

1 Based on a share value of CHF 80.00.

2 Based on a share value of CHF 56.60 for the period in 2022 and CHF 61.10 for the period in 2023.

3 Compensation period not yet completed; a conclusive assessment will be provided in the Compensation Report 2024.

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	Compensation at a glance

Compensation for the

Executive Committee

Compensation elements	Purpose	Vehicle	Period	Performance measure
Fixed compensation
Fixed base salary	Pay for the function	Cash	Monthly	Skills, experience and individual
				performance
Benefits	Ensure protection against
	risks such as death,
	disability and old age
Variable compensation
Short-term incentive	Pay for annual	Cash	Annual	Organic sales growth
(STI)	performance based on			Return on sales (EBIT margin)
	GF strategic targets			ROIC
				Sustainability (ESG)
				Individual objectives
Long-term incentive (LTI)	Pay for long-term	Performance shares	3-year vesting and	EPS
	performance		additional 2-year	rTSR
			blocking
	Align with shareholders'
	interests and GF's
	strategy
	Participate in long-term
	success of the company

Performance in 2023

Short-term incentive (STI)

Despite geostatic and macroeconomic challenges, GF grew organically in 2023. Thanks to its increased portfolio resilience, profitability remained strong. The STI payout for 2023 for the Executive Committee (incl. CEO) is based on target achievements in the range from 96.4% to 122.1% and was lower than for the previous year, mainly due to the increased aspirational targets set for the reporting year.

Long-term incentive (LTI)

The vesting level of the LTI plan 2021 (performance period ended at the end of 2023) amounted to 150.0% (cap) for the EPS-related performance shares and 111.0% of target for the rTSR-related performance shares, resulting in an overall vesting level of 130.5%. The above information includes EPS-related adjustments in connection with the Uponor acquisition in 2023, ensuring like-for-like measurement as explained in more detail in the relevant sections below.

Compensation awarded for 2023

The compensation awarded to the Executive Committee (including the CEO) for 2023 is within the limits approved by the shareholders at the 2022 Annual Shareholders' Meeting:

Compensation period	Amount approved	Effective amount
2023	CHF 11'402'000	CHF 9'067'000

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	Compensation at a glance

The ratio between fixed and awarded variable compensation in 2023 was as follows:

CEO compensation for 2023

in CHF 1'000	Fixed base salary
3'220	29%

Short-term incentive 35%

Long-term incentive 26%

Benefits 10%

Executive Committee compensation (incl. CEO) for 2023

in CHF 1'000	Fixed base salary		Short-term incentive
9'067	35%		30%

Compensation principles

The compensation policy applicable to the Executive Committee is designed to attract, motivate and retain talented individuals based on the following principles:

• Fairness and transparency;

• Pay for performance, business and sustainability strategy implementation;

• Long-term orientation and alignment to shareholders' interests;

• Market competitiveness.

Compensation governance

• Authority for decisions related to compensation is governed by GF's Articles of Association;

• The Board of Directors is supported by the Compensation Committee in preparing all compensation-related decisions regarding the Board of Directors and the Executive Committee;

• The maximum aggregate amounts of compensation for the members of the Board of Directors and the Executive Committee are subject to binding prospective shareholders' votes at the Annual Shareholders' Meeting;

• In addition, the Compensation Report is subject to a retrospective consultative vote at the Annual Shareholders' Meeting.

Long-term incentive 24%

Benefits 11%

Corporate Reports 2023

Contents

The Compensation Report provides information about the compensation policy, the compensation programs and the process for determining compensation for the Board of Directors and the Executive Committee of GF. It also includes details on the compensation payments related to the 2023 business year.

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This report is written in accordance with the Swiss Code of Obligations ("CO"), the standards for information on corporate governance issued by the SIX Swiss Exchange and the principles of the Swiss Code of Best Practice for Corporate Governance of Economiesuisse.

The Compensation Report is structured as follows:

Compensation governance

Rules relating to compensation in the Articles of Association Compensation Committee

Levels of authority

Method used to determine compensation

Compensation structure

Compensation of the Board of Directors

Compensation principles

Compensation model

Shareholding ownership guideline

Compensation of the Executive Committee

Compensation principles

Compensation model

Compensation mix and caps

Fixed base salary

Short-term incentive

Long-term incentive (share-based compensation)

Clawback and malus provisions

Benefits

Contractual terms

Shareholding ownership guideline

Compensation for the financial year 2023

Board of Directors Executive Committee Performance in 2023

Shareholdings of the members of the Board of Directors and of the Executive Committee Loans to members of the governing bodies Functions of the members of the Board of Directors Functions of the members of the Executive Committee Outlook

Report of the statutory auditor

Corporate Reports 2023

Compensation governance

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Rules relating to compensation in the Articles of Association

The Articles of Association of GF contain provisions regarding the compensation principles applicable to the Board of Directors and to the Executive Committee. These provisions can be found on GF's website and include:

• Principles of compensation of the Board of Directors (Article 22);

• Principles of compensation of the Executive Committee (Article 23c);

• Additional amount for new members of the Executive Committee (Article 23c.9);

• Provisions on the employment contracts for members of the Executive Committee (Article 23b);

• Credits and loans (Article 23d.1);

• Provisions on early retirement for members of the Executive Committee (Article 23d.2).

According to articles 22 and 23 of the Articles of Association, the

Annual­ Shareholders' Meeting approves annually the maximum aggregate compensation of the Board of Directors for the period from the Annual Shareholders' Meeting to the next Annual Shareholders' Meeting, as well as the maximum aggregate compensation of the ­Executive Committee for the following calendar year. In addition, the Compensation Report is submitted to the Annual Shareholders' Meeting for an advisory vote on a yearly basis, so that shareholders can express their opinion on the compensation policy and programs.

Compensation Committee

The Compensation Committee consists of three non-executive members of the Board of Directors who are elected annually and individually by the Annual Shareholders' Meeting for a one-year period until the next Annual Shareholders' Meeting. At the 2023 Annual Share- holders' Meeting, Eveline Saupper (Chairwoman) and Roger Michaelis were re-elected as members of the Compensation Committee. Riet Cadonau was replaced by Michelle Wen, who was elected as a new member of the Compensation Committee. The Compensation Committee supports the Board of Directors with the following duties:

• Determining the compensation policy of the company at the highest corporate level, including the principles for the variable compensation and shareholding programs;

• Reviewing the guidelines governing compensation of the Board of Directors and the Executive Committee;

• Preparing the motions related to the maximum aggregate amounts of compensation for the Annual Shareholders' Meeting;

• Proposing the amount of compensation to be paid to the Board of Directors, to the CEO and to the other members of the Executive Committee within the limits approved by the Annual Shareholders' Meeting;

• Reviewing and proposing the annual Compensation Report to the Board of Directors.

During 2023, the Compensation Committee performed the following tasks:

• Reviewed the benchmark analysis prepared in 2022 for the compensation of the Board of Directors and, based on the outcomes, proposed adjustments to the Board of Directors;

• Conducted a benchmark analysis for the compensation of the CEO and of the other members of the Executive Committee, and proposed salary adjustments to the Board of Directors;

• Evaluated the business performance for the 2022 financial

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	Compensation governance

year against the pre-set objectives and prepared a proposal for the Board of Directors on the short-term incentive to be paid to the CEO and to the other members of the Executive Committee;

• Determined the business objectives for the 2023 financial year for the CEO and reviewed those of the other members of the Executive Committee before submitting them to the Board of Directors for approval;

• Assessed the impacts of the Uponor acquisition on the ongoing compensation models;

Overview of meeting schedule 2023

• Reviewed the Compensation Report 2022 and prepared the compensation motions to be submitted to vote at the 2023 Annual Shareholders' Meeting;

• Reviewed and discussed the voting results on the compensation motions at the 2023 Annual Shareholders' Meeting, as well as the proxy advisors' and shareholders' feedback received on compensation matters;

• Engaged with proxy advisors and major shareholders on compensation matters in order to gather their feedback and comments;

• Prepared the Compensation Report 2023.

The Compensation Committee convenes as often as necessary, but at least twice per year. In 2023, the Committee held four meetings of approximately two hours each, according to the schedule below:

January (27 January)	February (22 February)	October (13 October)	December (8 December)

Final decision on changes for the Board of Directors compensation and proposed adjustments to the Board of Directors

Business performance 2022; approval of the STI 2022 (business and individual objectives) for CEO and EC

Target setting for the STI 2023 (business and individual objectives) for CEO and EC

Review of draft of the

­Compensation Report 2022

Approval of the LTI 2019 vesting and LTI 2023 grant

Approval of the Compensation Report 2022

Determination of maximum amounts of compensation for the Board of Directors until the next Annual Shareholders' Meeting

Determination of maximum amounts of compensation for the EC for the business year 2024

Analysis of the voting outcomes for compensation motions at the Annual Shareholders' Meeting

Review of proxy advisors' and investors' feedback on compensation

Assessment impact of a possible acquisition of Uponor on compensation models

Review of compensation for the Board of Directors for the next compensation period

Benchmarking of compensation for the CEO and EC members

Review of target compensation for the CEO and EC members for the coming financial year

Review of proxy advisors' and investors' feedback on compensation, in particular due to Uponor acquisition

Decision on LTI adjustments due to Uponor acquisition

Review of draft of the Compensation Report 2023

In 2023, except for one meeting at which a member of the Board of Directors was absent with apologies, all Compensation Committee members attended all meetings­. The Chairman of the Board, the CEO, the Head of Corporate Human Resources and the Head of Corporate Compensation and Benefits are invited to attend the Compensation Committee meetings in an advisory capacity. The Chairman of the Board and the CEO do not attend the meeting when their own compensation or performance is discussed.

The Chairwoman of the Compensation Committee reports to the Board of Directors at each private meeting about the activities of the Compensation Committee. The minutes of the Compensation Committee meetings are available to all members of the Board of Directors.

Compensation proposals and decisions are made based on the following levels of authority:

Levels of authority

Approval framework

Subject	Recommendation from	Final approval from
Compensation policy and principles	Compensation Committee	Board of Directors
Aggregate compensation amount	Board of Directors based on proposal by	Annual Shareholders' Meeting (binding vote)
of the Board of Directors	Compensation Committee
Individual compensation of the members	Compensation Committee	Board of Directors
of the Board of Directors
Aggregate compensation amount	Board of Directors based on proposal by	Annual Shareholders' Meeting (binding vote)
of the Executive Committee	Compensation Committee
Individual compensation of the CEO	Compensation Committee based on proposal	Board of Directors
	by the Chairman of the Board
Individual compensation	Compensation Committee based on proposals	Board of Directors
of the Executive Committee members	by the CEO
Compensation Report	Board of Directors based on proposal by	Annual Shareholders' Meeting (consultative vote)
	Compensation Committee

Corporate Reports 2023

Method used to determine compensation

Benchmarking

The compensation structure and levels of the Board of Directors and the Executive Committee are reviewed every two to three years and are tailored to the relevant sectors and labor markets in which GF competes for talent. For the purpose of comparison, the Compensation Committee relies on compensation surveys published by independent consulting firms and on publicly available information such as the compensation disclosures of comparable companies.

Comparable companies are defined as multinational industrial companies listed on the Swiss stock exchange (SIX) with a similar business model and size in terms of market capitalization, sales, number of employees, complexity and geographic scope. The peer group for the compensation benchmark of the Board of Directors and the Executive Committee include the following Swiss companies: Bucher ­Industries, DKSH, dormakaba, Geberit, OC Oerlikon, SIG Combibloc, Sonova, Straumann and Sulzer. Compensation benchmarking was last conducted in 2023.

Performance management

The Compensation Committee also takes into consideration effective business and individual performance while determining the compensation amounts to be paid to the CEO and to the other members of the Executive Committee. Individual performance is assessed through the annual Management By Objectives (MBO) pro- cess, for which individual objectives are defined at the beginning of the year and the achievement against those objectives is evaluated at the end of the year. The objective setting and the performance assessment of the members of the Executive Committee are conducted by the CEO and by the Chairman of the Board for the CEO. The performance assessment of the CEO and the other members of the Executive Committee is reviewed by the Compensation Committee.

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Compensation governance

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Compensation structure

Compensation of the Board of Directors

Compensation principles

In order to ensure their independence in exercising their supervisory duties, the members of the Board of Directors receive fixed compensation only. The compensation is paid partially in cash and partially in shares blocked for a period of five years in order to closely align their compensation with shareholders' interests.

Compensation model

The compensation applicable to the Board of Directors is reviewed every two to three years based on competitive market practice, and its basic structure is kept as constant as possible.

In order to guarantee the independence of the members of the Board of Directors in executing their supervisory duties, their compensation is fixed and does not contain any performance-related compo- nent. The annual compensation for each Member of the Board of Directors depends on the functions and tasks carried out in the year under review, and consists of an annual basis fee paid in cash and in blocked shares, as well as additional committee fees paid in cash.

	The Compensation Committee conducted a benchmarking analysis
	in 2022 for the Board of Directors' compensation using the same
	approach as in prior years. Feedback from exchanges with investors­
	and proxy advisors was also taken into consideration. The results
	showed that total compensation levels are in line with the market.
	However, the Board membership basis cash fee was found to be
	lower, while the share-based compensation was determined to be
	higher compared to the peer group. This leads to volatility in total
	compensation when the share price fluctuates. To better balance
	cash and share-based compensation and to reduce the volatility of
	total compensation, the Board of Directors approved, based on the
	proposal of the Compensation Committee, the following new com-
	pensation structure for members of the Board of Directors, with
	effect­	from the Annual Shareholders' Meeting 2023:
Compensation model
Responsibility	Fee		Restricted shares
Basis fee
Board membership	CHF 100'000	2'500 shares
Additional fees
Board chairmanship1	CHF 260'000	3'500 shares
Independent Lead Director	CHF   22'500
Audit Committee chairmanship	CHF   80'000
Audit Committee membership	CHF   30'000
Compensation Committee chairmanship	CHF   60'000
Compensation Committee membership	CHF   20'000
Nomination and Sustainability Committee chairmanship	CHF   60'000
Nomination and Sustainability Committee membership	CHF   20'000

1 The Chairman of the Board of Directors is not eligible for additional committee fees.