Sika : Compensation Report - Annual Report 2022

SIKA

BUSINESS YEAR

2022

WWW.SIKA.COM/ANNUALREPORT

SIKA ANNUAL

COMPENSATION REPORT

The compensation system is well balanced and supports the long-term value creation for Sika and its stakeholders.

100%

independent Nomination

and Compensation Committee

Safety

introduced as performance metric for 2023

COMPENSATION REPORT

The Compensation Report describes the compensation principles and programs, as well as the governance framework related to the compensation of the Board of Directors and the members of Sika's Group Management. The report also provides details regarding the compensation programs and the payments made to members of the Board of Directors and of Group Management in the 2022 business year.

The Compensation Report is written in accordance with the Ordinance against Excessive Compensation in Listed Stock Corporations, 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 by economiesuisse. It has the following structure:

Introduction by the Chair of the Nomination and Compensation Committee	179
Compensation governance	180
Architecture of compensation of the members of the Board of Directors	185
Architecture of compensation of the members of Group Management	186
Compensation awarded to the Board of Directors in 2022 (audited)	192
Compensation awarded to the CEO and to Group Management in 2022 (audited)	193
Shareholdings of the members of the Board of Directors and Group Management in 2022	197
Report of the statutory auditor	198

SIKA ANNUAL REPORT 2022	178
Compensation Report

Introduction by the Chair of the Nomination and Compensation Committee

Dear Shareholders,

In the name of the Board of Directors and the Nomination and Compensation Committee, I am pleased to introduce the 2022 Compensation Report.

Sika achieved an all-time high in sales in fiscal year 2022 exceeding the CHF 10 billion sales mark for the first time; it also set a record in profit. EBIT amounted to CHF 1,579.4 million (previous year: CHF 1,391.4 million) increasing by 13.5%. The EBIT margin expanded to 15.1% (previous year: 15.0%). The takeover of MBCC is now in the final stages. An agreement was signed with Ineos in January 2023 for the purchase of parts of MBCC Group's admixtures business. The closing of the acquisition is scheduled for the first half of 2023. The Compensation Report outlines how the business results impacted the variable incentive payments made to the members of Group Management under the different compensation plans.

In the reporting year, the Nomination and Compensation Committee continued to focus on the succession planning for positions on the Board of Directors and Group Management. At the 2022 Annual General Meeting on April 12, 2022, Lucrèce Foufopoulos-De Ridder and Gordana Landén were elected as members of the Board of Directors; Lucrèce Foufopoulos-De Ridder was appointed member of the Audit and of the Sustainability Committees, and Gordana Landén member of the Nomination and Compensation Committee.

The Nomination and Compensation Committee performed its regular activities on compensation matters throughout the year, such as the annual review of the compensation programs, the performance goal-setting of Group Management at the beginning of the year and the performance assessment at year-end, the determination of the compensation of the members of the Board of Directors and Group Management, as well as the preparation of the Compensation Report and of the say-on-pay votes at the Annual General Meeting. In particular, the Nomination and Compensation Committee reviewed the shareholding ownership guidelines for the Board of Directors and the Group Management:

• In order to reinforce the link with shareholders' interests, the Nomination and Compensation Committee proposed to introduce shareholding ownership guidelines for the Board of Directors: members of the Board of Directors are required to own at least 200% of their annual board retainer in Sika shares within five years of their election to the Board of Directors. This measure was approved by the Board of Directors in May 2022 and is applicable as of the Annual General Meeting 2022.
• In addition, the Nomination and Compensation Committee decided to increase the shareholding owner- ship requirement for the CEO from 300% to 500% of the annual base salary, in order to align Sika's policy to market practice and to even further align the interests of the CEO to those of the shareholders.

Further information on these changes can be found in the respective sections of this Compensation Report.

At the 2022 Annual General Meeting, a binding vote on the aggregate maximum compensation amounts for the Board of Directors and for Group Management was conducted, as well as a consultative vote on the Compensation Report, so that shareholders could express their opinion on our compensation policies and principles. The shareholders approved the compensation amounts for the Board of Directors and for Group Management and the consultative vote on the Compensation Report with a very high approval rate. These positive voting outcomes demonstrate that the company's active dialogue with investors is fruitful and that shareholders endorse the company's compensation system. We would like to thank investors for their continued trust and support.

Looking ahead, we will continue to assess and review our compensation programs to ensure that they are still fulfilling their purpose in the evolving context in which the company operates and are aligned with the interests of our shareholders. We will also continue to maintain an open dialogue with our shareholders and their representatives. We would like to thank you for sharing your perspectives on executive compensation with us, and trust that you will find this report informative.

Chair of the Nomination and Compensation Committee

SIKA ANNUAL REPORT 2022	179
Compensation Report

Compensation governance

NOMINATION AND COMPENSATION COMMITTEE

In accordance with the Articles of Association and the Organizational Rules of Sika AG, the Nomination and Compensation Committee is composed of three members of the Board of Directors who are elected individually by the Annual General Meeting for a period of one year. At the Annual General Meeting 2022, Mr. Justin M. Howell (Chair), Mrs. Gordana Landén, and Mr. Thierry F. J. Vanlancker were elected members of the Nomination and Compensation Committee.

It is the responsibility of the Nomination and Compensation Committee to:

• review and determine the compensation policy, including the principles for variable compensation and shareholding programs according to the provisions specified in the Articles of Association;
• propose to the Board of Directors the maximum aggregate amounts of compensation of the Board of Directors and of Group Management to be submitted to the shareholders' vote at the Annual General Meeting;
• propose to the Board of Directors the compensation level for the members of the Board of Directors, the CEO, and the other members of Group Management, within the maximum aggregate compensation amounts approved by the Annual General Meeting;
• provide the Board of Directors with a performance assessment of the CEO and of the other members of Group Management, together with a recommendation for the short-term and long-term incentives to be awarded to each of them, based on their individual performance and the performance of the company;
• propose to the Board of Directors the Compensation Report;
• prepare the succession planning of the CEO and other members of Group Management, and propose to the Board of Directors the appointment of new members of Group Management;
• prepare the succession planning of the Board of Directors and propose to the Board of Directors new can- didates to the Board of Directors.

LEVELS OF AUTHORITY

		CEO		BoD Chair		NCC		BoD		AGM
Compensation policy and principles						Proposes	Approves
Maximum aggregate compensation						Proposes		Reviews	Approves
amounts of BoD and GM									(binding votes)
Compensation of BoD Chair						Proposes	Approves
Individual compensation of						Proposes	Approves
BoD members
Compensation of CEO				Proposes		Reviews	Approves
Individual compensation of		Proposes				Reviews	Approves
members of GM
Compensation Report						Proposes	Approves		Consultative vote

CEO = Chief Executive Officer, BoD = Board of Directors, NCC = Nomination and Compensation Committee, AGM = Annual General Meeting, GM = Group Management

In 2022, the Nomination and Compensation Committee held five meetings according to the following predetermined annual agenda.

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Compensation Report