Governance and shareholder involvement - Sonova Annual Report 2024/25

5.1 Governance and shareholder involvement

Authority for decisions related to compensation of the members of the Board of Directors and the Management Board is governed by the Articles of Association.

The prospective maximum aggregate compensation amounts to be awarded to the Board of Directors and the Management Board are subject to a yearly binding shareholder vote at the AGM. The provisions of the Articles of Association foresee that shareholders vote prospectively: on the maximum aggregate compensation for the Board of Directors for the period until the next ordinary AGM, and for the Management Board for the following financial year. In addition, Sonova annually submits the compensation report to a consultative shareholder vote, so that our shareholders have an opportunity to express their opinion on the compensation of the previous financial year.

This year, Sonova has engaged with in depth dialogue with shareholders and proxy advisors and has made significant efforts to improve its compensation disclosure in terms of transparency and level of detail provided about its principles and system of compensation. In 2024/25 we have introduced several improvements to the compensation report in response to the feedback received from our shareholders.

Matters to be voted on at the 2025 Annual General Shareholdersʼ Meeting

The maximum aggregate compensation amount for the Board of Directors comprises fixed compensation components, including a cash retainer and restricted shares as well as committee fees (as applicable).

The maximum aggregate compensation amount for the Management Board (including the CEO) comprises:

Fixed compensation components:

Fixed base salary, value of benefits and employerʼs contributions to Sonovaʼs pension plan.

Variable compensation components:

Short-term cash incentive award (VCC): maximum possible payout under the VCC, should the achievement of all performance objectives reach the cap.
Long-term equity incentive award (EEAP): fair value of the equity awards at grant (performance options and PSUs).

Due to the maximum possible VCC payout, the maximum aggregate compensation amount submitted to shareholder vote is very likely to be higher than the actual amount of total compensation for the members of the Management Board based on the performance achieved in the financial year. The total compensation amount awarded to the Management Board will be disclosed in the compensation report for the respective financial year, which will be subject to a consultative shareholder vote at the AGM.

We are convinced that the binding prospective votes on the maximum aggregate compensation amounts, combined with a consultative retrospective vote on the compensation report, provide Sonovaʼs shareholders with a far-reaching “say on pay.”

Articles of Association

The Articles of Association regarding the compensation of the members of the Board of Directors and the Management Board were revised and approved by the 2014 AGM, and amended and approved to be compliant with the revised OR by the 2023 AGM. The Articles of Association include the following provisions on compensation:

Powers and duties (Art. 24)
Approval of compensation by the General Shareholder Meeting (Art. 10 para. 5/Art. 26)
Additional reserve amount for changes in the Management Board (Art. 27)
General compensation principles (Art. 28)
Maximum consideration for non-competition agreement (Art. 29 para.3)
Prohibition on loans (Art. 31)

The Articles of Association are available in their entirety here.