4. Compensation governance
Our Articles of Association govern decision-making authorities for the Board and the Group Executivesʼ compensation.
Binding votes: Each year at the AGM, shareholders vote prospectively on the maximum aggregate compensation amounts:
- Board: For the period until the next AGM
- Group Executives: For the following financial year.
Advisory vote: Shareholders also vote at each AGM on the Compensation Report itself, allowing them to express their opinion on whether the compensation framework and overall approach is appropriate.
Articles of Association
Sonovaʼs 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. 6/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)
As determined in the Articles of Association, the Organizational Regulations, and the Nomination and Compensation Committee Charter, the Nomination and Compensation Committee (NCC) supports the Board in fulfilling its duties and responsibilities in compensation and personnel matters. In particular:
- Periodical review of Sonovaʼs compensation principles
- Periodical benchmark reviews covering the compensation of the Board (including the Board Chair), the CEO, and other Group Executives
- A yearly review of the individual compensation of the CEO and other Group Executives, including the levels of VCC and EEAP
- Review of the target-setting and related performance appraisals of Group Executives (prepared by the CEO) and CEO (prepared by the Board Chair)
- Preparation of the Compensation Report
- Succession planning of the Board and the Group Executives
- Pre-selection of suitable candidates for the Board, selection and nomination of candidates for the role of the CEO, and for nomination to the Group Executives as proposed by the CEO
- Periodical review of employment terms and policies.
Decision on | CEO | NCC | Board of Directors | AGM | ||||
Compensation principles and system for the Board and the Group Executives | propose | approve | ||||||
Maximum aggregate amount of compensation for the Board and the Group Executives to be submitted to binding and separate shareholder votes | propose | review and propose to AGM | binding votes | |||||
Individual compensation, including cash components and shares, to be granted to the Board members1 | propose | approve | ||||||
Individual compensation, including fixed base salary, VCC, and EEAP of the CEO1 | propose | approve | ||||||
Employment terms of the CEO1 | propose | approve | ||||||
Individual compensation, including fixed base salary, VCC, and EEAP of the other Group Executives (excluding CEO)1 | recommend | propose | approve | |||||
Annual total amount of EEAP to be granted to all other eligible employees | recommend | propose | approve | |||||
Compensation Report | propose | approve | advisory vote |
1Within the framework of the Articles of Association and the maximum aggregate amount of compensation approved by the AGM.
The NCC consists exclusively of independent, non-executive members of the Board, each elected individually and annually at the AGM. During the reporting period, the committee comprised Roland Diggelmann (Chair of the NCC), Gregory Behar, and Julie Tay.
The NCC meets at least four times per year, with additional meetings as required. In the 2025/26 financial year, it held 7 meetings covering the following recurring agenda items, among others:
Item | May | September | November | January | ||||
Compensation policy & process | Approval of Group Executives’ compensation benchmark peer group | Update on feedback from key investors and proxy advisors following AGM vote Information on compensation review process for leaders below Group Executives | Preview of Group-wide salary review for the following financial year | Approval of Group-wide EEAP grant Approval of EEAP plan regulations | ||||
Board & Group Executive matters | Approval of payout of VCC for the previous financial year Vesting of EEAP for the previous EEAP cycle | Review of Board and Group Executives’ compensation benchmarks | Preview of target compensation review for the following financial year (including EEAP grant) | Review of target compensation for the following financial year (including EEAP grant) Approval of VCC performance scheme for the following financial year Setting of EEAP performance targets for the next EEAP cycle | ||||
Governance | Approval of corporate governance, Compensation Report, and compensation part of the AGM invitation Proposal of maximum aggregate amount of compensation for Board and Group Executives submitted to AGM vote Share ownership status review of the Board and Group Executives Review and approval of NCC charter | Review of proxy advisor/shareholder feedback on Compensation Report Board evaluation | Review of first draft of Compensation Report Approval of EEAP pool for yearly grant | Approval of draft 2025/26 Compensation Report without financials | ||||
Nomination | Succession planning for the Group Executives |
Ad hoc items, such as executive personnel changes, are addressed when they arise.
The Board Chair, CEO, Chief Human Resources Officer (CHRO), and VP Total Reward typically attend NCC meetings, but are excluded when their own performance or compensation is under discussion. Each meeting ends with a closed session.
The Chair of the NCC reports to the Board on committee activities and recommendations after each meeting. NCC meeting minutes are available to all Board members.
External advisors
The NCC may decide to consult external advisors for specific compensation matters. In the reporting year, Aon was tasked with the performance share unit (PSU) valuation and performance measurement under the EEAP; Algofin performed the option valuation. PricewaterhouseCoopers (PwC) and Willis Towers Watson (WTW) provided support in the context of the benchmarking review of compensation for the Board and the Group Executives. HCM International Ltd. provided support in the context of the compensation review for the Board and the Group Executives (see Outlook section). PwC also provided support in the preparation of the Compensation Report. The external advisors provided independent advice and expertise to the NCC in connection with compensation related matters.
Compensation structure and components
The compensation structure and components for the Board and the Group Executives are reviewed periodically to ensure that they continue to be aligned with Sonovaʼs strategy and external market practice.
Benchmarks
Sonova conducts benchmarking analysis of the levels and structure of total compensation for the Board and the Group Executives regularly.
The primary peer group of Swiss listed companies and secondary peer group of international companies were amended to exclude companies with a limited free float, a different size, or a non-producing business focus, and to include companies more relevant to Sonova. The benchmark analysis for the Board was based on the primary peer group, while for the Group Executives both the primary and secondary peer groups were considered.
Swiss Listed Companies
Alcon Inc., Barry Callebaut AG, Bucher Industries AG, Clariant AG, dormakaba Holding AG, Geberit AG, Georg Fischer AG, Givaudan SA, Chocoladefabriken Lindt & Sprüngli AG, Lonza Group AG, OC Oerlikon Corporation AG, SIG Group AG, Sika AG, Straumann Holding AG, Sulzer AG, Tecan Group AG.
Exclusion of EMS-Chemie Holding AG, Mettler-Toledo International Inc., Schindler Holding AG, SGS SA, The Swatch Group AG, and VAT Group AG and inclusion of Alcon Inc., Lonza Group AG, and OC Oerlikon Corporation AG.
International companies
Align Technology, Inc., Amplifon S.p.A, Carl Zeiss Meditec AG, Cochlear Limited, Coloplast A/S, ConvaTec Group plc, Demant A/S, Dentsply Sirona Inc., Fielmann Group AG, Fresenius SE & Co. KGaA, GN Store Nord A/S, Hologic, Inc., HOYA Corporation, Mettler Toledo, Koninklijke Philips N.V., Smith+Nephew plc, Teleflex Incorporated, WS Audiology A/S, Zimmer Biomet Holdings, Inc.
Inclusion of ConvaTec Group PLC and HOYA Corporation. Mettler-Toledo International Inc. reclassified from the Swiss listed companies.
For the Board of Directors, the benchmarking analysis confirmed that the fee structure for the Board of Directors is consistent with common market practice. Additionally, while some committee fees were below the target for competitive positioning, total fees remain appropriate in the context of the external market. The use of equity-based fees to compensate the Board, and their relative weighting, are also in line with market practice.
The compensation structure of the Group Executives continues to be generally in line with both Swiss and international market practice. A small number of structural adjustments were made in the reporting year, given the latest external benchmark information and some material changes being made to the roles of specific Group Executives.