2011 ACTELION
COMPENSATION REPORT
ADDITIONAL INFORMATION FOR SHAREHOLDERS
The Annual General Meeting (AGM) in 2012 will give Actelion's shareholders their first opportunity to take part in a
consultative vote on the Company's Compensation Report. As this vote will be consultative it will not be binding in nature,
however, the Board of Directors takes the views of Actelion's shareholders seriously. In order to ensure that shareholders
have all of the information they require in order to make informed judgements about Actelion's compensation policies
and programmes, this document contains more detailed information on certain aspects than is required to be disclosed
in the Compensation Report together with the outcome of bonus arrangements in respect of the 2011 financial year,
which had not been finalised by the time the Compensation Report was published in the 2011 Annual Report.
1. COMPENSATION STRATEGY AND PHILOSOPHY
Actelion's compensation strategy supports its effort to attract, engage and retain the best professionals in a competitive
environment for talent and to align employee rewards with sustainable performance.
The key principles underpinning our compensation strategy are to:
•
•
•
•
offer competitive compensation
ensure fairness and transparency in compensation decisions
support a pay for performance culture linked with sustainable value creation
share company success with our employees
The objective is to set levels of compensation that are comparable to other organisations with whom Actelion competes
for talent. To encourage and reward superior performance, we include a significant variable pay element in the form of
short- and long-term incentives.
Remuneration of the members of the AEC (Actelion Executive Committee) is typically composed of: base salary; shortterm incentives, comprising a performance cash bonus plan and a deferred cash profit-sharing plan; and long-term
incentives in the form of share options and/or restricted share units.
2. AEC (ACTELION EXECUTIVE COMMITTEE) MEMBER’S REMUNERATION
2.1.
BASE SALARY
• Set according to the level of responsibility, skills and experience required. • For members of the AEC and other executives in specific pharmaceutical functions, a peer group of European
pharmaceutical companies is used to benchmark levels of compensation.
• For executives in other functions, the Company also has regard to data from other listed Swiss companies as well as
European companies of a similar size.
• Salaries are reviewed annually taking account of individual performance as well as market and company conditions.
The table below summarises current and historic base salary increases for the CEO and other members of the AEC:
Q1 2012
2011
2010
Jean-Paul Clozel
2.50%
3.00%
5.00%
Other Executive Committee Members (average)
2.63%
4.27%
2.43%
Total AEC Average
2.60%
4.11%
2.75%
AEC member included in the above table based on AEC membership for each respective year
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2011 Actelion Compensation Report - Additional Information for Shareholders
2.2.
SHORT-TERM INCENTIVES
As a means of fostering a pay for performance culture, all permanent employees of Actelion are eligible to participate
in a cash bonus plan and receive special awards.
Members of the AEC and certain other senior executives are eligible to participate in addition to a deferred cash profit
sharing bonus.
2.2.1. PERFORMANCE CASH BONUS
• The target bonus level for the CEO is 100% of his base salary and for other members of the AEC it ranges between
30% and 50% of their respective base salary.
• Depending on performance, bonuses of between 0% and 130% of the target levels can be paid.
• Awards are subject to the achievement of defined goals related to corporate, business unit and individual performance. The weighting of performance measures is shown in the table below:
CEO
Other AEC
members
100%
10%
Business Unit
-
40%
Individual Performance
-
50%
Corporate
• For 2011, the corporate performance measures were sales, profit and project or operational achievements.
• For 2012, the corporate performance measures will be sales and profit achievements.
Performance against the corporate measures and the performance of the CEO are evaluated by the Board of Directors.
The performance of business units is approved by the Board of Directors upon the recommendation of the CEO. The
performance of individual members of the AEC reporting to the CEO is evaluated by the CEO and approved by the Board
of Directors.
The Compensation Committee met in February 2012 to approve bonuses in respect of 2011. Bonuses paid in respect of
2011 and each of the previous two financial years are summarised in the table below:
Q1 2012
2011
% of salary
% of salary
% of salary1
Jean-Paul Clozel
100.00%
100.00%
100.00%
Other Executive Committee Members (total)
61.23%
48.69%
52.63%
Total
70.89%
61.58%
72.57%
Performance year/Payout year
1
1
2010
1
salary at the year end of each performance year
AEC members included in the above table based on AEC membership at time of payment
2.2.2. SPECIAL AWARDS
As a mean to incentivise and reward special achievements, special awards may be paid out.
All amounts in CHF
Q1 2012
2011
2010
0
0
0
1’325’000
300’000
250’000
Jean-Paul Clozel
Other Executive Committee Members (total)
AEC members included in the above table based on AEC membership at time of payment
2.2.3. DEFERRED CASH PROFIT SHARING BONUS
The deferred profit sharing bonus comprises a pool of value created from a percentage of Actelion's operating profit
determined by the Compensation Committee at the beginning of each financial year. Participation is offered to selected
executives as a means of recognising their contribution to the Company and assisting with their retention. Its principal
terms are summarised below:
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2011 Actelion Compensation Report - Additional Information for Shareholders
• Eligible executives are selected for participation in the plan at the beginning of each financial year and conditionally
allocated a number of points in the pool based on their level of responsibility and performance.
• Award levels are capped at the average base salary of the level to which each executive is matched within the
Company global grading system.
• Following the end of the financial year an incentive pool is created and deferred for a further twelve months. • Payments are conditioned to the employment of the participant by the Company until the end of the deferral period.
Payouts under the plan in respect of each of the last three financial years are summarised in the table below:
2010/2012
2009/2011
2008/2010
% of salary
% of salary
% of salary1
Jean-Paul Clozel
68.28%
41.67%
45.28%
Other Executive Committee Members (total)
93.73%
77.00%
85.57%
Total
83.06%
67.78%
74.05%
Performance year/Payout year
1
1
1
salary at the year end of each performance year
AEC members included in the above table based on AEC membership at time of payment
Given the impact on the 2011 accounts of the ongoing litigation in relation to the Asahi legal action, the payouts to be
made in 2013 under the 2011 plan have not yet been finally determined and have been made dependent on the outcome
of the appeal that has been introduced. Depending on the outcome of this litigation, the payout under the plan will be
between 0% and 100% of the target level. The actual level of payout will be reported in the 2013 Annual Report.
The deferred cash profit sharing bonus is entirely at the discretion of the Board of Actelion Ltd. The Board will review
the achievement of strategic initiatives and ensure that the long-term objectives are not compromised for the sake of
reaching a higher operating profit. The Board of Actelion Ltd may decide at anytime to suspend or cancel participation
of a participant from the deferred cash profit sharing bonus as well as individual bonus payouts.
2.3.
LONG-TERM INCENTIVES
Actelion's long-term incentive plans are aimed at aligning the interests of Directors, employees and shareholders. All
Directors and employees are eligible to receive awards of long-term incentives. These are described in detail below.
• Members of the AEC, are eligible to receive long-term incentive awards in the form of share options under the
Employee Stock Option Plan ('ESOP') and Restricted Stock Units ('RSUs') under the Employee Share Plan ('ESP'). The members are given the choice between receiving their award entirely in the form of stock options or in the form
of RSUs or a mix of the two.
• Awards granted since April 2009 vest and become exercisable three years after the date of grant subject to continued
employment
• Options generally expire between 10 and 10.5 years after the grant date.
• Any unvested awards under the ESOP or ESP normally lapse immediately on cessation of employment, other than in
predefined good leaver circumstances, on a change of control or at the discretion of the Committee. In such
circumstances awards would not normally vest until the normal vesting date and are pro-rated to reflect the amount
of time elapsed since grant.
• Prior to 2012, the CEO was granted equities under the plans applying to Directors (DSOP and DSP). From 2012
onwards, his equities will be granted under the employees’ equity plans (ESOP and ESP).
The total fair value of planned and actual awards of stock options and RSUs to members of the AEC in 2012 and in the
three previous financial years are summarised in the table below:
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2011 Actelion Compensation Report - Additional Information for Shareholders
Q1 2012
Jean-Paul Clozel
2011
2010
Fair value of
awards
Fair value of
awards
Fair value of
awards
Fair value of
awards
Fair value of
awards
Fair value of
awards
CHF
% of
salary
CHF
% of salary
CHF
% of salary
DSOP
668,403
61.80%
964,800
89.21%
643,028
26.03
1,336,800 127.31%
ESOP
DSP
0
0%
ESP
Other Executive Committee
ESOP
Members (total)
ESP
0
0%
1,861,757 91.68%
Total
2,425,273 77.47%
3,200,922 129.56
1,874,428 59.87%
5,477,153 154.19
5,636,501 134.83%
* Prior to 2012, the CEO was granted equities under the plans applying to Directors (DSOP and DSP). From 2012 onwards, his equities will be granted under the employees’
equity plans (ESOP and ESP). For 2012, his equity award will be granted on the day of the AGM 2012.
AEC members included in the above table based on AEC membership at time of equity allocation
2.3.1. THE 2008-2011 ACTELION SHARE CHALLENGE PLAN ('THE PLAN')
The Plan was initiated in 2008 to promote a long-term perspective on managing the business in alignment with
shareholder interests and to reward long-term employee dedication.
• All permanent employees and Directors who joined the company by the end of 2009 were allocated awards of RSUs. • Vesting of RSUs was based on three performance conditions, which relate to the Actelion's product development,
revenue and clinical development performance. The revenue generation objective was achieved in 2010 and the
remaining two were achieved in 2011.
• The Board of Directors confirmed that the performance conditions were met and approved the allocation of RSUs,
which vested on 3 January 2012 according to the plan regulations.
The number and total fair value of RSUs vesting in 2012 is summarised in the table below:
Fair value on
date of vesting
CHF
% of salary1
Jean-Paul Clozel
10,000
331,400
29.89%
Other Executive Committee Members (total)
9,005
298,426
18.39%
19,005
629,826
Total
1
Fair value on
date of vesting
Salary effective at time of vesting
AEC members included in the above table based on AEC membership at time of vesting
2.4.BENEFITS
In 2011 the company paid additional employer contributions to social security schemes and pension plans on behalf of
AEC members totalling CHF 1,070,286. The Company also paid other benefits for transportation allowances, car
allowances and contributions to gym memberships totalling CHF 60,800.
2.5.
NOTICE PERIODS AND TERMINATION PROVISIONS
The CEO and other members of the AEC have contracts which provide for 3 months notice from the employee and from
the Company.
In addition, there are addendums to the contracts of all members of the AEC and 79 key employees within the Group
providing for compensation in case of loss of position because of a change in control of the ownership of Actelion.
These individuals may receive a severance payment equivalent to twice their total yearly cash compensation and fringe
benefits. However, this severance payment would only be due if, within six months prior to or two years after the effective
date of a change in control, the company terminates the employee‘s employment without Cause or the employee
terminates his or her employment with Good Reason. Good Reason being:
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2011 Actelion Compensation Report - Additional Information for Shareholders
• a reduction in the key employee‘s salary, or
• a material reduction, or adverse or substantive change in the key employee‘s duties or responsibilities, or
• the requirement that the key employee relocate to a worksite more than fifty (50) kilometres from the employing
company’s current principal office.
In addition, in the case of change of control equities granted to these individuals under Actelion's long-term incentives
will vest immediately and become exercisable.
No other severance agreements have been entered into with members of the AEC.
2.6.
PLANNED CHANGES TO AEC REMUNERATION FOR 2012
• During the course of 2012 the Compensation Committee plans to introduce clawback provision that will enable the
Company to reclaim from its employees the value of incentives that were paid as a result of a material misstatement
of the Company's accounts for the relevant financial year or in circumstances of gross misconduct by an individual
participant in the plan.
• Untill 2011, the CEO was granted equities under the plans applying to Directors (DSOP and DSP). From 2012 onwards,
his equities will be granted under the employees’ equity plans (ESOP and ESP).
3. NON-EXECUTIVE BOARD MEMBER COMPENSATION
The compensation of the Non-Executive members of the Board of Directors is benchmarked every three years against
a peer group of European and US pharmaceutical companies. The current package of compensation consists of annual
retainers for Board membership and for committee membership plus meeting fees paid according to attendance at
Board and committee meetings.
In addition to retainers and meeting fees paid in 2011, the Company paid employer contributions on behalf of the
Non-Executives and a former member to social security schemes totalling CHF 161,113.
Non-Executives could choose to take part of their retainer as an allotment of shares under the DSP and/or in stock
options under the DSOP and/or in cash. The DSP and DSOP are described above.
Retainers are paid in respect of a typical annual time commitment. Where this is significantly exceeded, the Company
has discretion to pay additional compensation to reflect the additional time commitment. In consideration of the
significant additional time commitments of the Non-Executives during 2011, the Company paid additional fees. In
addition, Jean-Pierre Garnier received a supplementary retainer of CHF 405’000 linked to his election as Chairman of
the Board in the course of 2011.
3.1.
PLANNED CHANGES TO NON-EXECUTIVE BOARD MEMBER COMPENSATION FOR 2012
The Board of Directors is currently reviewing the compensation of its Non-Executive members. This review remains
ongoing; however, the Board has decided to make the following changes to the compensation of its Non-Executive
members.
• In line with market practice, the meeting fees that are currently paid in addition to the annual Board and committee
retainers will be consolidated into the annual retainer.
• The Company will continue to retain flexibility to pay additional compensation to its Non-Executive Board members
where in exceptional circumstances their normal annual time commitment is significantly exceeded.
• Non-Executives will no longer be offered the opportunity to receive part of their annual retainer in the form of stock
options and will therefore only be offered the opportunity to receive their annual retainers in cash and/or as an
allotment of shares.
• The Company intends to introduce share ownership guidelines for its Non-Executives under which they will be
required to acquire and retain shares worth a set multiple of their annual retainer.
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2011 Actelion Compensation Report - Additional Information for Shareholders