Board compensation

Compensation principles

The compensation system for the members of the Board is designed to attract and retain experienced people on the Board. Compensation of Board members takes into account the responsibilities, time and effort required to fulfill their roles on the Board and its committees. From time to time the levels and mix of compensation of Board members are compared against the compensation of non-executive board members of publicly traded companies in Switzerland that are part of the Swiss Market Index.

The compensation of Board members is fixed. They do not receive variable compensation or pension benefits, underscoring their focus on corporate strategy, supervision and governance. In accordance with Swiss law, Board members may not receive golden parachutes or other special benefits in the event of a change of control. Board members are paid for their service over a 12-month period that starts with their election at the AGM. Payment is made in semi-annual installments in arrears.

In order to further align the interests of Board members with those of ABB’s shareholders, half of their total compensation has to be paid in ABB shares, although Board members may choose to receive all of their compensation in shares. The number of shares delivered is calculated prior to each semi-annual payment by dividing the monetary amount to which the Board members are entitled by the average closing price of the ABB share over a predefined 30-day period. The shares are subject to a three-year restriction period during which they cannot be sold, transferred or pledged. Any restricted shares are unblocked when the Board member leaves the Board.

Structure of Board compensation

The structure of Board compensation for the term of office from AGM to AGM is described in Exhibit 4.

Exhibit 4: Structure of Board compensation

 

Board term fee (CHF)

(1)

The Chairman and Vice-chairman did not receive any additional committee fees for their roles on the GNC.

(2)

CC: Compensation Committee.

 

FACC: Finance, Audit & Compliance Committee.

 

GNC: Governance & Nomination Committee.

Chairman of the Board(1)

1,200,000

Vice-chairman of the Board(1)

450,000

Member of the Board

290,000

 

 

Additional committee fees:

 

Chairman of FACC(2)

110,000

Chairman of GNC and CC(2)

60,000

Member of FACC(2)

40,000

Member of GNC and CC(2)

30,000

The compensation amounts paid to the Board members for the calendar year 2016 and for the term of office from the 2016 AGM to the 2017 AGM are disclosed in Exhibits 19 and 20, respectively, in the section “Compensation and share ownership tables”.