Board compensation

Compensation principles and governance

The compensation system for the members of the Board of Directors is designed to attract and retain experienced people in the role. Compensation for Board members takes into account the responsibilities, time and effort required to fulfill their roles on the Board and its committees.

The compensation of Board members is fixed. They do not receive variable compensation, underscoring their focus on corporate strategy, supervision and governance. However, in order to further align the interests of Board members with those of ABB’s shareholders, half of each member’s compensation has to be paid in the form of ABB shares, although Board members can choose to receive all of their compensation in shares. The shares are kept in a blocked account for three years. Departing Board members are entitled to the shares when they leave the company.

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. The number of shares delivered is calculated prior to each semi-annual payment by dividing the sum to which the Board members are entitled by the average closing price of the ABB share over a predefined 30-day period. Board members do not receive pension benefits and are not eligible to participate in any of ABB’s employee incentive programs. In accordance with Swiss law, none of ABB’s Board members receive golden parachutes or other special benefits in the event of a change of control. Furthermore, no credits and loans may be granted to Board members.

The CC is responsible for making recommendations to the Board regarding the level of compensation of Board members. Based on the recommendation of the CC and subject to any limits approved by the shareholders, the Board determines the compensation of each of its members.

Exhibit 3: Approval process for Board compensation
Board compensation – Approval process for Board compensation (graphic)Board compensation – Approval process for Board compensation (graphic)

Shareholders decide on the maximum aggregate compensation to the Board.

From time to time the Board and CC review the levels and mix of compensation of Board members against the compensation of non-executive board members of publicly traded companies in Switzerland that are part of the Swiss Market Index.

Level and development of Board compensation

The compensation amounts per Board member for the 2015–2016 and 2014–2015 terms of office were:

Exhibit 4: Total compensation per Board member (audited)

Name

Specific Board Roles

Board term
2015–2016

Board term
2014–2015

 

 

CHF

CHF

(1)

Peter Voser joined the Board as Chairman at the 2015 ABB Ltd AGM succeeding Hubertus von Grünberg who did not stand for re-election

(2)

David Constable joined the Board at the 2015 ABB Ltd AGM

(3)

Michael Treschow did not stand for re-election at the 2015 ABB Ltd AGM

 

Key:

 

CC: Compensation Committee

 

FACC: Finance, Audit & Compliance Committee

 

GNC: Governance & Nomination Committee

 

 

 

 

Peter Voser(1)

Chairman of the Board and Chairman of GNC 2015-2016

1,200,000

-

Hubertus von Grünberg(1)

Chairman of the Board and GNC member 2014-2015

-

1,200,000

Jacob Wallenberg

Vice-Chairman of the Board and GNC member 2015-2016; FACC member 2014-2015

450,000

330,000

Roger Agnelli

FACC member

330,000

330,000

Matti Alahuhta

FACC member 2015-2016 and GNC member

360,000

320,000

David Constable(2)

CC member 2015-2016

320,000

-

Louis R. Hughes

Chairman of FACC

400,000

400,000

Michel de Rosen

Chairman of CC

350,000

350,000

Michael Treschow(3)

Chairman of GNC 2014-2015

-

380,000

Ying Yeh

CC member

320,000

320,000

Total

 

3,730,000

3,630,000

For compensation amounts per Board member in the calendar years 2015 and 2014, see Exhibit 19.

The increase in the total compensation of the Board members is due to the addition of a vice-chairman role in the 2015-2016 term. The roles and responsibilities of Board members are described in the Corporate governance report, section "Board of Directors".