3. Architecture of compensation of the Board of Directors

In order to guarantee their independence in their supervisory position for the Group Executive Committee, the members of the Board of Directors receive a fixed compensation only, consisting of a fixed annual retainer, fixed cash compensation for their membership of committees of the Board of Directors, and an expense lump sum.

In order to strengthen the alignment to long-term shareholder interests, payment of the fixed annual retainer for the Board of Directors is made half in cash and half in the form of registered shares A of Zehnder Group. The number of shares awarded is determined based on the average volume-weighted share price in the period between 1 and 31 December of that year. The shares are subject to a restriction period of three years during which they cannot be sold, transferred, or pledged. The restriction period also applies in the case of termination of the mandate, except in case of death or change of control, where the restriction immediately lapses.

The cash compensation is paid out on a monthly basis and the registered shares A are allocated in January for the current compensation period corresponding to the term of office from the Annual General Meeting of the previous year to the Annual General Meeting of the reporting year.

Additional compensation to members of the Board of Directors for advisory services to the company or for activities in companies that are controlled directly or indirectly by the company is permitted. This compensation is reflected in the total amount of compensation paid to the Board of Directors, which must be approved by the Annual General Meeting.

The compensation of the Board of Directors is reviewed every two to three years, and most recently in the reporting year. The benchmark analysis carried out by Willis Towers Watson was used firstly to define the benchmark companies more clearly and secondly to review the compensation model since its introduction in the 2021/22 term of office in comparison to the market. This resulted in a confirmation of the existing compensation.

The compensation structure of the Board of Directors is summarised in the following table.

Architecture of compensation of the Board of Directors

CHF	In cash	In shares 1
Retainer (gross p.a.)
Chairman of the Board of Directors 2	210,000	210,000
Vice Chairman of the Board of Directors 3	90,000	90,000
Members of the Board of Directors	50,000	50,000
Committee fees (gross p.a.)
Chairman of the Nomination and Compensation Committee or Audit Committee	50,000
Member of the Nomination and Compensation Committee or Audit Committee	25,000
Expense lump sum (gross) 4	2,000

1 Converted into shares on the basis of the average volume-weighted share price in the period between 1 to 31 December

2 Further duties of the Chairman of the Board of Directors are listed in the Corporate Governance Report.

3 The Vice Chairman of the Board of Directors also fulfils the role of Lead Independent Director.

4 The Chairman and Vice Chairman of the Board of Directors are paid an expense lump sum in line with the company’s rules on executives’ expenses depending on the work commitment (currently 50% for the Chairman of the Board of Directors and 25% for the Vice Chairman). No expense lump sum is paid to members of the Board of Directors based outside Switzerland. If the actual business expenses exceed CHF 2,000, then they are reimbursed on an actual cost basis.