Compensation Report

1. Governance and methods to determine compensation

1.1 Shareholders’ involvement

The Annual General Meeting approves the maximum compensation amounts paid to the Board of Directors and to the Group Executive Committee, each in a binding vote. The provisions of the Articles of Association of Zehnder Group (www.zehndergroup.com/en/investor-­relations/­corporate-governance; Article 15) envisage that the Annual General Meeting votes annually and prospectively on each of the aggregate compensation amounts as follows:

• The maximum total compensation of the Board of Directors for the period up to the next Annual General Meeting;
• The maximum total compensation of the Group Executive Committee for the current fiscal year.

The Articles of Association of Zehnder Group (www.zehndergroup.com/en/investor-­relations/­corporate-governance; Article 31 et seq.) include the following provisions on compensation:

• Principles of compensation and the allocation of listed shares to the Board of Directors (Articles 31 and 33);
• Principles of compensation and the allocation of listed shares to members of the Group Executive Committee (Articles 32, 33 and 35);
• Additional amount for payments to members of the Group Executive Committee appointed after the vote on compensation at the Annual General Meeting (Article 36);
• Loans, credit facilities, and post-employment benefits for members of the Board of Directors and of the Group Executive Committee (Article 34).

In addition, in accordance with the requirements of the Code of Obligations, shareholders can express their views on the compensation system by means of an annual consultative vote on the compensation report.

1.2 Nomination and Compensation Committee

According to the Articles of Association, on an annual and individual basis, the Annual General Meeting elects at least two and no more than four members of the Board of Directors to the Nomination and Compensation Committee for a term of office of one year until the conclusion of the next Annual General Meeting. Members are eligible for re-election. At the 2024 Annual General Meeting, the shareholders elected the following members of the Nomination and Compensation Committee:

The responsibilities of the Nomination and Compensation Committee are set out in the Articles of Association (www.zehndergroup.com/en/investor-relations/corporate-governance; Article 26) and Organisational Regulations (www.zehndergroup.com/en/investor-relations/corporate-governance; Article 4.3.) and include the following duties with reference to compensation:

• Submission of motions to the Board of Directors relating to the Group's remuneration system;
• Submission of motions to the Board of Directors relating to targets set for the Group Executive Committee, the achievement of which has an impact on remuneration;
• Provision of information to the Board of Directors on all events relating to the Nomination and Compensation Committee that are not the direct responsibility of the Board of Directors;
• Submission of motions to the Board of Directors relating to the specific remuneration paid to the Chairman of the Board of Directors and each of the other members of the Board of Directors;
• Submission of motions to the Board of Directors relating to the specific remuneration paid to the CEO as well as the specific remuneration paid to each of the other members of the Group Executive Committee;
• Submission of proposals to the Board of Directors relating to amendments to the Articles of Association affecting the remuneration system for compensating the members of the Group Executive Committee;

The levels of authority, held by the Nomination and Compensation Committee, the Board of Directors and the Annual General Meeting are summarised by the following table.

Responsibility levels

The Nomination and Compensation Committee meets as often as business matters require, generally before meetings of the entire Board of Directors, which take place at least four times a year. In 2024, the Nomination and Compensation Committee met five times, for an average of one and a half hours, generally with the participation of all members and with the support of Group HR.

In general, the Chairman and Vice Chairman of the Board of Directors as well as the CEO attend the meetings in an advisory capacity. The Chairman of the Nomination and Compensation Committee may invite other executives as appropriate. However, the Chairman of the Board of Directors and the executives do not participate in the meetings or parts thereof if their own compensation and/or performance is under discussion. After each meeting, the Chairman of the Nomination and Compensation Committee reports on the activities of the Committee to the Board of Directors. The minutes of the Committee meetings are available to the Board of Directors.

The Nomination and Compensation Committee is entitled to involve external consultants regarding specific compensation-related matters. In 2024, the Nomination and Compensation Committee commissioned PricewaterhouseCoopers (PwC) to conduct a benchmark for the compensation of the members of the Group Executive Committee and Willis Towers Watson to provide benchmark data for a new Group Executive Committee member in North America.

1.3 Method to determine compensation

The compensation of the Board of Directors is reviewed every two to three years, most recently in 2023. The benchmark analysis carried out by Willis Towers Watson was used to define the benchmark companies in a more precise manner. Parameters such as threshold and cap in terms of market capitalisation, turnover, and number of employees have been defined, alongside the criteria of operating in the same or similar industry, stock exchange listing, having headquarters in Switzerland, and business activities in the same or a similar geographical scope. The following companies were therefore selected for comparison: Arbonia, Belimo, Bossard, Burckhardt Compression, Burkhalter, Bystronic, Daetwyler, Feintool, Forbo, Gurit, Huber+Suhner, Interroll, Kardex, Komax, Landis+Gyr, Meier Tobler, Phoenix Mecano, Rieter, Schweiter Technologies, Tecan, VAT Group, Vetropack, and V-Zug.

The benchmark has also been used to review the compensation model in market comparison since its introduction in the 2021/2022 term of office. The result of the analysis has confirmed the level of compensation with no adjustment to the fixed annual retainer nor to the fixed cash compensation for membership of committees of the Board of Directors. The review took into consideration the additional duties of the Chairman of the Board of Directors and the additional responsibility of the Vice Chairman of the Board of Directors as Lead Independent Director.

The compensation of Group Executive Committee members is also regularly benchmarked against that of executives from comparable international industrial companies in order to ensure competitive compensation levels that enable key talent to be attracted and motivated on a long-term basis. Executives who attain the defined performance objectives are generally awarded target compensation at market median level of the relevant benchmark data.

The benchmark data constitute just one of the factors taken into consideration by the Nomination and Compensation Committee when determining the compensation of members of the Group Executive Committee. Additional factors are also considered, such as the internal compensation structure (equity), the profile of the Group Executive Committee member (skill set, experience), and the responsibilities borne by that member. The performance of the company in any given year has a direct impact on the short- and long-term incentives paid to the members of the Group Executive Committee.

In 2024, the consulting firm PwC performed a benchmarking analysis for the compensation of the Group Executive Committee members in Switzerland. For this purpose, PwC used benchmark data from industrial companies from its existing database. The selection criteria for the peer group were reviewed and aligned with the group of companies used for the previous year’s benchmark for the Board of Directors. These companies fulfil the selection criteria, and the following companies were therefore selected for comparison: Arbonia, Belimo, Bossard, Burckhardt Compression, Burkhalter, Bystronic, Daetwyler, Feintool, Forbo, Gurit, Huber+Suhner, Interroll, Kardex, Komax, Landis+Gyr, Meier Tobler, Phoenix Mecano, Rieter, Schweiter Technologies, Starrag, Tecan, VAT Group, Vetropack, and V-Zug. The benchmark helps the Nomination and Compensation Committee to analyse the compensation of members of the Group Executive Committee in Switzerland and decide on any adjustments for the 2025 business year.