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The system applied for the compensation of the Board of Directors is based on the “total compensation” approach and comprises:

  • a basic salary
  • long-term incentives (shares) and
  • fringe benefits.

The members of the Board of Directors receive the fixed compensation proposed by the NCC (generally in December) and approved by the full Board whose amount per Board role is specified in the “Compensation Elements of the Board of Directors of Kuoni Travel Holding” regulations of 18 April 2007. These regulations were devised at Kuoni’s own discretion on the basis of the Ethos Survey entitled “Executive Remuneration in the 100 Largest Companies listed in Switzerland” of November 2006 and a report on compensation practices for chairmen of the board of directors produced by the CC&T company in 2002. In 2012 PricewaterhouseCoopers, Zurich was commissioned with conducting an analysis of the structure and amount of the compensation for the Board of Directors. The fixed compensation awarded to members of the Board of Directors has been confirmed (instead of adjusted) annually since 2007.

50% of the total compensation paid to members of the Board of Directors is paid in cash form; the remaining 50% is paid in shares. The issue price of the shares concerned is redefined each year and amounts to the average of all closing prices for the last ten trading days of the month before the Ordinary General Meeting of Shareholders. The shares are awarded on the trading day following the day of dividend distribution after the Ordinary General Meeting of Shareholders, and are subject to a blocking period of three years.

The members of the Board of Directors are entitled to travel concessions which predominantly match those granted to Kuoni Group employees.


The compensation guidelines of the Kuoni Group are an integral part of Kuoni’s personnel policy, and are intended to motivate and retain existing employees, to recruit talented new personnel and to help and encourage all employees to deliver a performance that is of a continuously high level. The Kuoni Group’s compensation system is based on the “total compensation” principle and comprises:

  • a basic salary
  • short-term incentives (personal performance in relation to quality/quantity goals, and financial results in relation to budget)
  • long-term incentives (value-adding performance and further corporate development in relation to the objectives set) and
  • fringe benefits.

The short-term and long-term incentives offered are closely linked to the company’s financial development and success. This establishes and maintains a commonality of interests between the company’s shareholders and its employees.

The Kuoni Group maintains various forms of pension and other retirement benefit schemes for employees entitled thereto. These schemes cover a large majority of the Kuoni Group’s personnel. For further details, please refer to pages 177 to 180 in the Financial Report.

It is the duty of the Group Executive Board and of Human Resources Management to ensure that Kuoni attracts, retains and further develops the best executive talent in the respective business area within the Kuoni Group.

A Management Performance Plan (MPP) compensation system has been in place since 2008 for Group Executive Board members and senior management (Senior Vice Presidents and Vice Presidents) groupwide. Under the MPP, the members of the Group Executive Board can receive compensation for the 2012 business year which is divided into a fixed (roughly 40%) and a variable (roughly 60%) performance-based component. Around one-third of this variable component takes the form of a short-term incentive, while the remaining two-thirds take the form of a long-term incentive.

The short-term incentive is based in equal amounts on the achievement of annual financial targets (the 2012 Kuoni Group EBIT compared to budgeted projections, with a possible target achievement of between 0% and 200%) and personal targets (with a possible target achievement of between 0% and 120%), with payment in April 2013 in cash form. The personal targets here should always serve to help ensure the overall further development of the Group or the business units concerned. The personal targets for Group Executive Board members are proposed by the CEO, discussed on the NCC and approved by the Board of Directors. The personal targets for the CEO are proposed by the Chairman of the Board of Directors. These personal targets generally fall into four categories – strategy, transformation, people and stakeholders – with their relative weightings varying according to the function held.

The long-term incentive, which uses a PSP to assign the persons entitled thereto a certain number of Kuoni shares at the beginning of each plan period (business year), is based by contrast on the valueadding performance achieved over a three-year period extending from 2012 to 2014. The number of shares assigned at the beginning of the reference period will be multiplied by a “performance factor” whose value will depend on the subsequent performance achieved in the period concerned.

A long-term incentive will only be paid if no negative cumulative EBIT is incurred in the reference period concerned. The performance factor will range, based on actual performance achieved, between a floor of 0.25 and a cap of 3. The basis of this financial performance assessment is the value-based management performance indicator known as the “Kuoni Economic Profit” or KEP.

For clarification purposes the challenge of achieving a “Factor 1” result under the above provisions is shown below.

The KEP target is based primarily on two considerations. First, the KEP target reflects a risk-adjusted expected return (8.5% WACC) that is based on market value. Secondly, as a profit value, the KEP incorporates not only operating costs but also the costs of capital employed. As such, it represents a far more challenging target than the usual profit criteria.

The maximum factor of 3 will only be applied if investor expectations (8.5% WACC) have been clearly exceeded in return terms.

Kuoni’s long-term incentive (LTI) is designed to be self-financing, i.e. any additional costs incurred through the LTI are already included in the KEP result. Kuoni strives to enable its management to participate in the company’s value-adding achievements in accordance with the “pay for performance” principle. The LTI plan provides such participation in the event of both over- and underperformance. In accordance with this, a factor of zero will be applied if the EBIT result falls below a specified level. Based on the entitlement of international plan participants and the past history of Kuoni’s longterm incentive systems, the current long-term incentive plan has a maximum factor of 3, to ensure that significant overperformance over a longer period can continue to be rewarded appropriately.

The calibration of the KEP target for the long-term incentive is essentially based on an investor’s perspective which considers not only Kuoni but also comparable companies with similar business portfolios. This process also pays due regard to the growth expectations, risk profiles, investment levels and profitability levels that are typical of the industry. All such considerations flow directly into the Kuoni KEP target-setting process.

The KEP target-setting process assumes that investors expect a risk-adjusted return on their investment which is based on market value, and translates such expected returns over a three-year period into operational KEP targets. The KEP target for the Kuoni Group for the 2012– 2014 period was devised with the assistance of independent external consultants Hostettler Kramarsch & Partner, Zurich, based on shareholders’ expectations (external perspective, 8.5% WACC).

The shares concerned will be awarded in April 2015, based on actual performance in the corresponding reference period. Once awarded, the shares will not be subject to any further vesting period.

The LTI plan is intended to provide the company’s top management with a further incentive to contribute to the success and business health of the Kuoni Group, and thereby enhance the Group’s market value, to the benefit of its shareholders. The plan should also enable the company’s top management to participate in the Kuoni Group’s long-term success.

In the event of a change of control of the company, the present compensation system excludes on principle the conclusion of any generous “golden parachute” agreements. Apart from any possible legal obligations, the system also excludes any kind of severance payments in the event of termination of employment.

Contractual obligations dating from 2005 exist in respect of one member of the Group Executive Board. Under these obligations, should the employment be terminated by the employer, the Group Executive Board member concerned will receive six monthly salaries plus one monthly salary for every year of their age after age 47 until age 56.

No share options have been issued since 2005.

The Kuoni Group’s compensation programmes have been designed to ensure that they are comparable and competitive with those of a benchmark group of other world-class corporations of similar rank and renown which are also constantly on the lookout for management talent worldwide.

The total compensation (including basic salary, incentives and fringe benefits) paid to members of the Group Executive Board is determined with due regard to a market comparison conducted by Mercer Zurich management consultants. This comparison considers comparable roles of international corporations of comparable size from all industry sectors. Mercer Zurich was not commissioned with any further services by Kuoni Travel Ltd. in 2012.