Compensation of the Executive Committee

Compensation set-up

Compensation philosophy

Our remuneration principles are in line with how the top executives of listed companies in the EU and Switzerland are rewarded. Our approach focuses on creating long-term stakeholder value, and we align compensation not only with financial targets but also with sustainability goals and ambitions. The key elements of our compensation philosophy and implementation guidelines are set out in the overview below.

Benchmarking

Compensation for the Executive Committee is benchmarked against the market to ensure that we attract and retain talented leaders and remain competitive. This includes a quantitative review of remuneration levels as well as a qualitative review of best practices and developments regarding remuneration in the public domain. A labor market peer group (see table below) has been defined. The peer group includes manufacturing companies headquartered in Europe (a mix of Switzerland, the Netherlands, and others); US companies are excluded. Acknowledging recommendations by shareholder representatives, selected peer group companies are comparable in size and complexity. Indicators considered in this respect are market capitalization, revenue, and number of employees.

Positioning

The remuneration structure was established in 2023, reflecting the position of dsm-firmenich in the selected peer group.

Total Direct Compensation opportunity for the CEO has been positioned around the median of the peer group. There is a strong focus on long-term value creation in the pay-mix design: the maximum payout can only be achieved by delivering exceptional performance.

This approach also applies to the other Executive Committee Members and serves as the remuneration reference for existing and future Executive Committee appointments, considering the scope and responsibilities of the role. Total remuneration for the individual Executive Committee Members is around the median of the peer group.

Pay-mix

The direct compensation of the Executive Committee Members is approved by the Board of Directors. It comprises:

• Total Direct Compensation (base salary, Short-Term Incentive, Long-Term Incentive)
• Benefits, including pension benefits and risk insurances, company car, and social security contributions

Total Direct Compensation is strongly linked to the short- and long-term success of the company. The incentive plans are designed to link award opportunities to business performance. For the CEO, 75% of the at-target Total Direct Compensation is linked to incentive programs. Outstanding business performance and achievements may result in pay-out or vesting above target, while performance that remains below expectation results in a pay-out below target or a (partial) forfeiture of LTI grants. Each of the components is further explained hereafter. The graph below provides an overview of the applicable pay-mix.

Base salary

With reference to the Total Direct Compensation benchmark, base salary is set acknowledging the scope of responsibilities, competencies and skill set, and competitive market data. It is the foundation for determining the Short- and Long-Term incentive opportunity.

Base salary is reviewed annually and may be adjusted considering the responsibilities in the role, performance, and contribution of the Executive Committee Members as well as market movements.

Pension and other benefits

The CEO participates in an international pension plan, while the Members of the Executive Committee participate in the local pension plan of the country in which their employment resides. The benefits to be accrued under the respective (international) plans are similar to the plans applicable to the workforce in the respective countries (the international plan mirrors the Swiss pension scheme).

Typical other benefits include a company car and risk insurances in the event of death in service or full disability. In specific situations, temporary housing or typical expatriation benefits may be foreseen.

Short-Term Incentive

The Short-Term Incentive (STI) scheme is designed to reward short-term (operational) performance within the long-term objective of creating sustainable value and growth, considering the interests of all stakeholders. For at-target performance, the annual STI opportunity amounts to 85% or 100% of annual base salary. The maximum pay-out is capped at 200% of target.

For each goal, a target will be set corresponding to a 100% pay-out. In addition, a floor defines the level of performance below which no pay-out will be made, while the cap represents the level of performance at which the maximum pay-out is 200% of the target opportunity. Pay-out levels between floor, target, and the cap are calculated by linear extrapolation.

In determining the target achievement, the Board of Directors shall assess whether the result is fair given business circumstances and may at their sole discretion adjust achievement accordingly. The STI is subject to an overall threshold. If the actual Adjusted EBITDA over the performance year does not reach 75% of the budgeted Adjusted EBITDA of the year, no STI will be awarded at all.

Long-Term Incentive

The Long-Term Incentive (LTI) is designed to ensure long-term value creation and alignment with the interests of all stakeholders and supports the retention of talented leaders.

The LTI scheme is a rolling cliff plan covering a three-year performance period. Any grant is subject to goals set by the Board of Directors. For each goal, a target will be set corresponding to the level of performance that will result in an at-target vesting (i.e., 100% achievement of the target). In addition, a floor defines the level of performance below which no vesting will take place, while the cap represents the level of performance at which the maximum vesting is earned. Achievement between floor, target, and the maximum is calculated by linear extrapolation. Final assessment of target achievement is at the sole discretion of the Board of Directors.

The at-target grant level for the CEO represents 200% of base salary; maximum vesting is capped at 150% of target. For other Executive Committee Members, the at-target grant is set at 120% or 100% of base salary, with maximum vesting capped at 150% or 200% of target respectively.

Main plan features:

• Grant of Performance Share Units (PSUs), i.e., the right to receive – upon vesting – one ordinary dsm-firmenich share for each PSU, provided the vesting criteria are met
• In specific situations, also the grant of Restricted Share Units (RSUs) is possible
• Vesting is subject to continued employment and the achievement of the performance goals set for the respective grant
• Vesting and holding period: three years starting from the grant date
• Performance period: three financial years starting on 1 January of the year of grant
• The number of share units to be granted is determined by the base salary at the grant date and the average share price over the reference period to be set by the Board of Directors
• At vesting, Grantees may elect a sell-to-cover in order to settle the withholding of social security contributions and withholding of taxes due at the vesting date

Share ownership guidance

To align the interests of the Executive Committee Members even further with those of our stakeholders, the Members of the Executive Committee are required to hold a minimum multiple of their annual base salary in dsm-firmenich ordinary shares equivalent to:

• CEO: three times annual base salary
• Other Members: one annual base salary

The required value must be accrued within a five-year period. Only shares in the form of fully vested shares obtained upon the vesting of share units granted under a Company program or shares privately acquired on the open market are considered.

Goal setting

A broader set of key performance indicators is in place for dsm-firmenich, some of which feature in our incentive programs. This relates to targets that reflect our financial performance and sustainability goals, since bringing progress to life goes hand in hand with profitable growth. The design of our Short- and Long-Term Incentive plans emphasizes the importance of building long-term growth opportunities. Our goals underpin our commitment to contribute to a better world, while at the same time generating profitable growth in line with our key strategic goals.

Concerning our incentive programs, the Board of Directors will set goals, their weight, and targets (i.e., the metric to be achieved) for each performance year or equity grant. The weighting shall reflect the importance of both financial and sustainability aspirations. In doing so, the Board of Directors may respond in an agile way to business needs and/or strategy adjustments in a changing environment. In doing this, the Board of Directors shall:

• Derive goals from the company strategy
• Focus on objectives instrumental to achieving long-term value creation
• Consider historical performance, business outlook and circumstances, and priorities
• Take into account stakeholders’ expectations
• Ensure that targets are stretching, in order to drive competitive advantage while discouraging excessive risk-taking

No individual goals are included.

Following the end of an applicable performance period, the Board of Directors will compare the actual performance with the targets that were set and will assess whether the result is considered fair given (business) circumstances and may adjust, at their sole discretion, achievement accordingly. Within the limits of business-sensitive information, dsm-firmenich will give stakeholders insight into target-setting and achievement.

Employment terms and conditions

All employment agreements of the Members of the Executive Committee include a clause prohibiting (changes in) pay to be executed if such (change in) remuneration is not included in the maximum amount of remuneration approved by the General Meeting.

Members of the Executive Committee have an employment agreement for an indefinite period of time and are subject to a notice period of six or 12 months. During this period (unless there has been a termination for cause), entitlement to base salary and STI continues. Unvested Long-Term incentives grants are forfeited on the effective date of a resignation or termination for cause. In other cases of a termination of employment, unvested LTI grants will vest on a pro rata basis on the effective date of such termination.

In accordance with Swiss law, no severance payments or change-in-control provisions are agreed or paid. The employment arrangements of the CEO and the Members of the Executive Committee include non-compete as well as non-solicitation clauses.

Non-compete provisions will be activated on a case-by-case basis and are in line with the Swiss Code of Obligations and shall not exceed a period of 12 months. Indemnities in view of a non-compete will consider base salary and benefits only (over the term the non-compete applies). The Board of Directors may, at its discretion, recover variable remuneration awarded on the basis of incorrect data, provided that such recovery is required by law and/or will result in the re-statement of annual accounts. This right of recovery shall expire three years from the date of the adoption by the General Meeting of the annual accounts in which the (last instalment of the) applicable variable remuneration has been accounted for.

Compensation of the Executive Committee in 2024

Composition of the Executive Committee

In 2024, no changes in the composition of the Executive Committee occurred.

Base salary

Base salaries were slightly adjusted in line with observed market movements. On an annual basis, the CEO’s base salary was, with effect from 1 April 2024, adjusted to CHF 1,383,750. This represents an increase of 2.5% compared to 2023 (CHF 1,350,000).

Pension and other benefits

The total contribution to the pension plan for the CEO amounted to €192,086 (CHF Value: 180,791). For the Members of the Executive Committee, the amount is €1,189,469 (CHF Value: 1,119,528). The spend on other benefits, such as a company car and risk insurances in the event of death in service or full disability, as well as housing and other benefits associated with international assignments, amounted to €5,379,749 (CHF Value: 5,063,420).

Short-Term Incentive (STI)

On an annual basis, the at-target STI opportunity is set at 100% of base salary for the CEO. The at-target STI for other Members of the Executive Committee is set at 85% or 100% of base salary on an annual basis. The maximum pay-out is capped at 200% of the at-target opportunity. Goals have been defined by the Board of Directors; for each goal (overview below), a target and pay-out curve are defined:

• If the defined target is achieved, the pay-out is equal to the at-target percentage times base salary times the weight assigned to the respective goal
• A minimum floor is set for each goal; an achievement below this threshold results in no pay-out
• Over-performance results in a pay-out exceeding 100%, where the maximum achievement is capped at 200% of the ‘at-target’ weighting of the respective goal
• Between floor and target and between target and cap, a linear extrapolation determines the achievement and pay-out

In case of a ‘Safety-fatality’, the Safety target will not result in a pay-out. If the actual Adjusted EBITDA over the performance year does not reach 75% of the budgeted Adjusted EBITDA of the year, no STI will be awarded at all.

We have a focus on (organic) growth based on our scientific backbone and innovations. Sales growth is a yard stick to measure progress in this respect. Strong EBITDA performance and cash flow ensure profitability and liquidity to enhance innovations and to explore new opportunities. Our close to 30,000 talented employees are the backbone of our success. Their well-being in the organization is vital to realize our objectives, making safety and engagement of our workforce important parameters.

STI achievement

Since the merger we established ourselves as an innovation-focused consumer company, leveraging our unique portfolio and capabilities to further strengthen our position as a global leader in nutrition, health, and beauty. We delivered on our commitments for 2024. We redefined our strategic course with the announcement of the separation of Animal Nutrition & Health and the tuning of our portfolio which is well-progressed with the sales of marine lipids, yeast extracts, and our minority stake in Robertet S.A.

Our business results significantly improved in 2024. Sales increased and surpassed the target set for the year. This growth, supported by the delivery of merger synergies and the vitamin transformation program, resulted in an adjusted EBITDA (at constant currency) exceeding the target. Thanks to strong cash discipline and carefully managed inventories, we clearly surpassed our cash flow target, with the pay-out capped at 200%. Throughout 2024, we significantly improved our safety performance, achieving a Total Recordable Incident (TRI) rate of 0.24, placing us among the peer industry leaders in safety. The General & Administrative (G&A) savings related to the merger met the target set. The trust and commitment of our employees are cornerstones of our company’s success. Despite the uncertainties that a merger and the announced business separation may bring, our workforce’s engagement remained nearly on par (79 versus 80%) and within the defined target range. Overall, the 2024 Short-Term Incentive (STI) resulted in an achievement of 175% of target (see table below).

Long-Term incentive (LTI)

The 2024 grant was implemented on 28 March 2024. The performance period starts on 1 January 2024 and ends on 31 December 2026. The vesting is set for 28 March 2027. PSUs have been granted to the Members of the Executive Committee, subject to the goals (as included in the overview below). On an annual basis, the at-target LTI opportunity for the CEO is set at 200% of base salary (vesting is capped at 150% of the number of PSUs granted at-target). For other Members of the Executive Committee, the at-target grant is set at 120% of base salary (vesting is capped at 150% of the number of PSUs granted at-target) or at 100% of base salary (vesting is capped at 200% of the number of PSUs granted at-target). The 2024 grant is implemented by dividing the at-target grant value (% of base salary) by the average opening price of the share on the Amsterdam stock exchange over the reference period (i.e., €91.19). The table below provides an overview of the number of share units granted, the face value of such grant (opening price on the date of grant) as well as the fair value calculated at grant date (acc. to IFRS rules).

Overview of goals and targets 2024 LTI grant

Goals (overview below) are set by the Board of Directors. Combining the essential, the desirable, and the sustainable to bring progress to life is translated into our LTI targets. Total Shareholder Return is an indicator how we perform against the business segments in which we operate. Strong ROCE performance drives our investment and growth initiatives. Sustainability is a business driver and core responsibility, determining our license to operate. Reducing our own and our customers’ greenhouse gas emissions is one of the areas in which we can make a difference. We empower our people to thrive in the business. Improving on Diversity and Inclusion fosters new perspectives enabling us to respond more quickly and flexibly to global trends and enhances (product) innovations while attracting and retaining the best talent.

For each goal, a pay-out curve is defined:

• If the defined target is achieved, the vesting shall be equal to the number of granted PSUs at-target times the weight assigned to the respective goal
• A minimum floor is set for each goal; an achievement below this threshold results in no vesting related to the relevant goal
• Over-performance results in a vesting exceeding the at-target level, where the maximum achievement is capped at 150% or 200% of the at-target weighting of the respective goal
• Between floor and target and cap, a linear extrapolation determines the achievement and vesting

Total compensation

With reference to the remarks made in the section on Currency, the total remuneration to the Members of the Executive Committee in 2024, excluding social security contributions, amounts to €35,323,388 (compared to €20,418,000 in 2023), as included in the tables below. No loans were provided to Members of the Executive Committee, and no payments have been made by any subsidiary of the Company.

Neither DSM-Firmenich AG nor any of its subsidiaries granted loans/credit facilities or made payments (directly or indirectly) to persons closely connected to the Members of the Executive Committee (Audited).

Shareholding obligation

In addition to the vested performance shares, Members of the Executive Committee also invested in dsm-firmenich stock. Stocks were bought through private transactions with private funds. The first table below provides an overview of the number of shares held at year-end by the Members of the Executive Committee (including Closely Associated Persons). The CEO significantly exceeds the shareholding obligation (300% of base salary). Depending on whether the legacy company had a cash-settled (Firmenich) or equity-settled (DSM) Long-Term Incentive plan, various Members of the Executive Committee exceed the shareholding obligation (100% of base salary).

Compensation voting

The General Meeting on 29 June 2023 approved a maximum total amount of remuneration for the Executive Committee of €37.912 million for 2024. In establishing the amount, the Assumed Fx rate (€1 = CHF1) was applied.

The approved maximum total amount of remuneration includes the fixed base salary, benefits, and the maximum STI that can be achieved. Regarding the LTI, the amount included represents the at-target value of the grant as a percentage of Annual Base Salary. The number of PSUs is calculated considering the average share price over a reference period. Therefore, the approved maximum amount includes an amount to offset an eventual appreciation of the share price on the grant date compared to the reference period.

An amount of €2.6 million is included for other and unforeseen items. This amount concerns, among other things, obligations toward Executive Committee Members following international assignment arrangements agreed by the legacy companies prior to the appointment to the Executive Committee of dsm-firmenich and will otherwise be used to cover unforeseen circumstances such as changes in regulatory requirements.

The approved amount does not include the company-related portion of contributions to social security systems paid in line with applicable laws and regulations in any geography, nor does it include foreign exchange rate fluctuations. Obligations toward Executive Committee Members confirmed by the legacy companies prior to the appointment into the Executive Committee of dsm-firmenich are not included in the approved amount. This includes, but is not limited to, special payments by Royal DSM and Firmenich SA as referred to in the Offering Circular (issued 22 November 2022) or the vesting of Long-Term Incentives granted prior to the Settlement Date (as such term is defined in the Offering Circular).

As the tables above demonstrate, the total remuneration excluding social security contributions provided in 2024 to all Members of the Executive Committee amounts to €35.323 million (compared to €20.418 million over 2023) and remains within the approved maximum total amount of remuneration of €39.794 million. Against the Average Fx rate, the total remuneration provided in 2024 amounts to CHF33.653 million (compared to CHF 19.841 million over 2023).