Guidelines for remuneration to senior executives and board members
At the Annual General Meeting on 8 April 2024, it was decided to adopt the following guidelines for remuneration to the board, the CEO and other senior executives.
The board of directors, the CEO and other members of the executive management fall within the provisions of these guidelines. The guidelines are forward-looking, i.e., they are applicable to remuneration agreed, and amendments to remuneration already agreed, after adoption of the guidelines by the annual general meeting 2024. The guidelines do not apply to any remuneration decided or approved by the general meeting.
The guidelines’ promotion of the Company’s business strategy, long-term interests and sustainability
Cinclus Pharma is a Swedish clinical-stage pharmaceutical company developing a molecule for the treatment of, inter alia, gastroesophageal reflux disease. For further information on the Company’s business strategy, read more here.
A prerequisite for the successful implementation of the Company’s business strategy and safeguarding of its long-term interests, including its sustainability, is that the company is able to recruit and retain qualified personnel. To this end, it is necessary that the company offers competitive remuneration. These guidelines enable the company to offer the members of the executive management a competitive total remuneration. The board of directors considers it to be of great importance that there is a strong correlation between the remuneration and the Group’s values and financial targets, both in the short and long term, i.e., its business strategy and sustainability.
Long-term share-based incentive programs have been implemented in the Company in the form of warrant programs and a qualified employee stock option program. The programs include the CEO, other senior executives and employees of the Company and aim at equalizing the interests of key employees with those of shareholders.
Variable cash remuneration covered by these guidelines shall aim at promoting the Company’s business strategy and long-term interests, including its sustainability.
Forms of remuneration etc.
The remuneration shall be on market terms and the criteria shall be based on the importance of the tasks, the requirements of competence, experience and performance. The remuneration may consist of the following components: basic pay, variable cash remuneration, pension benefits and other benefits as well as departure conditions. Additionally, the general meeting may – irrespective of these guidelines – resolve on, among other things, share-related or share price-related remuneration or market-based programs such as warrant programs.
The satisfaction of criteria for awarding variable cash remuneration shall be measured over a period of one year. The variable cash remuneration may not exceed 50 percent of the basic pay for the CEO and not more than 30 percent of the basic pay of other senior executives. Variable cash remuneration shall be based on the Company’s overall objectives. During the first year of employment at the Company, the employee may receive variable cash compensation for that year if employment commenced no later than 30 June. If the employment commences after 30 June, the employee cannot receive variable cash payment until the following year.
The CEO shall receive pension benefits amounting to 25 percent of the fixed annual basic pay. For other senior executives, pension premium in an amount calculated on the basis of a company-specific pension policy equivalent to the ITP1 plan shall be paid. Variable cash remuneration is not pensionable.
Other benefits may include, for example, life insurance, medical insurance (Sw. Sjukvårdsförsäkring) and company cars. Such benefits may amount to not more than 15 percent of the fixed annual basic pay.
For employments governed by rules other than Swedish, pension benefits and other benefits may be duly adjusted for compliance with mandatory rules or established local practice, taking into account, to the extent possible, the overall purpose of these guidelines.
Termination of employment
If notice of termination of employment is given by the Company, the notice period may not exceed twelve months, without any right to severance pay. If the senior executive resigns, the notice period may not exceed six months without any right to severance pay.
Additionally, remuneration may be paid for non-compete undertakings. Such remuneration shall compensate for potential loss of income and shall only be paid in so far as the previously employed executive is not entitled to severance pay. The remuneration shall be based on the average monthly remuneration (fixed and variable) of the executive during the 12 months preceding termination of employment, up to a maximum of 60 percent of the average remuneration of the executive and be paid during the time the non-compete undertaking applies, which may not exceed 12 months following termination of employment.
Criteria for awarding variable cash remuneration, etc.
The variable cash remuneration shall be linked to predetermined and measurable criteria which can be financial or non-financial. The criteria shall be designed so as to contribute to the Company’s business strategy and long-term interests, including its sustainability, by for example being clearly linked to the business strategy.
To which extent the criteria for awarding variable cash remuneration has been satisfied shall be evaluated/determined when the measurement period has ended. The remuneration committee is responsible for the evaluation and the decision is made by the board of directors. For financial objectives, the evaluation shall be based on the latest financial information made public by the Company.
Remuneration to the board of directors
The remuneration paid to board members for their work on the board of directors of the Company is decided by the general meeting. Board members are entitled to remuneration only as resolved by the general meeting. Any additional remuneration may, however, be paid for services provided by members of the board of directors to Cinclus Pharma within their respective areas of expertise outside their mandate as board members. Such remuneration shall be market-based and regulated in a consultancy agreement approved by the board of directors.
Salary and employment conditions for employees
In the preparation of the board of directors’ proposal for these remuneration guidelines, salary and employment conditions for employees of the company have been taken into account by including information on the employees’ total income, the components of the remuneration and increase and growth rate over time, in the remuneration committee’s and the board of directors’ basis of decision when evaluating whether the guidelines and the limitations set out herein are reasonable. Changes in the gap between the remuneration of senior executives and that of other employees will be reported in the remuneration report.
The decision-making process to determine, review and implement the guidelines
The board of directors has established a remuneration committee. The committee’s tasks include preparing the board of directors’ decision to propose guidelines to senior executives. The board of directors shall prepare a proposal for new guidelines at least every fourth year and submit it to the annual general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting. The remuneration committee shall also monitor and evaluate programs for variable remuneration for the executive management, the application of the guidelines for executive remuneration as well as the current remuneration structures and compensation levels in the Company. The members of the remuneration committee are independent of the company and its executive management. The CEO and the other members of the executive management do not participate in the board of directors’ processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.
Derogation from the guidelines
The board of directors may temporarily resolve to derogate from the guidelines, in whole or in part, if in a specific case there is special cause for the derogation and a derogation is necessary to serve the company’s long-term interests, including its sustainability, or to ensure the company’s financial viability. As set out above, the remuneration committee’s tasks include preparing the board of directors’ resolutions in remuneration-related matters, including decisions on derogations from the guidelines.