ABB Annual Report 2012 PDF - ABB Group Annual Report 2012

ABB’s success depends on its ability to attract and retainpeople who will drive the business to outperform competitorsand create value for shareholders over the long term. Theseare important considerations behind ABB’s remunerationpolicy. The Remuneration report presents the principles ofthis policy, the mechanisms for managing remuneration,and the compensation in 2012 for members of the Boardof Directors (Board) and the Executive Committee (EC).For the compensation in 2011, see Notes 10 and 11 to theABB Ltd statutory financial statements.1. Board remuneration1.1 Governance and principlesThe Board sets and periodically reviews compensation for itsmembers based on a comparison of the compensation ofnon-executive board members of publicly-traded companiesin Switzerland that are part of the Swiss Market Index.The Governance, Nomination and Compensation Committee(GNCC) is responsible for making recommendations to theBoard.1.2 Components of compensationMembers of the Board are paid for their service over a12-month period that starts with their election at the annualgeneral meeting. Payment is made in two installments,one following the first six months of the term and one at theend. Board members do not receive pension benefits andare not eligible to participate in any of ABB’s employee incentiveprograms.To align the interests of Board members with those ofABB’s shareholders, half of each member’s compensation ispaid in the form of ABB shares, though Board memberscan alternatively choose to receive all their compensation inshares. The shares are kept in a blocked account for threeyears. Departing Board members are entitled to the shareswhen they leave the company unless agreed otherwise.The number of shares awarded is calculated prior to eachsemi-annual payment by dividing the sum to which theBoard members are entitled by the average closing price ofthe ABB share over a predefined 30-day period.30 Remuneration report | ABB Annual Report 2012