Shareholders' Letter

sizes domiciled in Switzerland and representing all sectors. Swisscom only considers companies
headquartered in Switzerland with average revenues of CHF 3 billion and an average workforce
of 16,000 (FTEs). The “European Executive Survey” from Hewitt covers 28 European groups, mainly
telecommunications companies, with average revenues of CHF 34 billion and an average workforce
of 77,000 (FTEs). These studies, with their numerous reference companies, provide the basis
for a representative comparison. When evaluating these studies, Swisscom took into account factors
such as sector, revenue, number of employees and location. Overall, the analysis revealed that
salaries for comparable management positions have risen by a cumulative average of just under
8% over the last three years (2008 to 2010). The basic salary of some members of the Group Executive
Board was therefore adjusted during the course of the reporting year in order to bring them
into line with standard market salary levels.
Targets for the variable performance-related component
The incentive targets underlying the variable performance-related component are reviewed annually
in December for the coming year by the Board of Directors following a proposal submitted by
the Remuneration Committee The relevant targets set for the reporting year are based on the
Swisscom Group’s budget figures for 2010.
The three target levels Group (excluding Fastweb), Fastweb and segments/Group companies were
defined for the year under review. All members of the Group Executive Board are measured against
the Group targets and, depending on their function, against additional Fastweb targets and/or
additional target values of the segments or Group companies for which they are responsible. The
Group targets consist of financial targets and customer targets measured on the basis of residential
and business customers in Switzerland that are of central importance to the long-term development
of company value. The additional targets adjusted to the relevant function of each Group
Executive Board member consist of financial and in some cases, specific, financial also non financial
targets.
The following table shows the target structure with the three target levels, targets and weighting
per target for the members of the Group Executive Board valid for the year under review.
Target levels Objectives Weighting
Net revenue 4.5–12%
EBITDA margin 4.5–12%
Operating free cash flow 6–16%
Group (without Fastweb) Customer targets 15–30%
Net revenue 0–15%
Fastweb Operating free cash flow 0–15%
Net revenue 0–20%
EBITDA margin 0–10%
EBITDA less capital expenditure 0–20%
Operating free cash flow 0–10%
Segments/subsidiaries Customer targets 0–40%
Swisscom’s target structure focuses on striking a balance between financial performance and market
performance, taking into account the specific responsibilities of the individual members of the
Group Executive Board.
Depending on their function, members of the Group Executive Board receive a variable performance-related
component of between 33% and 117% of their fixed basic salary if they meet their
targets. The amount of the performance-related component paid out depends on the level of
achievement of the targets set by the Remuneration Committee. Special factors can be taken into
account such as an unscheduled acquisition or divestment. If targets are exceeded, additional
remuneration up to a maximum of double the variable performance-related component figure
may be paid.
Corporate Governance and Remuneration Report 130 | 131
Remuneration Report