2018 Proxy Voting Guidelines Corporate Governance Principles - Electronic version

 
2018 Proxy Voting
           Guidelines
Corporate Governance
            Principles

               Electronic version
The Ethos Foundation is composed of more than 220 Swiss pension funds and other
  tax-exempt institutions. Ethos was founded in 1997 and aims at promoting socially re-
  sponsible investment as well as a stable and prosperous socio-economic environment.

  The company Ethos Services SA conducts asset management and advisory mandates
  in the field of socially responsible investment (SRI). Ethos Services offers a wide range
  of SRI-funds. The company also provides proxy voting reports including voting recom-
  mendations, a shareholder engagement programme, as well as sustainability and cor-
  porate governance ratings and analyses of listed companies. Ethos Services is owned
  by the Ethos Foundation and several of its members.

  The association Ethos Académie allows private individuals to take part in the activities
  of Ethos. This non-profit and tax-exempt organisation was launched in 2012 by the
  Ethos Foundation and has currently about 200 members. It conducts outreach activities
  in the field of socially responsible investment, including an electronic news service,
  organising conferences and debates, supporting the exercise of shareholders’ voting
  rights and the funding of studies.

  www.ethosfund.ch
                                                                                                2018 Proxy Voting Guidelines
  www.ethosacademie.ch

                                                                                                Corporate Governance
                                                                                                Principles

                                                                                                17th edition

® © Ethos, December 2017. Reproduction in full, or in part, is prohibited without the consent
of the Ethos, Geneva. Quotations are authorised with an indication of the source.
Table of contents

IN TR OD UC TI O N                                                           7      5.3 Capital increase for a specific purpose, with pre-emptive rights        37
                                                                                    5.4 Capital increase for a specific purpose, without pre-emptive rights     37
1 . Pr e a m b le                                                            9
                                                                                    5.5 Share repurchase with cancellation or capital reduction via
2 . Implica tio ns of the Imple me nta t io n of the Minde r                             reimbursement of par value                                             38
    In it ia t iv e                                                         13      5.6 Share repurchase without cancellation                                   38
    2.1 “Governance” votes                                                  13      5.7 Capital reduction via cancellation of shares                            39
    2.2 “Remuneration” votes                                                15      5.8 Cancellation or introduction of a class of shares                       39
                                                                                    5.9 Removal or introduction of a limit on voting rights                     39
2 0 1 8 P ROX Y VO T IN G G U ID EL I N ES                                  19
                                                                                    5.10 Removal or introduction of an opting out or opting up clause           40
1 . A cco u nts , D iv i de n d a n d D i sc ha r ge                        21      5.11 Introduction or renewal of anti-takeover provisions                    40
    1.1 Annual report and accounts                                          21
    1.2 Discharge of the board of directors                                 21   6 . Me r ge r s, A c q ui si ti o ns , a n d Re l oca ti o ns                  41
                                                                                     6.1 Proposals for mergers, acquisitions, and relocations                   41
    1.3 Allocation of income and dividend distribution                      23
                                                                                 7 . A me n d me n ts t o the A r t ic le s of A ss oc ia t i on                42
2 . Boa r d of D ir e ct or s                                               24
                                                                                     7.1 Various amendments to the articles of association                      42
    2.1 Election or re-election of non-executive directors                  24
    2.2 Election or re-election of executive directors                      26       7.2 Fixing of the minimum and maximum board size                           42
                                                                                     7.3 Modification of the length of the mandate of directors                 43
    2.3 Election or re-election of the chairman of the board of directors   27
                                                                                     7.4 Modifications of the articles of association related to the Minder
    2.4 Election or re-election of the members of the remuneration
                                                                                         ordinance                                                              43
         committee                                                          27
    2.5 Grouped elections or re-elections of directors                      28   8 . Sha r e ho l de r Re s ol ut i on s                                        46
3 . A ud it F ir m                                                          29   9 . Ot he r Bu si ne s s                                                       47
    3.1 Election or re-election of the audit firm                           29       9.1 Resolutions not featured on the agenda                                 47
                                                                                     9.2 Election or re-election of the independent representative              47
4. Boa r d a n d Ex e c ut iv e Re mu ne r a t i on                         31
   4.1 Remuneration system and incentive plans                              31   A ppe ndix 1 : Inde pe nde nce cr ite r ia for the me mbe r s of
   4.2 Remuneration report                                                  31      the b oa r d of dir e ct or s                                               48
   4.3 Total remuneration amount for the board of directors                 31   A ppe n dix 2 : Ma x im u m n um be r o f e x te r na l ma n da te s           50
   4.4 Amount of fixed remuneration for the executive management            32
                                                                                 A ppe ndix 3 : Re quir e me nts with r e ga r d to the
   4.5 Maximum amount of variable remuneration (prospective or
                                                                                    r e mu ne r a t i on sy ste m                                               51
        retrospective vote)                                                 32
   4.6 Total remuneration amount (fixed and variable) for the executive          A ppe ndix 4: Re quir e me nts with r e ga r d to v a r ia ble
        management                                                          33      r e mu ne r a t i on ( b on us a nd lo n g -te r m i nce nt iv e pla ns )   54
   4.7 Length of employment contracts and of notice periods of the               A ppe ndix 5 : Re quir e me nts with r e ga r d to the
        members of the executive management                                 35      r e mu ne r a t i on r e por t                                              57
5 . Ca p ita l Str uct ur e a n d S ha r e h o lde r Ri g hts               36   A ppe n dix 6 : Sha r e h ol de r Re s o lu ti o ns                            59
    5.1 Changes in the capital structure                                    36
    5.2 Capital increase without specific purpose                           36

2 |                                                                                                                                                             | 3
COR P ORA TE GO VE RNA NC E P RI NC I PL ES                              61   6 . Me r ge r s, A c q ui si ti o ns a n d Re s tr u ct ur i n g   117
1 . A cco u nts , D iv i de n d a n d D i sc ha r ge                     63       6.1 General remarks                                            117
    1.1 Annual report                                                    63       6.2 Acquisition or merger by absorption                        118
    1.2 Financial report                                                 64       6.3 Merger by combination                                      119
    1.3 Allocation of income and dividend distribution                   65       6.4 Situations akin to mergers                                 120
    1.4 Political and charitable donations                               67       6.5 Company spin-offs                                          120
    1.5 Discharge of the board of directors                              68   7 . A me n d me n ts t o the A r t ic le s of A ss oc ia t i on    123
2 . Boa r d of D ir e ct or s                                            71   8 . Sha r e ho l de r Re s ol ut i on s                            125
    2.1 Board duties                                                     71       8.1 History                                                    125
    2.2 Board structure                                                  72       8.2 Analysis of shareholder resolutions                        127
    2.3 Board composition                                                72       8.3 Impact of shareholder resolutions                          129
    2.4 Board size                                                       75   9 . Ot he r Bu si ne s s                                           131
    2.5 Independence of directors                                        76
    2.6 Committees of the board of directors                             78
    2.7 Separate offices of chairman of the board and Chief Executive
         Officer (CEO)                                                   81
    2.8 Information on nominees proposed for election to the board of
         directors                                                       82
    2.9 Board’s election modalities                                      83
    2.10 Characteristics of directorships                                83
3 . A ud it F ir m                                                       87
    3.1 Fairness of the accounts                                         87
    3.2 Appointment of the external audit firm                           87
    3.3 Independence of the external audit firm                          87
4. Boa r d a n d Ex e c ut iv e Re mu ne r a t i on                      93
   4.1 The issues                                                        93
   4.2 Transparency of the remuneration system                           93
   4.3 Structure of the remuneration system                              95
   4.4 Competence with regard to remuneration                           101
5 . Ca p ita l Str uct ur e a n d S ha r e h o lde r Ri g hts           105
    5.1 Share capital                                                   105
    5.2 Capital increase                                                106
    5.3 Capital reduction                                               110
    5.4 Share repurchase without cancellation                           112
    5.5 Protection measures                                             112

4 |                                                                                                                                               | 5
Introduction

Introduction

               | 7
Introduction

1. Preamble

Institutional investors are entrusted       guidelines and corporate governance
with managing assets on behalf of a         principles are also based on Ethos’
large number of beneficiaries. It is        Charter, which is grounded in the con-
therefore their fiduciary duty to protect   cept of sustainable development
and enhance the long-term interests of      where corporate decisions are shaped
the end-owners they represent. Ethos        not only by financial, but also by social,
considers active share ownership as a       environmental and corporate govern-
means of obtaining higher long-term         ance considerations. In this respect,
returns and contributing to the efficient   Ethos is convinced that loyalty in the
functioning of the financial markets.       relations between a company and its
Voting at shareholder meetings and en-      various stakeholders contributes sub-
gaging in sustained dialogue with com-      stantially to the company’s long-term
panies are two basic elements of ac-        sustainability and its future value. For
tive ownership. This document sets          this reason, Ethos’ approach is reso-
out Ethos’ proxy voting guidelines and      lutely inspired by a long-term vision of
corporate     governance      principles.   a company.
These are the references that underpin
both Ethos’ dialogue with investee          Ethos’ proxy voting guidelines and cor-
companies and the vote at shareown-         porate governance principles serve a
ers’ general meetings.                      dual purpose. First, they set out the po-
                                            sition on essential issues of corporate
Ethos considers that best practice in       governance of an institutional investor
corporate governance is indispensable       committed to sustainable develop-
for the implementation of a strategy        ment and responsible investment. Sec-
based on corporate social responsibil-      ondly, they allow a systematic and con-
ity, as well as to ensure adequate          sistent exercise of shareowner voting
mechanisms of control. Ethos’ voting        rights aiming at promoting the long-
guidelines and corporate governance         term interests of a company’s share-
principles are based first and foremost     owners and other stakeholders.
on the main codes of best practice in
corporate governance. Adhesion to           The proxy voting guidelines provide de-
corporate governance best practice is a     tailed explanations of Ethos’ voting rec-
fundamental principle of corporate so-      ommendations on the different issues
cial responsibility and is necessary to     submitted to the vote at general meet-
ensure adequate control mechanisms          ings. These recommendations are con-
and limit risk for investors. The voting    structive in spirit since a shareowner

                                                                                  | 9
Introduction

should be able to trust the board of di-     awareness of environmental and social       general meetings of Swiss listed com-
rectors and ratify its proposals. Never-     challenges vary considerably from           panies. They must vote in the interest
theless, where careful scrutiny leads to     country to country, Ethos can be led to     of their beneficiaries. This is as the
the conclusion that the board’s pro-         adapt its voting positions to the partic-   case when the vote assures the pros-
posals are not in line with the long-term    ularities and realities of each market.     perity of pension funds in a sustainable
interests of the shareowners and other                                                   manner. Ethos considers that its voting
stakeholders, an abstain or oppose           The voting guidelines and principles of     guidelines respect in full the demands
vote might be appropriate.                   corporate governance are revised an-        of article 22 of the Minder ordinance.
                                             nually.
Ethos’ analysis is based on the “sub-
stance over form” principle. Thus,           2018 edition
when proposals put to the vote are
contrary to Ethos’ spirit, as laid down in   The 2018 edition has been reviewed
its Charter, Ethos will oppose them de-      and adapted to the ongoing develop-
spite an apparent adherence to form. In      ments in legislation and best practice.
light of the diversity and complexity of
some situations, Ethos reserves the          As for Switzerland, the current edition
right, should the need arise, to adopt a     takes namely into account:
position not explicitly foreseen in its
                                             ·   The Swiss Code of Best Practice
guidelines. In such cases, a clear and
                                                 for Corporate Governance of econ-
documented explanation of the ra-
                                                 omiesuisse (February 2016).
tionale underlying its position is pro-
vided.                                       ·   The Corporate Governance Di-
                                                 rective (CGD) of the Swiss stock
This document is divided into nine sec-          exchange SIX Exchange (Decem-
tions covering the main issues in the            ber 2016).
field of corporate governance. The prin-
                                             ·   The ordinance against excessive re-
ciples establish high standards regard-
                                                 muneration (Minder ordinance)
ing the attitude expected from compa-
nies toward their shareholders and
                                             Regarding the Minder ordinance, arti-
other stakeholders. The voting guide-
                                             cle 22 stipulates that pension funds
lines take into account the current
                                             subject to the Swiss Federal Law on
state of corporate governance in Swit-
                                             Vesting in Pension Plans (FZG) must
zerland and abroad. Given that corpo-
                                             exercise their voting rights at annual
rate governance standards, the legal
and regulatory framework, as well as

10 |                                                                                                                                       | 11
Introduction

2. Implications of the Implementation of
   the Minder Initiative

On March 3, 2013, the Swiss people           notably that people with executive
accepted with a large majority the pop-      functions in the company cannot be
ular initiative ”against excessive remu-     members of the board and therefore of
neration”, the so-called Minder initia-      the remuneration committee. This
tive that gives extensive rights to the      committee must also consist in major-
shareholders of Swiss listed compa-          ity of independent members.
nies, in particular with regard to approv-
ing board and executive remuneration.        Moreover, the principles regarding the
                                             tasks and competencies of the remu-
Following the acceptance of the              neration committee should be featured
Minder initiative and pending the revi-      in the articles of association and there-
sion of company law by the parliament,       fore approved by the shareholder gen-
the Federal council issued the Ordi-         eral meeting.
nance against excessive remunera-
tions (Minder ordinance), which en-          2.1.2 Independent representative
tered into force in full on December 31,
2015.                                        The existence of an “independent rep-
                                             resentative” of shareholders is neces-
2.1 “Governance” votes                       sary to allow the shareholders to vote
                                             by proxy ahead of the meeting. Follow-
2.1.1 Board of directors                     ing the entry into force of the Minder
                                             initiative, the independent representa-
The Minder foresees certain rules with       tive is put to annual (re)election by the
regard to board elections and to the         shareholders. For Ethos, independ-
functioning of the remuneration com-         ence is fundamental to ensure the
mittee. All the members of the board         credibility of the representative of the
are put to re-election every year individ-   shareholders.
ually.
                                             The Minder ordinance also stipulates
Since 1 January 2014, the shareholders       that the independence criteria regard-
are called to elect the chairman of the      ing the external auditor must be ap-
board and the members of the remu-           plied by analogy to the independent
neration committee in additional sepa-       representative of the shareholders. In
rate votes. Ethos’ conditions foresee

                                                                                 | 13
Introduction

particular, close links between the gov-   cases, a distinction should be made be-      who did not work during the notice pe-       Minder ordinance includes 3 minimum
erning bodies of the company or an im-     tween mandates in listed and non             riod.                                        requirements:
portant shareholder on the one hand,       listed companies or other institutions.
                                                                                                                                     ·   The shareholders must approve the
and the independent representative (or     These distinctions aim at allowing a         It should be noted that the Minder or-
                                                                                                                                         remuneration every year.
persons closely linked to him) on the      more precise assessment of the work-         dinance prohibits severance payments.
other hand are incompatible with the       load that the maximum number of              In order to circumvent this rule, many       ·   The shareholders must vote sepa-
notion of independence of the inde-        functions entails. This should also al-      companies have included in their arti-           rately on the amounts to be paid to
pendent representative.                    low determining whether the mem-             cles of association the possibility to in-       the board of directors, the execu-
                                           bers of the board and executive man-         clude compensated non-compete                    tive management and the advisory
2.1.3 Statutory provisions                 agement are in a position to carry out       clauses in the employment agree-                 board.
                                           their responsibilities with the required     ments of the members of the execu-
                                                                                                                                     ·   The vote of the shareholders is
The Minder ordinance stipulates that       diligence.                                   tive management. In principle, the arti-
                                                                                                                                         binding.
certain provisions with regard to the                                                   cles of association specify the duration
functioning of the company’s govern-       The question of maximum number of            of such clauses and the payments to
                                                                                                                                     Additional provisions, especially vote
ing bodies must necessarily be written     mandates acceptable to Ethos in the          which the beneficiary is entitled.
                                                                                                                                     modalities, must be stipulated in the
in the articles of association.            framework of the Minder ordinance is
                                                                                                                                     company’s articles of association
                                           treated in appendix 2 of the voting          2.2   “Remuneration” votes
A. Maximum number of mandates              guidelines.
                                                                                                                                     2.2.2 Voting modalities
                                                                                        With the entry into force of the Minder
To ensure that the members of the          B. Executive contracts                       initiative, Switzerland is one of the
                                                                                                                                     The voting modalities must be stipu-
governing bodies have sufficient time                                                   countries where the shareholders of
                                                                                                                                     lated in the articles of association. In
to devote to the exercise of their man-    The maximum termination period must          listed companies have the most rights
                                                                                                                                     principle, the companies request a pro-
date with the required diligence, the      be stipulated in the articles to avoid ex-   with regard to setting board and exec-
                                                                                                                                     spective (ex ante) vote on the board’s
maximum number of mandates held by         ecutive contracts circumventing the          utive remuneration. The shareholders
                                                                                                                                     fees. Regarding the remuneration of
the members of the board of directors,     ban on severance by way of long notice       now have the non-transferable right to
                                                                                                                                     the executive management, the com-
the advisory board (if any) and the ex-    periods or lengthy contracts. According      vote on the total amounts of remuner-
                                                                                                                                     panies can propose:
ecutive management in governing bod-       to the Minder ordinance, neither the         ation not only for the board of directors,
ies of other legal entities must be set    contract length nor the notice period        but also for the executive management        ·   a single vote on the maximum
in the articles of association.            should exceed one year. It is however        and if relevant for the advisory board.          amount
                                           not clear what remuneration the exec-
                                                                                                                                     ·   separate votes for the fixed and var-
Ethos is of the opinion that it is im-     utives are entitled to (fixed salary and     2.2.1 Mandatory requirements
                                                                                                                                         iable parts
portant to set a maximum number of         target bonus, or total remuneration
mandates for members of the execu-         package including shares and options).       As of 2015, Swiss listed companies are       Companies can also opt between:
tive management and for non execu-         Ethos is of the opinion that in principle,   required to submit the amounts of re-
                                                                                                                                     ·   prospective (ex ante) votes, by re-
tive board members separately to re-       only the fixed remuneration should be        muneration for the governing bodies to
                                                                                                                                         questing a maximum budget
flect their different status. In both      paid to an employee upon termination         the vote of the shareholders. The

14 |                                                                                                                                                                     | 15
Introduction

·   retrospective (ex post) votes on the      can receive their fixed salary for the        Regarding the long-term variable remu-
    remuneration that they want to pay        past financial year.                          neration, the precise performance tar-
    at the end of the performance pe-                                                       gets set are in general less commer-
    riod, when performance can be as-         Regarding the short-term variable re-         cially sensitive and can be based on ex-
    sessed                                    muneration (annual bonus), Ethos con-         ternal, which cannot be influenced by
                                              siders it preferable to hold a retrospec-     the company. Their publication is there-
A. Separation of the votes                    tive vote on the effective amount de-         fore less problematic for companies
                                              termined based on the performance             and the required transparency can be
Ethos is of the opinion that the votes        achieved. With retrospective votes,           sufficient to allow a prospective vote.
on fixed remuneration should be sepa-         companies can make a precise pro-             One must not lose sight of the problem
rate from those on variable remunera-         posal instead of requesting a high max-       posed by the calculation of the amount
tion. In fact, the fixed remuneration is      imum amount, while the amount effec-          that the companies must get approval
known in advance, whereas the varia-          tively paid is often much lower than the      for and which, in the case of certain
ble remuneration is conditional upon          maximum amount. In addition, with             plans, may seem excessive since it
achievement of past or future perfor-         retrospective votes, shareholders             corresponds to the maximum potential
mance objectives. Ethos also consid-          avoid the risk of undue payment of the        (theoretical) value in case the benefi-
ers that it would be preferable to sepa-      maximum amount. When a company                ciary exceeds all the objectives set at
rate the votes on short-term and long-        nonetheless wishes to vote on the             the beginning of the performance pe-
term variable remuneration (generally         maximum bonus amount prospec-                 riod.
share based plans). When companies            tively, it is indispensable that the trans-
ask for a single amount for the entire        parency as regards the remuneration
variable remuneration, it is important        system be very high. In particular, it is
that they give an explanation on the          necessary that the shareholders know
breakdown of the amount into short-           the precise performance targets. Un-
term bonus and long-term incentive            fortunately, this is rarely the case,
plan.                                         since this is considered by the compa-
                                              nies as commercially sensitive infor-
B. Prospective or retrospective votes         mation, which they are not willing to
                                              disclose in advance. In addition, the re-
For the fixed remuneration, Ethos con-        muneration system described in the ar-
siders that a prospective vote is the         ticles of association must set a cap on
best solution. It would be difficult to ar-   the variable remuneration with regards
gue that members of the executive             to base salary.
management must wait until the next
annual general meeting to be sure they

16 |                                                                                                                                          | 17
2018 Proxy Voting Guidelines

2018 Proxy Voting Guidelines

                                       | 19
2018 Proxy Voting Guidelines

1. Accounts, Dividend and Discharge

Situations that do not fall under a specific recommendation are to be assessed in
light of Ethos’ Principles of corporate governance.

1.1 Annual report and accounts
VOTE FOR the board of directors’ proposal, however:
       OPPOSE if one of the following conditions applies:
       a. The information presented to the shareholders does not meet corpo-
          rate governance best practice standards.
       b. Serious doubts are raised concerning the quality, sincerity and compre-
          hensiveness of the information provided.
       c. The annual report was not made available sufficiently in advance of the
          general meeting.
       d. The board of directors refuses to disclose important information that is
          firmly requested, or responds to legitimate requests for supplementary
          information in an unsatisfactory manner.
       e. There are serious and demonstrable failings in the statement of ac-
          counts.

1.2 Discharge of the board of directors
VOTE FOR the board of directors’ proposal, however:
       OPPOSE if one of the following conditions applies:
       a. The external auditors’ report expresses reservations concerning the
          board’s conduct of the company, or reveals serious shortcomings in
          the exercise of board members’ duties or deficiencies of the internal
          control system.
       b. A shareholder resolution or question or any other factual element reveal
          serious deficiencies in the board’s conduct of the company’s affairs.

                                                                             | 21
2018 Proxy Voting Guidelines

       c. Legal proceedings have been instituted or a criminal conviction is            1.3 Allocation of income and dividend dis tribution
          brought against the board of directors or the Supervisory Board con-
                                                                                        VOTE FOR the board of directors’ proposal, however:
          cerning the conduct of the company’s affairs.
                                                                                              OPPOSE if one of the following conditions applies:
       d. There is profound disagreement concerning the management of the
          company’s affairs or the Board’s decisions.                                         a. The proposed allocation of income seems inappropriate, given the fi-
                                                                                                 nancial situation and the long-term interests of the company, its share-
       e. Serious shortcomings in corporate governance constitute a major risk
                                                                                                 holders and its other stakeholders.
          for the company and its shareholders.
                                                                                              b. The proposal replaces the cash dividend with a share repurchase pro-
       f. The size of the board of directors has persistently remained below 4
                                                                                                 gramme.
          members.
                                                                                              c. The dividend is replaced by a reimbursement of nominal value of the
       g. There is a strong deterioration of the company’s financial situation due
                                                                                                 shares that substantially deteriorates the shareholders’ right to place
          to successive poor financial results, large impairments or significant
                                                                                                 an item on the agenda of the annual general meeting.
          new provisions for litigation costs.
       h. The company is in a situation of capital loss, of over indebtedness, in a
          definitive moratorium, or there is a material uncertainty on the ability of
          the company to continue as a going concern.
       i.   The board of directors has made decisions that constitute a major en-
            vironmental or social risk or it does not recognise the major environ-
            mental/social issues that the company faces.
       j.   The company is involved in an accident that seriously harmed the em-
            ployees’ health, local communities or the natural environment.
       k. There are well grounded accusations against the company for serious
          violations of internationally recognised human rights of employees, lo-
          cal communities, or the company is complicit in such violations along
          the supply chain.
       l.   The company refuses to recognise the negative impact of some of its
            products or its operations on humans or the natural environment.

22 |                                                                                                                                                                | 23
2018 Proxy Voting Guidelines

2. Board of Directors

Situations that do not fall under a specific recommendation are to be assessed in    i.   The nominee has held an executive function in the company during the
light of Ethos’ principles of corporate governance.                                       last three years and the board of directors includes too many executive
                                                                                          or former executive directors with respect to national standards of cor-
                                                                                          porate governance.
2.1 Election or re-election of non-executive directors
VOTE FOR the proposal of the board of directors or of certain shareholders, how-     j.   The nominee has held executive functions in the company during the
ever:                                                                                     last three years and he will sit on the audit committee.

       OPPOSE if one of the following conditions applies:                            k. The nominee is the chairman of the audit committee and the company
                                                                                        is facing serious problems related to the accounts, the internal control
       a. Insufficient information is provided concerning the nominee or the in-        system, the internal or external audit, or in terms of business ethics.
          formation does not allow evaluating his expected contribution to the
          board of directors.                                                        l.   The nominee is chairman of the nomination committee and one of the
                                                                                          following is true:
       b. The nominee was implicated in a serious controversy in the past or                 - The board renewal is insufficient.
          does not have a good reputation or his activities and attitude are not
                                                                                            -   The board composition is unsatisfactory.
          irreproachable.
                                                                                     m. The nationality/origin/domicile of the new nominee is overrepresented
       c. The number of mandates held by the nominee is excessive in light of
                                                                                        on the board without justification.
          the type of mandates and the maximum limit required by national
          standards on corporate governance (for Switzerland, see appendix 2).       n. The new nominee has a nationality/origin/residence other than the
                                                                                        country where the company is incorporated and the board does not
       d. The nominee has been a member of the board for more than 20 years
                                                                                        include any members with nationality/origin/residence in/of the country
          and there is no valid reason (e.g. he is not a founding member or major
                                                                                        of incorporation.
          shareholder, possesses no specific competencies, etc.) to justify his
          (re-)election.                                                             o. The nominee was employed by the audit firm as partner in charge of
                                                                                        the audit of the company’s accounts (lead auditor) during the past 2
       e. The nominee is 75 or older or 70 years or older upon first appointment
                                                                                        years.
          and there is no substantial justification for his nomination.
                                                                                     p. The nominee has attended too few board meetings (in principle less
       f. The nominee does not meet Ethos’ independence criteria (see appen-
                                                                                        than 75%) absent compelling and justified reasons.
          dix 1) and the overall board independence is not sufficient with respect
          of national standards of corporate governance.                             q. The nominee is the lead director, but does not meet Ethos’ independ-
                                                                                        ence criteria (see appendix 1); in particular due to a conflict of interest.
       g. The nominee has a major conflict of interest that is incompatible with
          his role as board member.
       h. The nominee is a representative of a significant shareholder who is suf-
          ficiently represented on the board. Under no circumstances should a
          shareholder control the board.

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2018 Proxy Voting Guidelines

2.2 Election or re-election of executive directors                                     2.3 Election or re-election of the chairman of the board of directors
VOTE FOR the proposal of the board of directors or of certain shareholders, how-       VOTE FOR the board of directors’ proposal, however,
ever:
                                                                                             OPPOSE if one of the following conditions applies:
       OPPOSE if one of the following conditions applies:
                                                                                             a. Ethos could not support the election or re-election of the nominee to
       a. In companies listed in Switzerland, the nominee to the board of direc-                the board of directors.
          tors is also a permanent member of the executive management.
                                                                                             b. The nominee is also member of the executive management and the
       b. Insufficient information is provided concerning the nominee.                          combination of functions is permanent.
       c. The nominee was implicated in a serious controversy in the past or                 c. The corporate governance of the company is unsatisfactory and the di-
          does not have a good reputation or his activities and attitude are not                alogue with the shareholders is difficult or does not lead to the desired
          irreproachable.                                                                       outcomes.
       d. The nominee chairs or will chair the board permanently and the share-              d. The board of directors refuses to implement a shareholder resolution
          holders cannot vote separately on the election of the chairman of the                 that received support from a majority of votes during previous general
          board.                                                                                meetings.
       e. The nominee serves or will serve on the audit committee or the remu-               e. The board has not established a nomination committee and one of the
          neration committee and the shareholders cannot vote separately on the                 following is true:
          election to the committee.                                                               -   The board renewal is insufficient.
       f. The nominee chairs or will chair the nomination committee.                               -   The board composition is unsatisfactory.

       g. The nominee serves or will serve on the nomination committee when                  f. The company’s financial performance has been unsatisfactory for sev-
          the overall composition of the latter does not guarantee the commit-                  eral years.
          tee’s independence (in principle when the majority of its members are
          not independent or it already includes an executive director).               2.4 Election or re-election of the members of the remuneration
                                                                                           committee
       h. The board of directors includes too many executive and former execu-
          tives with respect to national standards of corporate governance.            VOTE FOR the board of directors’ proposal, however,
       i.   The overall board independence is not sufficient with respect of na-             OPPOSE if one of the following conditions applies:
            tional standards of corporate governance and the shareholder struc-
                                                                                             a. Ethos could not support the election of the nominee to the board of
            ture.
                                                                                                directors.
       j.   The nominee is a representative of a significant shareholder who is suf-
                                                                                             b. The number of mandates held by the nominee is excessive in light of
            ficiently represented on the board. In no case should a shareholder con-
                                                                                                the types of mandates and the maximum limit required by national
            trol the board.
                                                                                                standards on corporate governance (for Switzerland see appendix 2).

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2018 Proxy Voting Guidelines

                                                                                     3. Audit Firm

       c. The nominee is not independent according to the criteria in appendix 1     Situations that do not fall under a specific recommendation are to be assessed in
          and the committee does not include at least 50% independent mem-           light of Ethos’ principles of corporate governance.
          bers.
       d. The nominee does not meet Ethos’ independence criteria (see appen-         3.1 Election or re-election of the audit firm
          dix 1) and the committee includes all board members.                       VOTE FOR the board of directors’ proposal concerning the election or re-election
       e. The nominee receives a remuneration that is excessive or not in line       of the external audit firm, however,
          with generally accepted best practice standards (see appendix 3).                 OPPOSE if one of the following conditions applies:
       f. The nominee holds an executive function in the company.                           a. The name of the audit firm is not disclosed before the annual general
       g. The nominee was member of the remuneration committee during the                      meeting.
          past financial year and one of the following points is true:                      b. The term of office of the audit firm exceeds the lesser of 20 years and
             -   The remuneration system of the company is deemed very unsat-                  the length foreseen by national standards of best practice.
                 isfactory.
                                                                                            c. The breakdown of the services provided by the audit firm is insufficient
             -   The transparency of the remuneration report is deemed very in-
                                                                                               to allow an informed assessment of the auditor’s independence.
                 sufficient.
             -   Unscheduled discretionary payments were made during the year               d. The fees paid to the audit firm for non-audit services exceed audit fees,
                 under review.                                                                 absent compelling justification by the company.
             -   The amounts paid out are not in line with the company’s perfor-            e. The aggregate fees paid to the audit firm for non-audit services during
                 mance or with the remuneration components approved by the                     the most recent three years exceed 50% of the aggregate fees paid
                 annual general meeting.                                                       for audit services during the same period.
             -   The exercise conditions for a variable remuneration plan were
                                                                                            f. The independence of the audit firm is compromised by links between
                 modified in the course of the financial year.
                                                                                               partners of the audit firm and/or the auditors in charge of the audit of
       h. The nominee was member of the remuneration committee in the past                     the accounts and the company (Directors, major shareholders, audit
          when this committee made decisions fundamentally in breach with                      committee members, senior managers).
          generally accepted best practice standards.
                                                                                            g. The fees paid by the company to its audit firm exceed 10% of the ex-
                                                                                               ternal auditor’s turnover.
2.5 Grouped elections or re-elections of directors
                                                                                            h. The lead auditor has recently been severely criticised in connection
VOTE FOR if there is no major objection to the nominees standing for (re)election.
                                                                                               with his fulfilment of a similar mandate.
OPPOSE if the board of directors’ proposal on the (re-)election of one or more              i.   The company accounts or the auditing procedure determined by the
directors is considered detrimental to the interests of the company and its share-               audit firm have been subject to severe criticism.
holders.

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2018 Proxy Voting Guidelines

                                                                                        4. Board and Executive Remuneration

       j.   The auditor failed to identify fraud or proven weaknesses in the internal   Situations that do not fall under a specific recommendation are to be assessed in
            control system that have had a significant negative impact on the com-      light of Ethos’ principles of corporate governance.
            pany’s financial results.
                                                                                        4.1 Remuneration system and incentive plans
                                                                                        VOTE FOR the board of directors’ proposal, however,
                                                                                               OPPOSE if one of the following conditions applies:
                                                                                               a. The information provided to the shareholders is insufficient to assess
                                                                                                  the principles, structure and components of the remuneration system
                                                                                                  (see appendices 3 and 4).
                                                                                               b. The structure of the remuneration is not in line with generally accepted
                                                                                                  best practice standards (see appendices 3 and 4).

                                                                                        4.2 Remuneration report
                                                                                        VOTE FOR the board of directors’ proposal, however,
                                                                                               OPPOSE if one of the following conditions applies:
                                                                                               a. The remuneration report does not respect the rules in appendix 5 con-
                                                                                                  cerning transparency or the pay-for-performance connection.
                                                                                               b. The non-executive directors receive remuneration other than a fixed
                                                                                                  amount paid in cash or in shares.
                                                                                               c. The use of the remuneration approved is not considered as being in
                                                                                                  line with the proposal put forward at the previous annual general meet-
                                                                                                  ing.

                                                                                        4.3 Total remuneration amount for the board of directors
                                                                                        VOTE FOR the board of directors’ proposal, however,
                                                                                               OPPOSE if one of the following conditions applies:
                                                                                               a. The information provided by the company is insufficient.
                                                                                               b. The remuneration planned for or paid out to one or several members is
                                                                                                  significantly higher than that of the peer group.

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2018 Proxy Voting Guidelines

       c. The proposed increase relative to the previous year is excessive or not         b. The maximum amount that can be effectively paid out in case of over-
          justified.                                                                         achievement of targets is significantly higher than the amount re-
                                                                                             quested at the general meeting.
       d. The non-executive directors receive remuneration other than a fixed
          amount paid in cash or in shares.                                               c. The structure and conditions of the plans do not respect generally ac-
                                                                                             cepted best practice standards (see appendix 4).
       e. The remuneration of the non-executive chairman largely exceeds that
          of the other non-executive board members without adequate justifica-            d. Past awards and the amounts released after the performance/blocking
          tion.                                                                              period, described in the remuneration report, do not allow confirmation
                                                                                             of the link between pay and performance.
       f. The remuneration of the executive members of the board (excluding
          the executive management) is excessive or is not in line with generally         e. The remuneration committee or the board of directors have excessive
          accepted best practice standards (see appendix 3).                                 discretion with regard to awards and administration of the plan, for ex-
                                                                                             ample in re-adjusting the exercise price, extension of the exercise pe-
4.4 Amount of fixed remuneration for the executive management                                riod, amendment to the performance criteria or in replacing one plan by
                                                                                             another, without prior shareholder approval.
VOTE FOR the board of directors’ proposal, however,
                                                                                          f. The requested amount does not allow to respect the principles men-
       OPPOSE if one of the following conditions applies:                                    tioned in appendix 3, in particular the maximum proportion between
       a. The information provided by the company, in particular with regard to              fixed and variable remuneration.
          the different components of the fixed remuneration or the number of
          beneficiaries, is insufficient.                                           4.6 Total remuneration amount (fixed and variable) for the
                                                                                        executive management
       b. The fixed remuneration planned for or paid out to one or several mem-
          bers is significantly higher than that of a peer group.                   VOTE FOR the board of directors’ proposal, however,
       c. The proposed increase relative to the previous year is excessive or not         OPPOSE if one of the following conditions applies:
          justified.
                                                                                          a. The information provided is insufficient for shareholders to assess the
                                                                                             relevance of the maximum requested amount (see appendix 3).
4.5 Maximum amount of variable remuneration (prospective or
    retrospective vote)                                                                   b. The total amount calculated on the basis of available information allows
                                                                                             for the payment of significantly higher remunerations than those of a
VOTE FOR the board of directors’ proposal, however,
                                                                                             peer group.
       OPPOSE if one of the following conditions applies:                                 c. The maximum amount that can be effectively paid out in case of over-
       a. The information provided is insufficient for shareholders to assess the            achievement of targets is significantly higher than the amount re-
          plans’ features and functioning (see appendix 4).                                  quested at the general meeting.

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2018 Proxy Voting Guidelines

       d. The remuneration structure and the maximum requested amount are           4.7 Length of employment contracts and of notice periods of the
          not in line with generally accepted best practice standards (see appen-       members of the executive management
          dix 3).
                                                                                    VOTE FOR the board of directors’ proposal, however,
       e. Past awards and the amounts released after the performance/blocking
                                                                                          OPPOSE if one of the following conditions applies:
          period described in the remuneration report do not allow confirmation
          of the link between pay and performance.                                        a. The employment contracts and notice periods exceed one year.
       f. The remuneration committee or the board of directors have excessive             b. The formulation of the contract allows for the payment of severance
          discretion with regard to awards or have paid out undue remuneration               payments higher than those prescribed by best practice.
          during the previous financial year.
                                                                                          c. The contracts include non-compete clauses that could lead to exces-
                                                                                             sive payments.

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2018 Proxy Voting Guidelines

5. Capital Structure and Shareholder
   Rights
                                                                                          e. The length of the authorisation exceeds the lesser of 24 months and
                                                                                             the length foreseen by local standards of best practice.
Situations that do not fall under a specific recommendation are to be assessed in
light of Ethos’ principles of corporate governance.
                                                                                    5.3 Capital increase for a specific purpose, with pre-emptive rights

5.1 Changes in the capital structure                                                VOTE FOR the board of directors’ proposal, however,

VOTE FOR the board of directors’ proposal, however,                                       OPPOSE if one of the following conditions applies:

       OPPOSE if one of the following conditions applies:                                 a. The purpose of the proposed capital increase (for example an acquisi-
                                                                                             tion or merger) is incompatible with the long-term interests of the ma-
       a. The amendment contravenes the “one share = one vote” principle,                    jority of the company’s stakeholders, with regard to the amount of new
          unless the company’s long-term survival is seriously undermined.                   capital requested and the financial situation of the company.
       b. The amendment is intended to protect management from a hostile                  b. The proposed capital increase exceeds the maximum percentage ac-
          takeover bid that is compatible with the long-term interests of the ma-            cepted by local standards of best practice, or the company’s needs,
          jority of the company’s stakeholders.                                              given the relevance of the pursued objective.

5.2 Capital increase without specific purpose                                       5.4 Capital increase for a specific purpose, without pre-emptive
VOTE FOR the board of directors’ proposal, however,                                     rights

       OPPOSE if one of the following conditions applies:                           VOTE FOR the board of directors’ proposal, however,

       a. The requested authority to issue shares, with tradable pre-emptive              OPPOSE if one of the following conditions applies:
          rights, for general financing purposes, exceeds the lesser of 50% of            a.   The information provided to shareholders so that they can assess the
          the issued capital and the maximum percentage accepted by local                      terms, conditions and the purpose of the capital increase is insuffi-
          standards of best practice.                                                          cient.
       b. The requested authority to issue shares, without tradable pre-emptive           b.   The purpose of the proposed increase (for example an acquisition,
          rights, for general financing purposes, exceeds the lesser of 15% of                 merger or employee incentive plan) is incompatible with the long-term
          the issued capital and the maximum percentage accepted by local                      interests of the majority of the company’s stakeholders, with regard
          standards of best practice.                                                          to the amount of new capital requested and the financial situation of
       c. In case of approval of the request, the aggregate of all authorities to              the company.
          issue shares without tradable pre-emptive rights for general financing          c.   The amount requested is too high in light of the stated purpose.
          purposes would exceed 20% of the issued share capital.
                                                                                          d.   The proposed increase exceeds the lesser of one-third of the capital
       d. The dilution due to the capital increases without pre-emptive rights in              and or the maximum percentage accepted by local standards of best
          the past three years has been excessive.                                             practice.

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2018 Proxy Voting Guidelines

       e.   The capital requested is intended to fund a share-based incentive plan         d. The ability of the company to pay a dividend is critically undermined by
            the main characteristics of which are incompatible with Ethos’ guide-             the repurchase of the shares.
            lines for such plans (see appendix 4).
                                                                                           e. The company can proceed to selective share repurchases.

5.5 Share repurchase with cancellation or capital reduction via                            f. The length of the authorisation exceeds the lesser of 24 months and
    reimbursement of par value                                                                the length prescribed by the local standards of best practice.

VOTE FOR the board of directors’ proposal, however,                                        g. The purpose of the repurchase, such as financing an employee partici-
                                                                                              pation plan for example, is incompatible with the long-term interests of
       OPPOSE if one of the following conditions applies:                                     minority shareholders or with those of the majority of the company’s
       a. The principle of equal treatment of shareholders is not respected .                 stakeholders.

       b. The amount of the repurchase/reimbursement is excessive given the
                                                                                     5.7 Capital reduction via cancellation of shares
          financial situation and perspectives of the company.
                                                                                     VOTE FOR the board of directors’ proposal, however:
       c. The company may undertake selective share repurchases.
                                                                                     OPPOSE if the capital reduction is incompatible with the long-term interests of
       d. The shareholders’ right to place an item on the agenda of the general
                                                                                     the majority of the company’s stakeholders.
          meeting is significantly undermined.
       e. The company proposes to cancel shares despite its significant capital      5.8 Cancellation or introduction of a class of shares
          need.
                                                                                     VOTE FOR the cancellation of a class of shares and OPPOSE the introduction of
       f. The share repurchase replaces the cash dividend.                           a new class of shares, unless one of the following conditions applies:
       g. The ability of the company to pay a dividend is critically undermined by         a. The long-term survival of the company is threatened.
          the repurchase of the shares.
                                                                                           b. The proposal is contrary to the long-term interests of a majority of the
                                                                                              stakeholders of the company.
5.6 Share repurchase without cancellation
VOTE FOR the board of directors’ proposal, however,                                  5.9 Removal or introduction of a limit on voting rights
       OPPOSE if one of the following conditions applies:                            VOTE FOR the removal and OPPOSE the introduction, unless one of the following
                                                                                     conditions applies
       a. The amount to be repurchased exceeds a given percentage of the
          share capital established in accordance with the rules of corporate gov-         a. The long-term survival of the company is threatened.
          ernance in the relevant country (in principle 10%).
                                                                                           b. The proposal contravenes the long-term interests of the majority of the
       b. The repurchase price is too high.                                                   company’s stakeholders.
       c. The share repurchase replaces the dividend in cash.

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2018 Proxy Voting Guidelines

                                                                                    6. Mergers, Acquisitions, and Relocations

5.10 Removal or introduction of an opting out or opting up clause                   Situations that do not fall under a specific recommendation are to be assessed in
VOTE FOR the removal and OPPOSE the introduction of an opting out or opting         light of Ethos’ principles of corporate governance.
up clause. The replacement of an opting out clause with an opting up clause can
be accepted.                                                                        6.1 Proposals for mergers, acquisitions, and relocations
                                                                                    VOTE FOR the board of directors’ proposal, however,
5.11 Introduction or renewal of anti-takeover provisions
                                                                                           OPPOSE if one of the following conditions applies:
OPPOSE the board of directors’ proposal, unless the company provides a con-
vincing explanation that the proposed measure is one-time-only, necessary to pre-          a. Given the scale of the proposed transaction, the acquisition, merger or
serve the long-term survival of the company and in line with the long-term inter-             spin-off is not consistent with the long-term interests of the majority of
ests of the majority of the company’s stakeholders.                                           the company’s stakeholders.
                                                                                           b. The “fairness opinion” was not done in compliance with the principles
                                                                                              of best practice.
                                                                                           c. The information available is not sufficient to make an informed deci-
                                                                                              sion.
                                                                                           d. The legislation and the corporate governance standards of the new
                                                                                              place of incorporation significantly deteriorate the rights of the share-
                                                                                              holders and other stakeholders.
                                                                                           e. The governance of the new entity is clearly worse than before.
                                                                                           f. The merger/acquisition does not respect international standards in re-
                                                                                              spect of human and labour rights and/or the environment.

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2018 Proxy Voting Guidelines

7. Amendments to the Articles of
   Association
                                                                                     7.3 Modification of the length of the mandate of directors

Situations that do not fall under a specific recommendation are to be assessed in    VOTE FOR the proposal of board of directors or of certain shareholders to de-
light of Ethos’ principles of corporate governance.                                  crease the length of the mandates unless the proposal threatens the long-term
                                                                                     survival of the company.
7.1 Various amendments to the articles of association                                OPPOSE the proposal of the board of directors or of certain shareholders to in-
VOTE FOR the board of directors’ proposal, however,                                  crease the length of the mandates.

       OPPOSE if one of the following conditions applies:                            7.4 Modifications of the articles of association related to the
       a. The company fails to provide sufficient information to enable the share-       Minder ordinance
          holders to assess the impact of the amendment(s) on their rights and       VOTE FOR the board of directors’ proposal, however
          interests.
                                                                                           OPPOSE if one of the following conditions applies:
       b. The amendment has a negative impact on the rights or interests of all
          or some of the shareholders.                                                     a. Several amendments are submitted to shareholder approval under a
                                                                                              bundled vote and have positive, negative and neutral impacts on share-
       c. The amendment has a negative impact on the long-term interests of                   holders’ rights and interests, but the negative impacts outweigh all oth-
          the majority of the company’s stakeholders.                                         ers.
       d. The amendment constitutes a risk for the going concern.                          Modalities of the vote on remuneration by the general meeting (art. 18
       e. Several amendments are submitted to shareholder approval under a                 Minder ordinance)
          bundled vote and have positive, negative and neutral impacts on share-           b. The proposed voting modalities stipulate a prospective vote on the
          holders’ rights and interests and other stakeholders, but the negative              maximum amount and the remuneration system described in the arti-
          impacts outweigh all others.                                                        cles of association does not include caps on the variable remuneration,
                                                                                              or these caps exceed those of Ethos (see appendices 3 and 4).
7.2 Fixing of the minimum and maximum board size
                                                                                           c. The proposed voting modalities include the possibility to vote on
VOTE FOR the proposal of the board of directors or of certain shareholders unless             changes to the remuneration retrospectively, even though the maxi-
the number proposed is not adequate for the size of the company and taking into               mum amount has already been accepted prospectively.
account the local standards of best practice.
                                                                                           d. The board may propose that in case of refusal by the shareholders, a
                                                                                              new vote will be held at the same general meeting, even though the
                                                                                              second proposal is not known to the shareholders who are not physi-
                                                                                              cally present at the meeting.

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2018 Proxy Voting Guidelines

       Remuneration structure                                                          Maximum number of external mandates for the members of the board
                                                                                       of directors and the executive management
       e. The structure of the remuneration is not in line with generally accepted
          best practice standards (see appendix 3).                                    l.   The proposed maximum number of mandates is considered excessive,
                                                                                            i.e. it does not guarantee sufficient availability to fulfil the mandate with
       f. The non-executive directors may receive remuneration other than a
                                                                                            the required diligence (see appendix 2).
          fixed amount paid in cash or shares.
       g. The information provided is insufficient for shareholders to assess the
          variable remuneration plans’ features and functioning (see appendix 4).
       h. The structure and conditions of the variable remuneration plans do not
          respect generally accepted best practice standards (see appendix 4).
       i.   The remuneration committee or the board of directors have excessive
            discretion with regard to awards and administration of the plan, for ex-
            ample in re-adjusting the exercise price, extension of the exercise pe-
            riod, amendment to the performance criteria or in replacing one plan by
            another, without prior shareholder approval.
       Reserve for new hires in the executive management
       j.   The amount available for new members of the executive management
            is excessive.
       Non-compete clauses
       k. The articles of association include the possibility to introduce non-com-
          pete clauses into employment contracts of the members of the exec-
          utive management and one of the following conditions is met:
              -   The maximum duration of the non-compete is not specified or is
                  excessive.
              -   The maximum amount to be paid in consideration of the non-
                  compete is not specified or can be assimilated to a severance
                  payment.

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2018 Proxy Voting Guidelines

8. Shareholder Resolutions                                                            9. Other Business

Situations that do not fall under a specific recommendation are to be assessed in     Situations that do not fall under a specific recommendation are to be assessed in
light of Ethos’ principles of corporate governance.                                   light of Ethos’ principles of corporate governance.

VOTE FOR a resolution submitted by an individual shareholder or a group of share-     9.1 Resolutions not featured on the agenda
holders if the following conditions apply:
                                                                                      OPPOSE any motion by the board of directors or any shareholders to vote on a
       a. The resolution is clearly phrased and properly substantiated.               proposal under the heading “Other business” (or “Miscellaneous”), if the pro-
       b. The resolution respects the principles of best practice in corporate gov-   posal was not disclosed and described in the agenda before the annual general
          ernance.                                                                    meeting.

       c. The resolution is in line with the long-term interests of the majority of   9.2 Election or re-election of the independent representative
          the company’s stakeholders.
                                                                                      VOTE FOR the board of directors’ proposal, however,
       d. The resolution complies with the principles stipulated in Ethos’ Charter,
          which is grounded in the concept of sustainable development.                       OPPOSE if one of the following conditions applies:

       e. The resolution aims at improving the company’s corporate governance                a.   Insufficient information is provided concerning the nominee.
          or to enhance the company’s social and environmental responsibility                b. The nominee does not have a good reputation or his activities and atti-
          (see examples in appendix 6).                                                         tude are not irreproachable.
                                                                                             c. The nominee’s independence is not guaranteed.

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2018 Proxy Voting Guidelines

Appendix 1: Independence criteria for the
members of the board of directors
                                                                                          l.   Does not receive variable remuneration or options that represent a substantial
                                                                                               part of his total remuneration and does not participate in the company’s pen-
In Ethos’ view, in order to be deemed independent, a board member:                             sion scheme.

a. Is not an executive director or employee of the company or a company of the            m. Does not hold options of a substantial intrinsic value.
   same group, and has not held such a position in the past five years.                   n. Is not considered non-independent by the company.
b. Is not him/herself an important shareholder or does not represent an important
   shareholder, a consultant of the company or another stakeholder (employees,
   suppliers, customers, public bodies, the State).
c. Has not been involved in auditing the company accounts during the previous
   five years.
d. Has not been a partner or a director of the audit firm that audits the financial
   statements of the company during the previous three years.
e. Is not a close relative of or does not have business relations with a member
   of the founding family, an important shareholder or an executive of the com-
   pany.
f. Does not have any permanent conflicts of interest.
g. Does not hold any conflicting office or cross-directorship with another director
   or with a member of the executive committee.
h. Does not hold an executive position in a political institution or non -profit organ-
   isation to which the company makes or from which it receives substantial do-
   nations in cash or kind.
i.   Does not regularly receive any material direct or indirect remuneration from
     the company except his director’s fees.
j.   Has not been sitting on the board or has not been linked to the company for
     more than twelve years (or less, depending on the codes of best practice that
     apply in the country).
k. Does not receive remuneration of an amount that could compromise his inde-
   pendence.

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2018 Proxy Voting Guidelines

Appendix 2: Maximum number of external                                                   Appendix 3: Requirements with regard to
mandates                                                                                 the remuneration system

The following limits are applied in order to define the conditions under which the       Transparency
amendments to the articles of association or the (re-)elections of the members of
the board of directors can be accepted by Ethos.                                         Approval of the remuneration system requires that the following elements should
                                                                                         be disclosed in principle:
For the following calculations, all the mandates at companies registered in the
commercial registry (or in a similar registry abroad) are taken into account. The
                                                                                         a. A detailed description of the principles and mechanisms of the remuneration
mandates at companies of the group count as one single mandate. The mandates
                                                                                            policy.
of chairman of the board in companies subject to an ordinary audit count double.
                                                                                         b. A detailed description of each of the components of remuneration, in particular
Ethos is aware that certain mandates can entail a particularly high workload, for
                                                                                            the bonus system and the long-term variable remuneration plans paid in eq-
example the chairman of the audit committee of a board of directors. In these
                                                                                            uity, options or in cash (see appendix 4).
situations, Ethos will assess on a case-by-case basis whether the nominee has
sufficient availability.                                                                 c. A summary of the retirement plans of executive management.

                                                                   BoD     Exec. B.      d. A description of the employment contracts of members of executive manage-
                                                                                            ment, including the sign-on and termination conditions for each member, in
    Total number of external mandates* per person                   15         5            particular in case of change of control or non-compete clauses.
    of which:                                                                            e. The market value at date of grant of each remuneration component.
      -      maximum number of mandates in companies sub-            8         2
             ject to ordinary audit **
                                                                                         Structure (for the board of directors)
      -      maximum number of mandates in listed companies          4         1
                                                                                         Approval of the remuneration system requires that the following rules should ap-
*         In addition to the mandate in the company to which the vote applies.           ply in principle for the remuneration of the board of directors:

**        An ordinary audit of the accounts (art. 727 Swiss Code of Obligations, as      a. The remuneration of the board members must be in line with that paid at com-
          opposed to limited audit) is obligatory for companies that, for two consecu-      panies of a similar size and complexity.
          tive financial years, fulfil at least two of the three following criteria:
                                                                                         b. The remuneration of the non-executive chairman should not significantly ex-
              - Revenues greater than CHF 40 million                                        ceed that of the other non-executive members without adequate justification.
              - Balance sheet total greater than CHF 20 million                          c. Potential year-on-year increases proposed should be limited and duly justified.
              - More than 250 full-time equivalents
                                                                                         d. The non-executive directors should not receive remuneration other than a
                                                                                            fixed amount in cash or shares.

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