Dear Shareholders,

In the name of the Board of Directors and the Remuneration Committee, I am pleased to introduce the 2021 Remuneration Report.

2021 was a very demanding year for the travel retail and tourism industry, as the COVID-19 pandemic continued to show its negative effects in terms of travel restrictions and limitations around the world. As reported by our CEO and CFO in their letters, we saw gradual improvements in the business environment during the first half of the year, and a strong re-bound of travel, predominantly in the Western hemisphere, during the second half. Across the entire company, our teams have shown a remarkable performance and strong commitment to Dufry enabling us to reopen shop-by-shop and to safeguard our leadership position in global travel retail despite the ongoing challenges.

Dufry was able to increase turnover by 53.2% compared to 2020, organically reaching a level of 46.5% of pre-crisis 2019. Equity Free Cash Flow strongly improved and amounted to CHF -33.4 million in total for the year 2021, significantly better than expected and achieved through cost savings and continued tight cash management. Overall savings for full year 2021 amounted to CHF 1,919.7 million consisting of MAG reliefs, personnel and other expense savings. We are prepared to take full advantage of the expected recovery in traveling and travel retail during 2022 and beyond.

In this Remuneration Report, we outline our current remuneration policies and the decisions made in relation to the 2021 compensation of the Board of Directors and the Global Executive Committee.

At the 2021 General Meeting of Shareholders, two binding votes on the aggregate maximum remuneration amount for the Board of Directors and for the Global Executive Committee as well as a consultative vote on the Remuneration Report were conducted, so that shareholders could express their opinion on our remuneration programs and principles. While the shareholders approved the remuneration amounts for the Board of Directors and for the Global Executive Committee with a voting result of 86.57% and 88.74% respectively, the consultative vote on the Remuneration Report was approved with a rate of 63.65% only. Following this result, the company reached out to investors and proxy advisors to understand and address their concerns. Further details on the outcomes of this dialogue are included in this report.

The Remuneration Committee focused its activities during fiscal year 2021 on the annual review of the remuneration programs for the Board of Directors and the Global Executive Committee, the performance objective setting for the incentive plans and their performance assessment. In addition, the Remuneration Committee reviewed the remuneration for each member of the Board of Directors and of the Global Executive Committee, as well as the Remuneration Report and the voting proposals on remuneration to the General Meeting of Shareholders. Furthermore, in 2021 and early 2022, the Remuneration Committee discussed how to include Environmental, Social and Governance (ESG) topics into the compensation structure of the Global Executive Committee going forward. ESG targets should be rigorously aligned with Dufry’s overall strategy, long-term oriented, measurable, and any compensation should be strictly linked to achievement of the ESG targets. An additional discussion by the Remuneration Committee was on the possible introduction of a relative Total Shareholder Return (TSR) metric. Final work needs to be done and decisions taken on both matters, but the Remuneration Committee and the Board of Directors intend to introduce such additional measures to the long-term incentive for the Global Executive Committee in 2022.

To improve the performance alignment of our executive remuneration framework in these challenging times and also take account of shareholder feedback, several changes to the remuneration programs were implemented in fiscal year 2021:

  • In order to reflect the short-term priorities of the Group navigating through the Covid-19 pandemic, the performance objectives for the annual bonus of the Global Executive Committee focus on the Group turnover, with a 50% weighting, and the Group cost savings, with a 50% weighting, similar to fiscal year 2020. The respective targets were set at the beginning of the fiscal years;
  • In order to foster the long-term commitment and pay-for-performance alignment of our executives, a grant of performance share units (PSU) was awarded in the reporting year (unlike in the previous year, when the PSU plan was suspended for the one-year period 2020 and no PSU were granted). The vesting of those performance share units is conditional upon the achievement of two performance conditions: Cumulative Adjusted EPS with a 50% weighting and Cumulative Equity Free Cash Flow with a 50% weighting. Those objectives reflect the mid- and long-term priorities of the Group. The three-year performance period of the PSU remained unchanged compared with earlier PSU plans;
  • Regular basic salary payments in fiscal year 2021 compared to a 30% voluntary salary reduction for the period April to June 2020. A single member of the Global Executive Committee (not the CEO) received a pre-defined basic salary increase in 2021 related to the increase in experience and responsibility. All other members of the Global Executive Committee did not receive any basic salary increase in the reporting year.

Furthermore, the fees for the Chairs of Board Committees were raised for the first time in the last seven years to compensate for the additional workload of the Chairpersons and the increasing complexities in the committee work.

As in previous years, we will submit the Remuneration Report 2021 for a consultative vote at our Annual Shareholders’ Meeting on May 17, 2021.

On behalf of the Remuneration Committee and the entire Board of Directors, I would like to thank you for your continued contributions, your trust in Dufry and in our long-term strategy and I trust that you will find this report informative.

Yours sincerely,

Luis Maroto Camino
Chairman of the Remuneration Committee

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