CSL Ltd Annual Report 2020

3.2 Remuneration Framework As a leading global biotechnology company with manufacturing sites across six countries and over 26,000 employees in 39 countries, CSL develops and delivers innovative biotherapies and influenza vaccines that save lives, and help people with life-threatening medical conditions live full lives. This requires a research to commercialisation lifecycle that can extend seven to ten years. Accordingly, we have designed a reward framework that effectively incentivises and rewards our executives over the long term. Our reward framework combines elements of traditional Fixed Reward (or base salary), STI and LTI plans with enhancements to several design factors to suit CSL’s business, a very different business to other companies in Australia, and with a diverse global employee and shareholder base. Our international footprint requires global leadership and, with executives based in different countries, we need to ensure our framework is fair, equitable and market competitive in the countries and industry in which we operate in order to attract and retain highly talented people. 3.2.1 Remuneration Framework Elements Fixed Reward (FR) Short Term Incentive (STI) Long Term Incentive (LTI) Purpose Attract, retain and engage key talent to deliver our CSL strategy Reward performance against annual Key Performance Indicators (KPIs) – maintaining a focus on underlying value creation within the business operations is critical to the success and sustainability of CSL Alignment to longer term performance and strategy of CSL, building economic alignment between Executive KMP and shareholders over the long term Structure Cash – salary and superannuation/pension Cash Performance Share Units 3 Approach Reviewed annually Determined based on the scope, complexity and responsibilities of the role, experience and performance Reviewed through both an internal and external relativity lens Peer group 4 – global pharmaceutical/ biotechnology peers or a general industry view depending on role (desired positioning at the median) Paid annually Mr Perreault’s target is 120% of FR, Dr McKenzie’s target is 100% of FR and the target for Professor Cuthbertson and Mr Lamont is 85% of FR Maximum payout is 150% of target for all Executive KMP Outcomes based on business (70%) and individual performance measures (30%), except for Professor Cuthbertsonwho has a 60%/40% split Granted annually with vesting in instalments over a four year period – 25% each year Performance measure is Return on Invested Capital – measured on a seven year rolling return in the year the award vests Risk Management Before determining remuneration outcomes and vesting, we ensure alignment with risk management outcomes to hold executives accountable for effective risk management – both financial and non-financial. In addition, all variable reward is subject to the Malus and Clawback Policy and the Board has full discretion over the outcome of any variable reward payment and vesting The Board has the discretion to apply a ‘Leading and Managing’ modifier to both the STI and LTI outcomes – formally recognising the importance of CSL’s culture including leadership behaviours, values, diversity objectives and management of risk. The modifier allows for the Board to adjust in exceptional circumstances +20%/-50% of annual STI earned, and/or LTI opportunity granted. The modifier is also available to adjust for risk management outcomes following the implementation of a more formal risk/consequence management framework. The Board has a discretion in all circumstances, including a significant risk management failure, to reduce further, including to zero Shareholding Requirement Executive KMP must hold CSL shares equal to 100% of FR (300% for the CEO) within five years from the date of appointment to their role Benefits We also provide market competitive benefits to attract and retain key talent. Benefits may include, but are not limited to, accident, disability and death insurance, health insurance, car parking and participation in local benefit programs As noted in the letter from the Chair, in 2021 we will be reviewing our remuneration framework for executives, with any changes to be implemented effective 1 July 2021. The review of our framework is directed at ensuring the arrangements in place facilitate the delivery of our 2030 strategy, deliver outstanding returns to shareholders and ensure a market competitive program. The review will include the STI framework, LTI measures, tranche structure and vesting schedule. 3 Legacy LTI plans (Options and Performance Rights) remain in place with final reporting in 2021. See section 10.1 for more details on testing and key plan characteristics. 4 The global pharmaceutical/biotechnology industry peer group serves as a primary reference group for remuneration benchmarking, created such that CSL falls in the middle of the group with respect to market capitalisation and revenue. The group represents global industry peers and is updated annually. The peer group in 2020 included: Alexion Pharmaceuticals, Inc.; Allergan plc; AstraZeneca PLC; Bayer Aktiengesellschaft; Biogen Inc.; BioMarin Pharmaceutical Inc.; Celgene Corporation; Eli Lilly and Company; GlaxoSmithKline plc; Gilead Sciences Inc.; Grifols, S.A.; Incyte Corporation; Jazz Pharmaceuticals Public Limited Company; Merck Kommanditgesellschaft auf Aktien; Novo Nordisk A/S; Regeneron Pharmaceuticals, Inc.; Shire plc; UCB SA; Vertex Pharmaceuticals Incorporated. For the 2021 year, AbbVie Inc., Amgen Inc., Bausch Health Companies Inc. and Bristol-Myers Squibb Company are added to the peer group and BioMarin Pharmaceutical Inc, Celgene Corporation, Incyte Corporation, Jazz Pharmaceuticals plc and Shire plc have been removed. In addition, two general industry reference groups representing Australia and North America also help us ensure we pay appropriately to reward senior talent and may be used as a primary, or hybrid, data set for certain Executive KMP dependent on role and location. CSL Limited Annual Report 2020 72 Directors’ Report