CSL Ltd Annual Report 2021

4. Remuneration Framework Changes in 2022 As communicated in our 2020 Report, in 2021 we undertook a review of our executive remuneration framework. Our current framework is now well established, but feedback from stakeholders highlighted opportunities for further improvement. The objective of the review was to ensure each component of reward is fit for purpose for CSL and enables us to attract, engage, and retain talent, compete with larger global pharmaceutical companies, and motivate our people to deliver their best performance. Effective 1 July 2021 the following changes will be implemented: Change Rationale STI Increase of the maximum payout opportunity from 150% to 200% of target opportunity • A market competitive program in line with our global pharmaceutical/ biotechnology peers where 89% of peers have a maximum payout above 150% of target and 69% are at or above 200% of target opportunity • Address attraction and retention issues in key growth markets, including the U.S. • Better alignment to our pay for performance philosophy – rewards will only be earned for truly outstanding performance LTI Introduction of a second performance measure of Earnings per Share growth to complement the current ROIC measure – measured over a three year period and weighted at 30% • Introducing an additional measure to support continued focus on sustainable growth and execution of our long term strategy • Alignment to shareholder experience and an indicator in increases in shareholder value • Responding to investor feedback on a single metric • Better aligning to market practice and peers where multiple measures are part of the LTI plan • Weighting reflects the importance of our ROIC measure given our strong investment focus on research and development and our capacity investment cycle LTI Move from tranche vesting over a four year period to single point vesting at year three • Recognising our current approach has served its purpose of getting equity into the hands of executives more quickly • Responding to investor feedback that LTI vests too early • Simpler design compared to current framework • Alignment with the most prevalent approach taken by our global pharmaceutical/biotechnology peers Benefits Introduction of mental health initiatives Increase in Total Employment Cost (TEC) for Australian Executive KMP to adjust for the increase in the Superannuation Guarantee Rate • Securing access to quality and affordable coverage for mental health conditions addresses the well-being of our employees and their dependents • Considered as part of the annual merit review an increase to TEC consistent with other Australian based employees Environment, Social and Corporate Governance (ESG) changes – CSL is committed to a healthier world. Our vision is a sustainable future for our employees, communities, patients and donors, inspired by innovative science and a values-driven culture. In 2021 we have adopted an ESG strategy that is based on the three pillars of Environment, Social and Sustainable Workforce. For the remainder of 2021 through to 2023, for the focus areas prioritised under each of the three pillars we will execute a number of actions to validate data sets and baselines. While ESG metrics are currently included in the individual STI KPIs of our executives, we need to ensure a global shared focus on our long term sustainability and global footprint consistent with our CSL purpose and values. In the 2022 financial year, ESG metrics will continue to form part of Executive KMP individual KPIs and when the Board assesses the STI outcomes for Executive KMP they will review the ESG outcomes of the organisation and consider the application of discretion through the ‘Leading and Managing’ modifier as appropriate. Effective 1 July 2022, we will introduce a CSL Group ESG metric that all executives will be held accountable for and will communicate this in our 2022 Remuneration Report. Remuneration Delivery Timeline – The following diagram sets out the timeline for delivery of remuneration under the new framework. Year 1 Year 2 Year 3 Year 4 FR STI LTI ● Award Granted ● Eligible for payment or vesting ● ● ● CSL Limited Annual Report 2020/21 83