Directors’ Report 3.2 Remuneration Framework CSL’s remuneration framework includes reward components of Fixed Reward (or base salary (FR)), and variable reward in the form of STI and LTI. These traditional elements are enhanced with several design factors to directly reflect the complexity of CSL’s business, a very different business to other companies in Australia, and with a diverse global employee and shareholder base. CSL’s international footprint requires global leadership and, with executives based in different countries, there is a need to put in place a framework that is fair, equitable and market competitive in the countries and industry in which CSL operates in order to attract and retain highly talented people. 3.2.1 2023 Remuneration Framework Elements for Executive KMP 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 CSL’s success and sustainability Alignment to the 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 Approach Paid throughout the year and reviewed annually Determined based on the scope, complexity and responsibilities of the role, with consideration of individual experience and performance Reviewed through both an internal and external relativity lens Peer group – global pharmaceutical/ biotechnology peers or a general industry view depending on role (desired positioning at the median) Paid annually Maximum payout is 200% of an Executive KMP’s target STI opportunity (i.e. STI target multiplied by 200%) Outcomes based on business (65%) and individual performance measures (35%) Granted annually with vesting following the end of the three year performance period The performance measures are Return on Invested Capital – measured over a seven year return period in the year the award vests (70%) and Earnings Per Share Growth – measured over the three year performance period (30%) For 2024, the ROIC measure will move to a three year forward looking measurement period Peer Group 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 2023 included: AbbVie Inc.; Amgen Inc.; AstraZeneca PLC; Bausch Health Companies Inc.; Bayer Aktiengesellschaft; Biogen Inc.; Bristol-Myers Squibb Company; Eli Lilly and Company; GlaxoSmithKline plc; Gilead Sciences Inc.; Grifols, S.A.; Merck Kommanditgesellschaft auf Aktien; Moderna Inc.; Novo Nordisk A/S; Regeneron Pharmaceuticals, Inc.; Takeda Pharmaceutical Company; UCB SA and Vertex Pharmaceuticals Incorporated. For the 2024 year, Novartis AG. has been added and UCB SA has been removed In addition, two general industry reference groups representing Australia and North America also help us appropriately reward senior talent and may be used as a primary, or hybrid, data set for certain Executive KMP dependent on role and location (the Chief Financial Officer for example) Risk Management Before determining remuneration outcomes and vesting, the Board assesses 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 STI and LTI outcomes – formally recognising the importance of CSL’s culture including leadership behaviours, values, diversity objectives, sustainability and management of risk. The modifier allows the Board to adjust in exceptional circumstances upwards by up to 20% or downwards by up to 50% of annual STI earned, and/or LTI opportunity granted. The modifier is also available to adjust STI and LTI outcomes for risk management outcomes under our formal risk/ consequence management framework. The Board has discretion in all circumstances, including a significant risk management failure, to reduce awards and/or vesting outcomes further, including to zero Malus and Clawback Executive KMP STI and LTI arrangements are subject to malus and clawback provisions that enable the Board to adjust both vested and unvested awards as appropriate. The circumstances include material misstatement or omission in financial statements, fraud, dishonesty, adverse risk management outcomes, violation of any material law or regulation, material violation of CSL’s Code of Conduct or any other policy governing the conduct of employees or any other serious and wilful misconduct. See section 9 for further details on CSL’s Malus and Clawback Policy 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 CSL provides 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, global parental and caregiver leave, select vaccinations and participation in local benefit programs The Board retains discretion across all elements of the remuneration framework. CSL Limited Annual Report 2022/23 90
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