Just a reminder for those that haven't fully read the revised Renumeration Report of Brainchip updated on 19 March 2024
REMUNERATION POLICY OVERVIEW 07 December 2023 (updated 19 March 2024) BrainChip Holdings Ltd REMUNERATION POLICY OVERVIEW Page 2 of 6 1. INTRODUCTION This document provides an overview of the remunera�on policies of BrainChip Holdings Ltd (“BrainChip” or “The Company”). It was prepared for the purpose of informing and educa�ng external stakeholders about the methodology and performance metrics used by the Board in determining the appropriate remunera�on and financial incen�ves for directors, execu�ves, and employees of the Company. In 2021, the Board undertook a comprehensive review of the Company’s remunera�on policies and prac�ces and determined that significant changes were required. The new remunera�on policies and prac�ces, formally adopted by the Board of Directors, reflect current market and stakeholder expecta�ons, being; • performance-based; • transparent; • globally benchmarked; and • aligned with the interest of shareholders. In preparing this document, BrainChip seeks to demonstrate to its key stakeholders that its remunera�on policies are equitable and transparent, in line with reasonable market expecta�ons, and in the best interests of the Company. 2. REMUNERATION BrainChip Holdings Ltd (“BrainChip” or ‘the Company”) is a US-based ASX-listed ar�ficial intelligence company that develops and sells IP (intellectual property) and generates revenue from IP licence sales and royal�es from the sale of royalty-bearing products using its IP. The Company operates in an intensely compe��ve global market, where exper�se and experience in a dynamic and fast-growing industry come at a significant cost and where the need to hire appropriately skilled talent represents a material risk to the business. This risk is not likely to ease in the near to mid-term future as tech talent is expensive and highly sought a�er, and the “right people” enjoy the ability to seek and receive significant remunera�on packages. Ensuring the Company adopts a globally compe��ve and transparent remunera�on policy is one way to effec�vely manage, mi�gate and reduce this material risk. 3. NON-EXECUTIVE DIRECTOR REMUNERATION The Company’s board (Board) currently comprises six (6) directors, with four (4) independent nonexecu�ve directors, one non-independent non-execu�ve director and one (1) execu�ve director (the Company’s CEO). Non-execu�ve directors (NEDs) are members of the Board but are independent of the management team and play a cri�cal role in providing independent oversight, strategic guidance and accountability in the governance of the Company. Their focus is on providing leadership and guidance regarding longer-term planning and strategic decision-making, compliance, governance, policymaking and holding the management team accountable for the Company’s performance. BrainChip Holdings Ltd REMUNERATION POLICY OVERVIEW Page 3 of 6 NEDs are remunerated out of a pool of Directors’ Fees, approved by shareholders, in accordance with the Company’s Cons�tu�on and the ASX Lis�ng Rules. Directors’ fees (both execu�ve directors and NEDs) are benchmarked against comparable global companies opera�ng in the technology sector. The compensa�on paid to NED’s includes a flat annual fee, to compensate NED’s for atending Board mee�ngs, adding value and dedica�ng such of their �me as is necessary to ensure that they discharge their du�es as a director of the Company. NED’s earn addi�onal fees for membership of and where applicable, chairing the Board and/or Commitees such as the Audit & Governance Committee and the Remuneration & Nominations Committee. As part of the NED’s compensa�on package and in addi�on to the cash component, each NED receives an annual equity grant in the form of either Restricted Stock Units (RSUs) for US-resident NEDs or Service Rights for NEDs resident in Australia. These equity instruments are granted, subject to Shareholder approval at the applicable Annual General Mee�ng, for nil considera�on and in recogni�on of NEDs fulfilling their obliga�ons effec�vely and the ongoing contribu�on each NED makes to the Company. They represent the noncash component of the NED’s remunera�on package and are subject to the NED remaining in office for ves�ng to occur. NEDs are held accountable against evalua�on criteria set out in the Non-Executive Director Remuneration Policy. These criteria include: • demonstra�ng a clear understanding of their fiduciary du�es to the Company and its shareholders; • effec�vely overseeing the financial performance of the Company; • providing independent oversight, free of any undue influence; • remaining well-informed about the company's risk profile and the steps being taken to mi�gate risks. • demonstra�ng commitment and engagement in Board ac�vi�es; • ac�vely par�cipa�ng in the development and review of the Company's strategic plans; • ac�vely contribu�ng to Board discussions and debates, fostering a culture of open and construc�ve dialogue; and • remaining vigilant about compliance with laws, regula�ons, and ethical standards. Annually, NEDs undergo a thorough assessment encompassing peer feedback alongside selfevalua�on. This coincides with a comprehensive review of the Board's composi�on, its prac�ces, and the overall knowledge of its members. Assessments, regular feedback and a commitment to best prac�ce ensure NEDs fulfil their roles effec�vely. 4. NON-EXECUTIVE DIRECTOR MINIMUM SHAREHOLDING The Board has put in place a NED Minimum Shareholding Policy, which s�pulates that: 1.1. A NED shall establish and hold a Minimum Shareholding based on 1 year of the NED base cash remunera�on (including superannua�on if applicable but excluding any compensa�on received for work undertaken on any Commitees or as Chair of the Board) (NED Minimum Shareholding Policy). BrainChip Holdings Ltd REMUNERATION POLICY OVERVIEW Page 4 of 6 1.2. For the purposes of the NED Minimum Shareholding Policy, a Share is a fully paid ordinary share or any other equity instrument or right awarded to an NED in the Company. 1.3. Each NED is required to meet this NED Minimum Shareholding threshold within a 3-year period from the date the NED Minimum Shareholding policy is approved by the Board or, if appointed a�er the date the NED Minimum Shareholding Policy is approved, from the date the NED is appointed to the Board. 1.4. A NEDs shareholding shall be assessed annually at the end of each calendar year. 1.5. The pricing formula for calcula�ng whether the NED Minimum Shareholding has been met is the 60-day volume weighted average price of the Company’s shares calculated at the end of each calendar year (November and December). 1.6. Once the NED Minimum Shareholding is reached by an NED it must be maintained for the period of the appointment as an NED. 1.7. The Nomina�ons and Remunera�on Commitee has been delegated to determine compliance rela�ng to the NED Minimum Shareholding threshold (including ‘top-ups’ where necessary). 5. EMPLOYEE AND EXECUTIVE SALARIES As a rela�vely small publicly listed company, BrainChip competes against global tech companies to atract the best available talent. This talent is highly mobile and aware of its market value, so to be successful in atrac�ng this talent BrainChip must offer compe��ve salaries, as well as other noncash elements as part of its remunera�on packages. Global compensa�on benchmarking was conducted by US-based remunera�on consultants in August 2021 on behalf of the Company and provided compara�ve salary data for key execu�ve posi�ons benchmarked against global tech industry compe�tors. The report obtained provided a template for salary packaging for execu�ves and employees that was both globally compe��ve and deemed to be appropriate for the Company in its current stage of growth. This salary packaging benchmarking data provides an appropriately atrac�ve salary range for each posi�on within the Company. However, a base salary is not on its own sufficient to provide the necessary incen�ve to atract, retain and mo�vate staff, and align their interests to the long-term interest of the Company and its shareholders. In addi�on to base salaries, the Company offers employees, execu�ves, and execu�ve directors a performance-based short-term bonus scheme with clearly defined performance metrics calculated on achieving a combina�on of Individual, Departmental and Company targets. The Company also invites employees, execu�ves, and execu�ve directors to par�cipate in a LongTerm Incen�ve Plan (LTIP) to acquire equity in the Company based on all-of-Company performance targets. The opportunity for employees to gain equity in the Company, in the form of Restricted Stock Units (RSUs), ensures that employees and execu�ves are personally mo�vated and incen�vised over a longer period to remain with the Company, achieve Company goals and share in its long-term success. This is one of the best and proven ways to ensure employees’ interests are aligned with the interests of shareholders. BrainChip Holdings Ltd
"REMUNERATION POLICY OVERVIEW Page 5 of 6 The Company intends to go out to market to obtain an updated global compensa�on benchmark report in 2024."
6. SHORT TERM INCENTIVE BONUS SCHEME Bonuses can be paid to employees annually according to a short-term performance-based criteria, as per the BrainChip Employee Bonus Scheme, introduced in 2022 (Bonus Scheme). In general, employee bonuses, as well as executive bonuses, are set at a base target of a percentage of salary. Total bonus payouts are determined through proportioning Company, Departmental and Individual performance metrics, which are segmented into: • Company goals, • Departmental goals; and • Individual employee goals. Departmental and Individual metrics are set by department heads and managers in conjunction with each employee and are assessed bi-annually as part of the annual employee performance review process. Performance areas are weighted according to the Company's key management priorities and reflect the Company's focus points at a given time. As the Company grows and matures, these performance areas are expected to change to reflect evolving strategic priorities and focus points over time. Company performance metrics are calculated with a focus on bookings and product development, as well as ongoing active risk management. These metrics are segmented as follows: Bookings performance considers a: • baseline bookings target; • sliding scale against percentage of bookings achieved; and • multiplier which can be applied to the overall calculated bonus rate for bookings above the 100% target. Product development performance focuses on meeting pre-defined deadlines for the delivery of next generation technology products; with bonus payments decremented for each month a project is behind schedule. Risk Management performance is assessed through the active maintenance of a comprehensive risk register, and includes cyber security auditing and bi-annual reporting to the Board. Once the year-end results are finalised, management presents the actual performance metrics to the Board Remunera�on Commitee, with a formal recommenda�on to the Board to approve the bonus payout. Approval to pay any bonus is at the Board’s discre�on. The Bonus Scheme does not apply to NEDs. BrainChip Holdings Ltd REMUNERATION POLICY OVERVIEW Page 6 of 6 7. LONG-TERM INCENTIVE PLAN (LTIP) The Company recognises that in addi�on to offering compe��ve salaries and short term incen�ve bonus schemes, there is a need to align the long-term interests of the Company’s employees with its shareholders, through performance-based incen�ves. The LTIP is based on three long-term strategic performance criteria condi�ons. • Bookings; • Conversion of bookings to revenue through service delivery; and • Achieving a 3-year share price target. LTIP performance metrics are all of Company goals. The LTIP 3-year measurement period runs from 01 January in the year of the grant to 31 December a full 3 calendar years later. 50% of the total annual LTIP grant award is “at-risk”. The Booking goal has the poten�al to pay out anywhere from 50%-150% based on performance. New-hire grants are awarded to employees when they join the Company a�er they complete their proba�onary period (where applicable). The value of this grant is based on a mul�ple of the employee’s star�ng salary. Annually, management prepares a formal request to the Board outlining the key components for the upcoming annual LTIP grant request as well as the total number of instruments to be awarded throughout the year. Key components include the formula for calcula�ng each employee grant, the share price used for all grant calcula�ons for the upcoming year, the methodology used to determine the share price, and the performance criteria to be used to measure Company performance - each with a payout formula based on performance against the goals. All LTIP grants are at the Board’s discre�on. The LTIP does not apply to NEDs.