317 Life Is On | Schneider Electric www.se.com Chapter 4 – Corporate Governance Report Corporate Governance 4. Annual variable compensation (continued) Application of the 2021 compensation policy The annual incentive due for 2021 was determined by the Board at the meeting of February 16, 2022, based on the attainment rate of the objectives set for fiscal year 2021 as follows: Weight (%) Performance Range Achievement 2021 performance criteria Threshold 0% Target 100% Maximum 200% 2021 Results Achievement rate (non- weighted) Achievement rate (weighted) Group financial indicators (80%) Organic Sales growth 40% 8% 10% 12% 12.7% 200.0% 80.0% Adjusted EBITA margin improvement (org.) 30% 0.9pts 1.3pts 1.5pts +1.4pts 150.0% 45.0% Cash Conversion rate 10% 85% 100% 115% 87% 13.3% 1.3% Sustainability (20%) Schneider Sustainability Impact (score) 20% 3.25 3.75 4.25 3.92 134.0% 26.8% Total 100% 15 3.1% Overall, 2021 annual variable compensation resulted in a total achievement rate of 153.1%, above target, reflecting record levels in revenues and adjusted EBITA, and good free cash-flow delivered by Schneider Electric in 2021 and the exceptional achievement of ambitious targets. Indeed, after having set the compensation targets on February 10, 2021, aligned with the targets disclosed to the market published at that time, the Board decided on April 27, 2021 to use the discretion clause provided in the 2021 Compensation policy approved by shareholders at the 2021 Annual General Meeting. The targets set at the beginning of 2021 did not appear adequate anymore considering the market’s growth which was much higher than expected. Therefore, the Board resolved to adjust and increase the targets linked to revenue growth and Adjusted EBITA margin improvement in order to align them with the new guidance announced to the market at that time: • Revenue growth of +8% to +11% organic; • Adjusted EBITA margin up +90bps to +130bps organic. This decision has been made to ensure a better alignment with the shareholders experience. The 2021 results having exceeded the targets disclosed to the market in April 2021, the total achievement rate of the annual variable compensation of the Corporate Officer was set by the Board at 153.1% of the targeted variable compensation, reflecting strong performance of Schneider Electric in 2021 as was also reflected in the excellent Total Shareholder Return of Schneider Electric. When the targets disclosed to the market were, once again, upgraded in July 2021, the Board resolved not to review the compensation targets as it was considered that this new guidance could not anymore be attributed to external factors, such as improved market conditions, but was instead linked to the company’s intrinsic performance. Detailed achievement of each criterion: • Organic Sales growth: The Group delivered an organic sales growth of +12.7%, which was above the guidance communicated to the market in April 2021 of +8% to +11%. Therefore, this good performance resulted in the maximum achievement rate of this criterion, i.e., 80% on the range between 0% to 80%. • Adjusted EBITA margin improvement: In 2021, Adjusted EBITA margin rate improved by +140bps organically to reach 17.3%, thanks to a combination of strong top line performance, pricing actions and productivity. This performance is above the guidance objective of +90bps to +130bps communicated to the market in April 2021. As a result, the achievement rate on this criterion is set at 45% on a scale from 0% to 60%. • Cash conversion: free cash-flow was €2.8bn with operating cash flow impacted by working capital requirements, as trade receivables rebounded and inventory increased both as a consequence of the strong external demand environment, and the supply chain pressures (some components shortages leading to higher safety stocks). Therefore, cash conversion was only 87% in 2021 which represented an achievement rate of 1.3% on this criterion, on a scale from 0% to 20%.