Chairman’s letter

Dear Shareholders,

Last year was an eventful one for our company and for the Board of Directors: we laid the foundation to shift the focus of our business to digital industries; we “on-boarded” three new Board members, elected at last year’s AGM; and we strengthened our focus on environmental, social and governance matters. All of these initiatives, as well as the others undertaken in 2018, are aimed at ensuring that ABB delivers long-term, sustainable value creation in line with our mandate from you, our shareholders.

New strategic direction

In December 2018, we announced a new strategic direction for our company, in which we will focus on digital industries by divesting our Power Grids business. This decision reflects the growing difference in customer needs between the large-scale infrastructure utility and industry sectors. We believe that the future development of the Power Grids business will be best served under Hitachi’s ownership, given its leading position in energy infrastructure and its long-term perspective for the power business.

The new ABB with its four businesses will be well-positioned as a provider of digitally enabled technologies to industries, especially in the B2B space, which are now beginning to digitalize in earnest. You can read more about our new strategy and the market opportunities we are targeting in the Chairman and CEO letter, and in the “New ABB” chapter.

Diverse, rejuvenated Board of Directors

In 2018, we welcomed three new members to the ABB Board of Directors, further broadening the diversity of our Board. With the integration of our new colleagues, we have further rejuvenated our Board, which has an average tenure of four-and-a-half years and is closely aligned with our strategic needs, business portfolio, geographic reach and culture. To help highlight the breadth and complementary nature of our Board members’ skills, experience and backgrounds, we are including for the first time a (XLS:) diversity and skills matrix in our corporate governance report.

Executive compensation

One of our key Board priorities has been to address your concerns about compensation policy and reporting. In 2018, we adjusted the long-term incentive program (LTIP) for our Executive Committee (EC) and certain other senior managers, linking it even more clearly to our performance and the interests of our shareholders. We also imposed more stringent shareholding requirements on our EC members. Further details can be found in our Compensation Report.

Environmental, social and governance matters

For ABB, being a good corporate citizen has long been important. We maintain the highest standards concerning integrity and ethical business practices and we have a zero-tolerance approach to unethical behavior.

In 2018, in line with good governance practices, the Board proposed a change of auditor, which was subsequently approved by the shareholders at our AGM.

In addition, we seek to minimize ABB’s environmental footprint and to conduct our business in a socially responsible manner. More than half of our revenue is related to energy efficiency, renewable energy and resource conservation, and our technologies contribute directly or indirectly to all 17 of the United Nations’ Sustainable Development Goals.

On the operations side, we have further improved our safety performance by lowering the lost-time injuries’ cases compared with 2017. Sadly, we still experienced four fatalities among employees and contractors in 2018. In 2017, we also had four fatalities. The learnings from all safety incidents are continuously disseminated throughout the organization, further improving our safety results. Regarding environmental performance, since 2013 we have reduced greenhouse gas emissions by 37 percent. ABB does not tolerate any modern slavery, human trafficking or child labor.

Board mandate

In line with the mandate that you approved last year, the Board of Directors is focused on securing long-term, sustainable value creation for the benefit of all of our stakeholders. To that end, we continue to collaborate closely with the CEO and the members of the EC to ensure that ABB’s strategy is implemented effectively, and that we live up to our commitments in terms of performance and our high ethical, environmental and social standards.

Thank you

Since my appointment as Chairman of the Board of Directors in 2015, I have sought to maintain an open dialogue between the Board and the shareholders in order to represent your interests in the best way possible. The feedback we have received from you has been extremely valuable in helping us to set priorities. Equally, your support has allowed the Board, CEO and the EC to run our business for the long-term. On behalf of the Board of Directors, I would like to thank you for your trust as we embark on the next phase of our company’s growth and development journey.

Peter Voser
Chairman of the Board of Directors

Zurich, March 27, 2019