ING Direct 2011 Annual Report Download - page 82

This chapter sets out the remuneration for the Executive Board and
the Supervisory Board. The remuneration policy for the Executive
Board was adopted by the annual General Meeting (AGM) on
27 April 2010; adjustments to the remuneration policy in line with
new regulatory developments were adopted by the AGM on 9 May
2011. In addition, the Remuneration report provides information on
the remuneration paid for 2011. Furthermore, information is
included on loans and advances to the Executive Board and
Supervisory Board members as well as ING depositary receipts for
shares held by members of both Boards.
REMUNERATION POLICY
The primary objective of the remuneration structure is to enable
ING to retain and recruit qualified and expert leaders, senior staff
and other highly qualified employees, who have a drive for
excellence in serving the interests of the Company’s various
stakeholders.
ING endeavours to match compensation of the Company’s
leadership appropriately against a variety of factors, such as the
complexity of functions, the scope of responsibilities, the alignment
of risks and rewards, and the long-term objectives of the Company
and its stakeholders, which is all the more important given the
changing international standards regarding responsible
remuneration. These factors differ for each role, line of business
and country. This is especially the case for ING with its operations
inover 40 countries and over 97,000 employees of whom around
71,000 are based outside the Netherlands (over 54% of senior
management is non-Dutch). As much as possible for a global
financial institution of this size, ING aims to take account of all
these differences and also of the standards applied within similar
financial institutions in the various countries in which it operates.
REMUNERATION POLICY FOR THE EXECUTIVE BOARD
ADOPTED IN 2010
According to the remuneration policy of the Executive Board as
adopted by the AGM on 27 April 2010 and amended by the AGM
on9 May 2011, remuneration of Executive Board members consists
of a combination of fixed remuneration (base salary) andvariable
remuneration (together ‘total direct compensation’), pension
arrangements and benefits as described below.
Total direct compensation: moderation and reduced
emphasis on variable remuneration
Total direct compensation levels are based on market data that
include peers both inside and outside the financial sector in the
international context in which ING operates. Total direct
compensation is benchmarked against a peer group of companies
that, in the opinion of the Supervisory Board, are comparable with
ING in terms of size and scope. In line with the foregoing, the
Supervisory Board has determined that the peer group consists of
the companies in the Dow Jones EURO STOXX 50 index. These are
50 companies, in a range of financial and non-financial industries,
which are based in countries within the Economic and Monetary
Union of the European Union. In accordance with the Dutch
Banking Code, ING’s new remuneration policy for the Executive
Board aims for total direct compensation levels slightly below market
median levels for comparable positions in the relevant markets.
In addition, the remuneration policy provides for a balanced mix
between fixed and variable remuneration. Variable remuneration
will not exceed 100% of fixed salary at the time of allocation. Fixed
remuneration (i.e. the base salary levels) will be determined in line
with the relevant market environment as an integral part of total
direct compensation, and will be reviewed from time to time by
theSupervisory Board. The policy provides for an at target variable
remuneration of 40% in cash and 40% in stock (in total 80%)
ofbase salary if performance criteria are met. If performance
criteria (as predetermined by the Supervisory Board) are exceeded,
the variable component can be increased from target to maximum,
notexceeding 100% of base salary at the time of allocation.
Increased emphasis on long-term value creation
The remuneration policy for the Executive Board combines the
short and long-term variable components into one structure. This
structure intends to support both long-term value creation and
short-term company objectives. The emphasis on long-term
performance indicators within the variable component of the
compensation package is increased by means of deferral,
areasonableness test and claw back mechanisms.
The allocation of variable remuneration is conditional on the
achievement of a number of performance objectives. The short-
term component, at maximum 40% of total variable remuneration,
is equally divided between cash and stock and awarded in the year
following the performance year. The other 60% of the total
variable remuneration is deferred and also equally divided between
cash and stock. This long-term component is intended to serve the
objective of retaining the members of the Executive Board for a
longer period of time. The value of the stock award is set such that
total variable remuneration at the time that the maximum number
of shares to be granted is determined stays within the 100% limit.
The long-term component, consisting of two equal portions of cash
and stock, will be subject to a tiered vesting on the first, second
and third anniversary of the grant date (one-third per annum). The
entire long-term component is subject to an ex-post performance
assessment by the Supervisory Board. The ex-post performance
assessment cannot lead to an upward adjustment of the value of
the cash deferred portion or the number of deferred shares.
Executive Board members are not allowed to sell depositary
receipts obtained within a period of five years from the grant date.
However, they are allowed to sell part of their depositary receipts at
the date of vesting to pay tax over the vested share award.
Increased focus on risk and non-financial performance
Variable remuneration is linked to risk and non-financial
performance and will take into consideration both individual and
company performance criteria. Performance measurement will
account for estimated risks and costs of capital. In addition to
financial indicators, performance will also be assessed based on
non-financial drivers, by means of a number of targets regarding
economic, environmental, customer satisfaction and social criteria.
Pensions Executive Board members
Members of the Executive Board, who are employed on the basis
of a Dutch employment contract, will participate in the defined
contribution pension plans introduced in 2010 as part of the
remuneration policy. Individual Board members participating in the
pension plan that existed before the introduction of the 2010 plans
were given the choice to keep their existing pension arrangement.
This existing pension arrangement, approved by the 2006 AGM, is
based on a defined contribution plan. Alternatively, they can switch
to the 2010 arrangements.
80 ING Group Annual Report 2011
Remuneration report