ING Direct 2011 Annual Report Download - page 87

1 Who we are 2 Report of the Executive Board 3 Corporate governance 4 Consolidated annual accounts 5 Parent company annual accounts 6 Other information 7 Additional information
REMUNERATION POLICY FOR SENIOR MANAGEMENT
As much as possible for a global financial institution of this size, ING
aims to take account of all the differences and standards applied
within similar financial institutions in the various countries in which
it operates. The remuneration of members of the Management
Boards and senior management will be in line with the general
principles of the amended remuneration structure for the Executive
Board, taking into account international and local practices.
TOTAL DIRECT COMPENSATION
Total direct compensation levels will be based on benchmark
datain the international context in which ING operates. ING
aimsforcompensation levels to be set at market median levels.
Totalcompensation levels will be determined in line with the
relevant market.
FOCUS ON LONG-TERM VALUE CREATION, RISK ANDNON-
FINANCIAL PERFORMANCE
Variable remuneration is linked to long-term value creation and risk.
It is determined based on individual, business and company
performance criteria. Performance measurement will increasingly
account for estimated risks and costs of capital. There will be
increased emphasis on long-term value creation by means of
long-term incentives, deferral and claw back mechanisms.
Furthermore, and in addition to financial indicators, performance is
also assessed based on non-financial drivers. The incorporation
ofnon-financial indicators in the overall assessment is particularly
aimed at further improving sustainable business practices within
ING. Therefore, a number of action targets have been formulated
regarding ING’s performance in the area of, for example, workforce
diversity, customer satisfaction, stakeholder engagement and
sustainable business practices.
2012 REMUNERATION STRUCTURE SENIOR MANAGEMENT
Given the differences in the regulatory requirements for banking
and insurance and the separation of ING’s banking and insurance
activities, the remuneration structures for senior management in
ING’s banking and insurance operations were determined
separately in2011 based on internal strategy and external
regulatory developments.
The remuneration policy for the Executive Board, which permits
acombination of fixed remuneration (base salary) andvariable
remuneration (together ‘total direct compensation’), pension
arrangements and benefits, will apply in full to members of the
Management Board Banking. For senior management in banking,
agradual shift to a more balanced mix of fixed and variable
remuneration, in line with the remuneration policy for the Executive
Board, was initiated in 2010 and will continue during the coming
year. Exceptions may exist for high value specialists and senior
management working in certain divisions and/or geographical
areas. In addition, the remuneration policy for senior management
has been amended in line with the requirements of the Capital
Requirements Directive III.
For the Management Board EurAsia and senior management in
ING’s EurAsia insurance operations, remuneration is in line with the
general principles of the new remuneration policy for the Executive
Board and the requirements under the Capital Requirements
Directive III.
The remuneration for a select group of ING Bank and Insurance
EurAsia employees has been reviewed and amended as necessary
in order to comply with the Capital Requirements Directive III. The
amendments relate to the allocation of variable remuneration and
the ratio between fixed and variable remuneration and are
intended to mitigate risk relating to remuneration. Measures
include an ex-ante and ex-post assessment of variable
remuneration prior to awarding and vesting respectively,
significant deferral of variable remuneration, an equal divide
between variable remuneration in cash and in shares, as well as
retention periods on all equity remuneration as soon as it becomes
unconditional.
Moreover, in light of the Capital Requirements Directive III
compensation packages related to control functions (such as risk
management functions) are structured so that they provide for
areduced emphasis on variable remuneration. To ensure the
autonomy of the individual, financial performance metrics are
dependent on objectives determined at the divisional level (i.e. not
at the level of the relevant business unit). In addition, performance
assessments are not only determined by business unit
management, but also by the functional line.
By making the above changes, ING has taken an important step to
further align its compensation philosophy and structure with its risk
profile. The current structure will in most cases lead to a decrease in
the cash component of variable remuneration and a decrease in the
ratio between fixed and variable remuneration.
For the Insurance US operations the changes in the mix between
fixed salary and variable remuneration as well as the allocation of
variable remuneration will need to be weighted in light of the
different regulatory requirements within the US insurance industry
and the intended separation of these activities from ING.
The regulatory environment governing remuneration is still in
development. The structure as set out above is based on
information currently available. Should it become clear that
adjustments are necessary, ING will amend the structure as deemed
appropriate.
85ING Group Annual Report 2011
Remuneration report continued