ICICI Bank 2013 Annual Report Download - page 25

Annual Report 2012-2013 23
Directors. The functions of the Committee include recommendation of appointments of Directors to the
Board, evaluation of the performance of the wholetime Directors (including the Managing Director & CEO)
on predetermined parameters, recommendation to the Board of the remuneration (including performance
bonus and perquisites) to wholetime Directors, approval of the policy for and quantum of bonus payable
to the members of the staff, framing of guidelines for the Employees Stock Option Scheme (ESOS) and
recommendation of grant of the Bank’s stock options to employees and wholetime Directors of the Bank
and its subsidiary companies.
b) Information relating to design and structure of remuneration processes and the key features and
objectives of remuneration policy
The Bank has under the guidance of the Board and the BGRNC, followed compensation practices
intended to drive meritocracy within the framework of prudent risk management. This approach has been
incorporated in the Compensation Policy approved by the Board on January 31, 2012, pursuant to the
guidelines issued by RBI.
The key elements of the Bank’s compensation practices are:
• Effective governance of compensation: The BGRNC has oversight over compensation. The Committee
defines Key Performance Indicators (KPIs) for wholetime Directors and equivalent positions and the
organisational performance norms for bonus based on the financial and strategic plan approved
by the Board. The KPIs include both quantitative and qualitative aspects. The BGRNC assesses
organisational performance as well as the individual performance for wholetime Directors and
equivalent positions. Based on its assessment, it makes recommendations to the Board regarding
compensation for wholetime Directors and equivalent positions and bonus for employees.
• Alignment of compensation philosophy with prudent risk taking: The Bank seeks to achieve a
prudent mix of fixed and variable pay, with a higher proportion of variable pay at senior levels and
no guaranteed bonuses. Compensation is sought to be aligned to both financial and non-financial
indicators of performance including aspects like risk management and customer service. In addition,
the Bank has an employee stock option scheme aimed at aligning compensation to long term
performance through stock option grants that vest over a period of time. Compensation of staff in
financial and risk control functions is independent of the business areas they oversee and depends
on their performance assessment.
c) Description of the ways in which current and future risks are taken into account in the
remuneration processes including the nature and type of the key measures used to take account
of these risks
The Board approves the risk framework for the Bank and the business activities of the Bank are
undertaken within this framework to achieve the financial plan. The risk framework includes the Bank’s
risk appetite, limits framework and policies and procedures governing various types of risk. KPIs of
wholetime Directors & equivalent positions, as well as employees, incorporate relevant risk management
related aspects. For example, in addition to performance targets in areas such as growth and profits,
performance indicators include aspects such as the desired funding profile and asset quality. The BGRNC
takes into consideration all the above aspects while assessing organisational and individual performance
and making compensation-related recommendations to the Board.
d) Description of the ways in which the Bank seeks to link performance during a performance
measurement period with levels of remuneration
The level of performance bonus, increments in salary and allowances and grant of stock options are
determined based on the assessment of performance as described above.