ING Direct 2002 Annual Report Download - page 84

Annual Report 2002 · ING Group 81
ING’s Governance
REMUNERATION EXECUTIVE BOARD
General policy
ING’s remuneration policy for the members of
the Executive Board is consistent with that for
other senior executives within the Group. Its
objectives are to attract and retain high-quality
people and motivate them towards excellent
performance, in accordance with ING’s strategic
and financial goals. The remuneration of the
Executive Board is determined by the Super-
visory Board on the basis of a proposal of its
Remuneration and Nomination Committee. The
remuneration package consists of a base salary,
a short-term performance-related cash bonus
and a long-term incentive currently in the form
of stock options. In order to maintain a
competitive remuneration package, benchmar-
king against comparable companies is carried
out regularly.
Currently, the Supervisory Board is reviewing the
compensation structure and level for the
Executive Board, because it believes that the
current compensation package is no longer
adequate and competitive. It has commissioned
a report from an external consultant to advise
on the future Executive Board reward strategy.
Key recommendations in this report include that
variable (performance-driven) rewards should
be more strongly emphasized over fixed pay and
benefits. Short-term incentives should be linked
to a combination of targeted financial and non-
financial drivers and not solely to growth in
earnings per share, while long-term incentives
should be linked to long-term drivers and
sustained shareholder value creation. The long-
term incentives should be realised through a
combination of stock options and shares in ING
Group. In the near future, the Supervisory Board
expects to complete its review and to put a
compensation philosophy in place that will
guide Executive Board rewards from 2003
onwards and be applied, as appropriate, to the
reward structure of other senior executives in
the Group.
Base salary
So far, the base salaries were reviewed every
two years against developments in the market.
It was decided not to change the base salaries
for 2002 compared with 2001. The base salaries
of the non-Dutch Executive Board members are
related to their respective home-country
practices.
Short-term and long-term
incentives
The variable remuneration of the Executive
Board so far was linked to the growth in
earnings per share (EPS) of ING Group as an
objectively measurable criterion and to the
collective and individual performance of the
members of the Executive Board. The EPS part of
the formula currently in place would result in
zero variable payment over 2002.
The Supervisory Board used its discretionary
power to set the variable component over 2002
as follows. No (short-term) cash bonus will be
granted, but the Executive Board members will
receive – as a long-term incentive – 35,000 stock
options (same level as over 2001). In addition,
the Supervisory Board adopted a conditional
share award policy, pursuant to which the
Executive Board members may be granted a
number of conditional share awards in ING
Group in 2003 out of a total pool of 50,000 ING
shares made available for this purpose, by way
of a long-term incentive remuneration in
respect of 2002. The Supervisory Board has the
intention to award on or about 16 May 2003,
out of this pool a number of 7,000 Conditional
Share Awards per member of the Executive
Board. If granted, the Executive Board members
must hold the conditional shares for a minimum
period of two years from the grant date, and
they will lapse in case the member concerned
will leave the employ of the company (other
than through a scheduled retirement) within
this period. The terms of this arrangement and
the grant date are subject to regulatory and
compliance restrictions.
Pensions
The pensions of the Dutch members of the
Excutive Board are based on defined benefit
plans, which are insured through a contract with
Nationale-Nederlanden Levensverzekering Maat -
schappij N.V. Members of the Excutive Board
retire by the end of the month in which they
reach the age of 60. By mutual agreement the
retirement date can be extended to the end
of the month in which they reach the age of
61 or 62. Their prospective pensions amount to
amaximum of 60% of their base salaries. Just as
for the other ING employees in the Netherlands,
the pension rights of the members of the
Excutive Board are free of premium. The non-
Dutch members of the Excutive Board have a
pension plan related to their home-country
practices.