ING Direct 2009 Annual Report Download - page 83

2009 REMUNERATION
CURRENT GENERAL POLICY SENIOR MANAGEMENT
REMUNERATION
Background
The prime objective of the remuneration policy is to enable the
Company to recruit and retain qualified and expert leaders. The
remuneration package supports a performance-driven culture
for excellence that aligns ING’s objectives with those of its
stakeholders. ING rewards performance on the basis of previously
determined, challenging, measurable and influenceable short-term
and long-term targets.
ING’s remuneration policy is based on five key principles that apply
throughout ING. These principles are:
Total compensation levels are benchmarked against relevant •
markets in which ING competes for talent.
ING aims for total compensation at the median level in the •
relevant market, allowing only for above-median compensation
in the event of outstanding performance.
The remuneration package includes variable-pay components •
(short-term and long-term incentives) to ensure that executive
remuneration is linked to ING’s short-term and long-term
business performance.
To enhance the effectiveness of the short-term incentive plan, •
clear, measurable and challenging targets are set at the
beginning of each year.
Long-term incentives ensure a focus on longer-term strategic •
targets and create alignment of management with the interests
of shareholders. A broad selection of ING’s senior leaders
participates in the plan to ensure a common focus on ING’s
overall performance.
Remuneration structure
Total compensation throughout ING consists of three basic
components:
Fixed or base salary which represents the total guaranteed •
annual income.
Short-term incentive (STI) in cash, which compensates for •
past performance measured over one year.
Long-term incentive (LTI) in stock options and/or performance •
shares, which compensates for performance measured over
multiple years and is forward-looking.
In addition to the base salary and incentive plan participation,
senior management and Executive Board members enjoy benefits
similar to most other comparable employees of ING Group. These
include benefits such as the use of company cars, contributions to
company savings plans and, if applicable, expatriate allowances.
REMUNERATION EXECUTIVE BOARD 2009
With regard to the remuneration for 2009, the Supervisory Board
continued to build upon the remuneration policy initiated in 2003.
In January 2009, ING and the Dutch State reached an agreement
on an Illiquid Assets Back-up Facility. Under the terms of this
agreement the members of the Executive Board will not receive
any bonuses until a reviewed remuneration policy has been
completed.
As a consequence of the Back to Basics strategy and the
organisational simplification resulting from it, certain Board
members no longer serve on the Executive Board of ING Groep N.V.
as of 1 June 2009. However, their current employment contracts
with ING Groep N.V. continued to remain in effect in 2009.
Executive Board base salary 2009
The base salary of all Executive Board members has been frozen
for 2009.
Executive Board short-term incentive plan 2009
Under the terms of the agreement reached with the Dutch State
on an Illiquid Assets Back-up Facility, the individual Executive Board
members will not receive a 2009 STI payout.
Executive Board long-term incentive plan 2009
Under the terms of the agreement reached with the Dutch State
on an Illiquid Assets Back-up Facility, the individual Executive Board
members will not receive a 2009 LTI grant.
Tom McInerney is entitled to receive a conditional share award on
the same grant date as the other long-term incentive awards. The
conditional share award would 100% vest four years after the
grant date with the condition being an active employment contract
at the date of vesting. This award is part of Tom McInerney’s
employment contract to align his total remuneration with the
market practice of senior executives in the US. Tom McInerney will
not be awarded a conditional share award in 2010 for the 2009
performance year.
Patrick Flynn received a ‘buyout’ for the loss of compensation
which he would have received at his previous employer had he not
resigned. This buyout consists of a conditional grant of restricted
stock to a maximum of 100,000 shares. A number of 30,000
shares will vest at the annual General Meeting in 2010, another
30,000 shares will vest at the annual General Meeting in 2011 and
the remaining 40,000 shares will vest at the annual General
Meeting in 2012, subject to satisfactory performance.
The cumulative value of the conditional share award is capped at
EUR 1.3 million. ING has amended the number of shares to adjust
for the effects of the rights issue, while maintaining the cumulative
value cap at EUR 1.3 million. The first vesting in the amount of
39,069 shares (30,000 adjusted for the effects of the rights issue)
will occur on 27 April 2010.
Long-term incentives awarded in previous years
The long-term incentive plan (LTIP) at ING includes both stock
options and performance shares. The ING stock options have a
total term of ten years and a vesting period of three years after
which they can be exercised for the remaining seven years.
Performance shares are conditionally granted. The number of ING
depositary receipts that is ultimately granted at the end of a
three-year performance period depends on ING’s Total Shareholder
Return (TSR) performance over three years (return in the form of
capital gains and reinvested dividends that shareholders receive
in that period) relative to the TSR performance of a predefined
peer group.
ING’s TSR ranking within this group of companies determines the
final number of performance shares that vest at the end of the
three-year performance period. The performance shares granted in
2007 had a three-year performance period of 2007–2009 and will
ING Group Annual Report 2009 81