throughout the organisation.
The Board of Directors resolves the Nordea Remuneration Policy and sees to that it is applied and followed-up, on proposal by the Remuneration Committee and based on an analysis of the risks it could be associated with.
Nordea Remuneration Policy will
Support Nordea’s ability to attract, develop and retain
·
highly motivated, competent and performance-oriented employees and thereby the People strategy.
Be a supplement to excellent leadership and challenging
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tasks as driving forces to create highly committed employees and a Great Nordea.
Ensure that compensation in Nordea is aligned with
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effi cient risk management and the Nordea values: Great customer experiences, It’s all about people and One Nordea team.
Nordea is offering competitive, but not market leading compensation packages.
Nordea has a total remuneration approach to compensa-tion acknowledging the importance of well balanced but different remuneration packages derived from business and local market needs, as well as the importance of com-pensation being consistent with and promoting sound and effective risk management not encouraging excessive risk-taking or counteracting Nordea’s long term interests.
There are two principal elements of remuneration, fi xed and variable.
Nordea remuneration components – purpose and eligibility
Fixed Salary is compensating employees for full satisfac-tory performance. The individual salary is based on three cornerstones: job complexity and responsibility, perform-ance and local market conditions.
Profi t Sharing is aiming at stimulating value creation for the customers and shareholders and is offered to all employees. The performance criteria refl ect Nordea’s long-term targets: Risk-adjusted profi t and Total Shareholder Return compared to the Nordic peers and relative Cus-tomer Satisfaction Index.
Variable Salary Part (VSP) is offered to selected manag-ers, specialists and key employees to ensure focus and strong performance. Judgement of individual performance shall be based on a pre-determined set of well-defi ned fi nancial as well as non-fi nancial success criteria, includ-ing Nordea Group criteria.
Bonus scheme is offered only to selected groups of employees employed in specifi c businesses areas or units.
The aim is to ensure focus, strong performance and main-tain cost fl exibility for Nordea. Judgement of individual performance shall be based on a pre-determined set of well-defi ned fi nancial as well as non-fi nancial success cri-teria, including Nordea Group criteria.
One Time Payment (OTP) can be granted to employees in case of extraordinary performance exceeding require-ments or expectations. Employees participating in a Bonus scheme cannot be offered an OTP and employees having Variable Salary Part can only in very extraordinary situa-tions be offered an OTP.
Long Term Incentive Programme (LTIP) is aiming at improving the long term shareholder value and to strengthen Nordea’s capability to retain and recruit the best talents. The programme targets managers and key employees identifi ed as essential to the future develop-ment of the Nordea Group. The performance criteria refl ect Nordea’s long-term fi nancial targets: Risk-adjusted profi t and Total Shareholder Return compared to the Nor-dic and European peers.
Pension and Insurance schemes offered are aiming at ensuring employees an appropriate standard of living after retirement as well as personal insurance during employment. Pension and insurance provisions are according to local law, regulation and market practice done either in form of determined public collective-agree-ments, company determined schemes or in a combination of these elements. Nordea aims at having defi ned contri-bution pension schemes.
Benefi ts in Nordea are given as a means to stimulate per-formance and well being. Benefi ts are either connected to the contract of employment or local conditions.
Further information regarding Profi t Sharing, Variable Salary Part, Bonus schemes and Long Term Incentive Pro-grammes is provided under respective corresponding heading below in this section.
Risk analysis
Nordea’s remuneration components have been evaluated during 2009 to ensure compliance with both local and international remuneration guidelines. In addition to the review of the components as such, a risk analysis address-ing issues arisaddress-ing in respect of Nordea’s Remuneration Policy has been conducted. Key factors addressed include risks related to the governance and structure of the remu-neration schemes, goal setting and measurement of results, as well as fraud and reputation. The main focus of the analysis is the variable components, potentially lead-ing to total compensations that might be considered high.
Nordea mitigates these risks by regularly reviewing the structure of the remuneration components, including the
Remuneration
B o ar d o f D ire ct o rs ’ r e p o rt
closing relevant information to the public. Furthermore, Nordea has established clear processes for target-setting, aligned with the Group’s strategy as well as predefi ned growth and development initiatives. Measurement of results is aligned with Nordea’s overall performance measurement, and decision on pay-out is subject to sepa-rate processes and the Grandfather principle (approval by the manager’s manager). Nordea also mitigates relevant risks by means of its internal control framework which is based on the control environment, and includes the fol-lowing elements: Values and management culture, goal orientation and follow-up, a clear and transparent organi-sational structure, segregation of duties, the four-eye prin-ciple, quality and effi ciency of internal communication and an independent evaluation process.
Risks related to the processes governed by the Remu-neration Policy exist and will continue to exist going for-ward. Nordea applies a wide range of processes, tools and control activities to manage the risks and thereby reduce potential negative effects. A summary of the risk analysis will be published on the Nordea homepage during March.
A number of employees who could impact Nordea’s risk profi le, as defi ned in the risk analysis, have on voluntary basis accepted a share-linked deferral on part of their vari-able compensation for 2009. The share-linked deferral is indexed with Nordea Total Shareholder Return and vests in equal installments over a three-year period. This to make Nordea compliant with international guidelines.
Going forward, Nordea aims to comply with international guidelines and national regulations where implemented.
Remuneration to the Board of Directors
The AGM annually decides on remuneration to the Board of Directors. Further information is found in Note 8 on page 101.
Remuneration to CEO and Group Execeutive Management (GEM)
The Board of Directors prepares the proposal for guidelines for remuneration to the executive offi cers to be approved by the AGM annually. According to these guidelines, the Board of Directors has decided on the actual remuneration to the CEO following a proposal from the Remuneration Committee. More information regarding the Remuneration Committee is found in the separate section “Corporate Governance”, page 61. The Remuneration Committee has also prepared proposal to the Board of Directors for altera-tions of the terms of employment for GEM as a whole.
The external auditors presented a report to the AGM 2009 stating that the Board of Directors and the CEO during 2008 have complied with the guidelines for remuneration to executive offi cers as adopted by the AGM 2007 and 2008.
the Remuneration Committee the Board of Directors decides on remuneration for CEO and also other employ-ees in leading positions. The Remuneration Committee at least annually follows-up the application of the Nordea Remuneration Policy and supplementing instructions through an independent review by Group Internal Audit.
Approved guidelines for remuneration to the executive offi cers for 2009
The AGM 2009 approved the following guidelines for remuneration to the executive offi cers.
Nordea maintains remuneration levels and other condi-tions needed to recruit and retain executive offi cers with competence and capacity to deliver according to Group targets. Salaries and other remuneration in line with mar-ket levels is thus the overriding principle for compensation to executive offi cers within Nordea. The term executive offi cers includes the CEO of Nordea Bank AB (publ) and the executives reporting directly to him also being mem-bers of Group Executive Management.
Fixed salaries are paid for fully satisfactory performance.
In addition variable salary can be offered to reward per-formance meeting agreed specifi c targets. The variable salary shall as a general rule not exceed 35 per cent of fi xed salary, and is determined by to what extent predetermined fi nancial, customer related and personal objectives are met.
However, no such variable salary will be paid for 2009.
The AGM 2007 decided to introduce a share- and per-formance-based Long Term Incentive Programme which requires an initial investment in Nordea shares by the par-ticipants. According to the programme the remuneration is proposed to be given in the form of a right to acquire Nordea shares, and requires, for full outcome, that certain predetermined fi nancial targets are reached. The pro-gramme has a cap. The underlying basic principles for compensation under the Long Term Incentive Programme are that the compensation shall be dependent on the crea-tion of long term shareholder value and the fulfi lment of Nordea’s fi nancial targets, which are based on the princi-ples of risk adjusted profi t and total shareholder return.
On a yearly basis the board of directors will evaluate whether a similar incentive programme should be pro-posed to the Annual General Meeting. The members of Group Executive Management will be invited to join the Long Term Incentive Programmes. If the Annual General Meeting does not approve a Long Term Incentive Pro-gramme, the variable cash remuneration to Group Execu-tive Management may be increased and shall as a general rule not exceed 50 per cent of fi xed salary.
Non-monetary benefi ts are given as a means to facilitate Group Executive Management members’ performance.
The levels of these benefi ts are determined by what is
B o ar d o f D ire ct o rs ’ r e p o rt
Any potential undertaking or commitment made by Nordea against a state or public authority in any guaran-tee agreement or any similar agreement which affect the remuneration of members of Group Executive Manage-ment will be observed.
The board of directors may deviate from the guidelines stated above, if there in a certain case are special rea-sons for this.
Proposal for guidelines for remuneration to the executive offi cers for 2010
Nordea shall maintain remuneration levels and other employment conditions needed to recruit and retain exec-utive offi cers with competence and capacity to deliver according to Nordea’s short and long term targets.
The term executive offi cers shall in this context mean the CEO of Nordea Bank AB (publ) and the executives reporting directly to him also being members of Group Executive Management.
Remuneration of executive offi cers will be decided by the Board of Directors in accordance with Nordea’s inter-nal policies and procedures, which are based on the Swed-ish Financial Supervisory Authority’s (SFSA) regulations and general guidelines on remuneration policy as well as international sound compensation practices. In this con-text, the principles established by the Financial Stability Board (FSB) and the European Commission are of particu-lar importance.
Salaries and other remuneration in line with market lev-els is the overriding principle for compensation to execu-tive offi cers within Nordea. Compensation to the execuexecu-tive offi cers shall be consistent with and promote sound and effective risk management and not encourage excessive risk-taking or counteract Nordea’s long term interests.
Fixed salary is paid for fully satisfactory performance.
In addition, variable salary part can be offered to reward performance meeting agreed predetermined targets on Group, business unit and individual level. The effect on the long term result is to be considered when determining the targets. The variable salary part shall as a general rule not exceed 35 per cent of fi xed salary. In accordance with international principles guaranteed variable salary part is to be exceptional and may only occur in the context of hir-ing a new executive offi cer and then be limited to the fi rst year.
A major part of the variable salary part shall be deferred with a minimum deferment period and with claw back clauses according to the SFSA’s regulations and general guidelines on remuneration policy taking account of domestic rules and practices where relevant.
The AGMs since 2007 have decided upon share- and performance-based Long Term Incentive Programmes which require an initial investment in Nordea shares by the participants and where compensation shall be depend-ent on the creation of long term shareholder value and the fulfi lment of Nordea’s fi nancial targets, which are based on the principles of risk adjusted profi t and total share-holder return. A similar programme though measuring
performance over a longer time period, three years, and based on matching and performance shares free of charge instead of rights to acquire Nordea shares is proposed for AGM 2010. The programmes have a cap. On a yearly basis the Board of Directors will evaluate whether a similar incentive programme should be proposed to the Annual General Meeting. The executive offi cers will be invited to join the Long Term Incentive Programmes. If the Annual General Meeting does not approve a Long Term Incentive Programme, the variable salary part to executive offi cers may be increased and shall as a general rule not exceed 50 per cent of fi xed salary.
Non-monetary benefi ts are given as a means to facilitate executive offi cers’ performance. The levels of these bene-fi ts are determined by what is considered fair in relation to general market practice. The executive offi cers shall be offered retirement benefi ts in accordance with market practice in the country of which they are permanent resi-dents. Notice and severance pay in total shall not exceed 24 months of fi xed salary for executive offi cers.
Any potential undertaking or commitment made by Nordea against a state or public authority in any guaran-tee agreement or any similar agreement which affect the remuneration of executive offi cers will be observed.
The Board of Directors may deviate from the guidelines stated above, if there in a certain case are special reasons for this.
Additional information to the Board of Directors’
proposal for guidelines Previous undertakings not yet due:
In accordance with the guidelines approved by AGM 2009 the remuneration for the CEO and other members of GEM consists of fi xed and variable salary part. However no such variable salary part will be paid for 2009. In the beginning of 2009 fi ve persons in GEM voluntarily waived fi xed sal-ary increases and variable salsal-ary part for the fi rst four months of the year. This voluntary waiver has thereafter been extended and widened through the bank’s agree-ment with the Swedish National Debt Offi ce in connection with the Swedish state subscribing for shares in the rights issue and now includes the whole calendar years 2009 and 2010. In addition, the other members of GEM have waived variable salary part for 2009.
Deviations from approved guidelines 2009:
GEM members employed in Nordea Bank Danmark A/S could not be offered the LTIP 2009 due to the restrictions in the Danish Act on Financial Stability. These GEM mem-bers could due to the remuneration guidelines neither be offered the cash based incentive programme, see below, offered to managers and key employees employed in Nor-dea Bank Danmark A/S.
Estimated cost for variable remunerations in 2010:
It is estimated that the total cost for variable salary parts, excluding Long Term Incentive Programmes, for GEM can reach a maximum of approx. EUR 0.3m.
B o ar d o f D ire ct o rs ’ r e p o rt
The estimated cost in 2010 for the approved Long Term Incentive Programmes (LTIP 2008 and LTIP 2009) and for the proposed Long Term Incentive Programme (LTIP 2010), allocated to GEM members is shown in the follow-ing table.
LTIP 2008 LTIP 2009 LTIP 2010 Maximum cost1 EUR 0.2m EUR 0.6m EUR 0.4m Expected cost2 EUR 0.1m EUR 0.4m EUR 0.2m Calculated cost3 EUR 0.6m EUR 1.0m EUR 0.7m
1) Maximum cost in 2010 assuming maximum investments by CEO and all GEM members and that all criteria are fully met expensed during 24 months 2008-2010 and 2009-2011 respectively and for LTIP 2010 expensed over 36 months in 2010-2013, excluding social costs.
2) Expected cost in 2010 assuming maximum investments by CEO and all GEM members based on 50% fulfi lment of the performance criteria for each programme expensed during 24 months 2008-2010 and 2009-2011 respectively and for LTIP 2010 expensed over 36 months in 2010-2013, excluding social costs.
3) The calculated cost of respective whole programme for GEM as at grant date, excluding social costs.
Additional information about incentive schemes Profi t Sharing scheme
The Profi t Sharing scheme is capped and not based on the value of the Nordea share. It is a benefi t, by which the employees get a part of the profi t to encourage good per-formance and one Nordea team, which in turn will lead to better profi tability and make it more attractive to work within the Nordea Group.
In 2009, a total of EUR 98m was provided for under Nordea’s Profi t Sharing scheme for all employees. For 2009, each employee can receive a maximum of EUR 3,200, of which EUR 2,000 is based on a pre-determined level of risk-adjusted profi t, an additional EUR 600 based on the level of relative customer satisfaction and an additional EUR 600 based on Nordea’s relative performance com-pared to a Nordic peer group as measured by Return on equity.
The Profi t Sharing scheme for 2010 is suggested to replace current Return on equity measure with Nordea’s relative performance compared to a Nordic peer group as measured by Total Shareholder Return. If all performance criteria are met, the cost of the scheme will amount to a maximum of approx. EUR 100m.
Variable Salary Part (VSP)
VSP may be offered to selected managers, specialists and key employees to reward strong performance and to attract, motivate and retain employees with strong per-formance within Nordea Group. VSP must be transparent and have predefi ned success criteria with clear weightings.
A VSP must include success criteria based on Nordea Group KPIs decided annually by CEO. In the event of weak or negative overall Nordea Group results, VSP out-comes will be adjusted downwards at the discretion of the CEO.
A VSP agreement should not exceed a maximum out-come of 25 % of annual fi xed salary, except for very few managers and key employees within specifi c areas, where the amount can be a maximum of 50 % of annual fi xed
salary. Head of Customer Areas and correspondent units may in extraordinary cases approve a VSP agreement exceeding 50 % of annual fi xed salary.
Nordea adheres to the Grandfather Principle when enrolling employees to any VSP scheme and approving the outcome. Group Board decides on VSP outcome for employees in leading positions on proposal from the Board Remuneration Committee.
Bonus schemes
Bonus scheme is offered only to selected groups of employees employed in specifi c businesses areas or units approved by GEM. Nordea pays bonuses linked to per-formance where both divisional bonus pools and
Bonus scheme is offered only to selected groups of employees employed in specifi c businesses areas or units approved by GEM. Nordea pays bonuses linked to per-formance where both divisional bonus pools and