Raiffeisen Switzerland remuneration report
Remuneration system features
Raiffeisen Switzerland has an independent remuneration system. The remuneration system regulates the remuneration paid to members of the Board of Directors, the Executive Board and the extended Executive Board in detail and lays out basic principles for the total remuneration paid to all employees. Raiffeisen Switzerland also issues recommendations to Raiffeisen banks.
Remuneration caps are defined for all groups of risk-takers. There are limits on variable components. All remuneration is paid in the form of non-deferred cash. Raiffeisen believes that it makes more sense to institute caps than to defer part of the variable remuneration. Being a cooperative, Raiffeisen has a low risk profile and aims for stable returns and sustained success, which significantly affects the remuneration system. The remuneration policy aims for consistency.
Furthermore, Raiffeisen places considerable emphasis on social responsibility and is committed to providing equal pay for equal work. The second study on wage equality, conducted at Raiffeisen Switzerland by the same independent partner as in 2014, once again found that Raiffeisen pays equal wages and that the wage difference is considerably lower than the tolerance level accepted by the Swiss Federal Office for Gender Equality.
Handling risk-takers separately
The Board of Directors has identified another group of risk-takers other than the eight members of the Executive Board, the Head of Internal Auditing and the four members of the extended Executive Board of Raiffeisen Switzerland: Central Bank employees with access to the market and trading opportunities. Despite quite modest trading operations and an extensive system of limits that are subject to ongoing monitoring by independent controlling functions, the variable remuneration of these risk-takers is best handled separately. Risk-takers at the Central Bank department are identified every year before the remuneration process begins; they are reported by the Head of Central Bank to the Head of Human Resources Management and are approved, by name, by the Executive Board of Raiffeisen Switzerland as part of the motion determining the total variable remuneration pool. In 2017, this group consisted of 56 people (not counting Executive Board members).
Remuneration policy governance
Raiffeisen Switzerland's Board of Directors is responsible for the following:
- –Outlining the remuneration policy in the form of regulations for Raiffeisen Switzerland and recommendations for Raiffeisen banks
- –Approving the annual remuneration report submitted to the Board by the Nomination and Remuneration Committee
- –Reviewing remuneration policy on a regular basis and whenever there are indications that reviews or revisions may be necessary
- –Having selected elements of its remuneration policy reviewed every year by external auditors or by Internal Auditing.
- –Determining the amount of the total variable remuneration pool each year
- –Defining fixed and variable remuneration components for Executive Board members, the members of the extended Executive Board and the Head of Internal Auditing, including pension plan contributions
The Nomination and Remuneration Committee is responsible for implementing regulations issued by the Board of Directors. It deals with remuneration topics in four meetings each year. The section "Committees of the Board of Directors" describes the composition and main responsibilities of the Nomination and Remuneration Committee.
Composition of remuneration
For all employees (including Executive Board members, the members of the Extended Executive Board and the Head of Internal Auditing), remuneration comprises the following elements:
- –Fixed remuneration in line with the market: Every employee has an individual contract establishing the fixed remuneration. This is based on a clearly defined job function and the employee's skills and knowledge. Salaries must also be competitive with regard to the labour market. All fixed remuneration is paid in cash.
- –Moderate variable remuneration: Variable remuneration is paid based on the Group's sustained success and individual employee performance reviews. These may be granted for all functions, including controlling functions. The Board of Directors does not receive variable remuneration. All variable remuneration is paid in cash and in non-deferred form.
- –Fringe benefits: Fringe benefits are granted within the framework of applicable regulations, directives and industry standards.
Determining fixed remuneration for the Board of Directors and the Executive Board (including the Extended Executive Board)
The members of the Raiffeisen Switzerland Board of Directors receive remuneration commensurate with their respective responsibilities and time commitment. Additionally, members belonging to a committee, heading a committee or presiding over the Board of Directors receive higher pay.
Fixed remuneration for Executive Board members, the members of the Extended Executive Board and the Head of Internal Auditing is set in accordance with their labour market value, the requirements of the assigned department, management responsibilities and seniority. Fixed remuneration (excluding employee and employer contributions to pension plans and social insurance) is capped at a maximum of CHF 1,200,000.
Determining the total variable remuneration pool
The determination of the total variable remuneration pool is based in equal measure on the long-term development of the following criteria:
- –Relative profitability over time compared to the market
- –Change in equity capital
- –Performance of strategic initiatives and projects
- –Changes in economic capital required relative to core capital
Role of controlling functions over variable compensation
The Heads of Group Risk Controlling and Legal & Compliance comment on the risk situation and compliance performance and provide their assessment of the current situation based on risk and compliance reports from 2017. These assessments, which expressly cover credit, market, liquidity and operational risk, are then consulted when determining the total variable remuneration pool. The measures of risk that are used include value at risk, limit utilisation parameters and audit findings (development and degree of completion). All the measures of risk that are used are supplemented by a qualitative assessment of the responsible controlling functions. As a result, an evaluation of all major risk categories is included in the remuneration process. By approving the risk and compliance report, the Board of Directors is regularly and comprehensively informed about risk development in accordance with Raiffeisen's risk profile.
Allocation of variable remuneration to the Executive Board (including Extended Executive Board and the Head of Internal Auditing) and risk-takers
The Board of Directors does not receive variable remuneration. The Board of Directors decides on the allocation of variable remuneration to Executive Board members, the members of the Extended Executive Board and the Head of Internal Auditing. It must not exceed two-thirds of the individual member’s fixed remuneration (excluding employee and employer contributions to pension plans and social insurance). The following criteria apply to the individual allocation:
- –Achievement of personal targets
- –Relative profitability of the Raiffeisen Group over time compared to the market
- –Progress in strategic initiatives and projects
- –Changes in risk assumed
The allocation of the variable remuneration to risk-takers is individually determined by the Executive Board. This allocation is based on the performance achieved by the Central Bank while taking into account the risks that were taken. The Executive Board or respective supervising managers responsible according to the hierarchy determine the allocation of variable remuneration among other employees. Function and performance reviews by the supervising manager play a major role in determining individual allocations. There are thus no incentives for individuals to strive for short-term success by taking excessive risks.
The remuneration structure is designed so that the variable remuneration paid to controlling functions in no way depends on the risks they monitor. In terms of their amount, variable remuneration should largely be qualified as bonuses (under civil law).
In the current year, Raiffeisen Switzerland paid out total remuneration (excluding employer pension plan and social insurance contributions) of CHF 296,323,079. Accrued remuneration expenses (both fixed and variable) for the year under review have been recorded in full as personnel expenses. There are no remuneration expenses from earlier reporting years that are recognised in profit and loss. In the current year, the Board of Directors approved a total variable remuneration pool (excluding employer pension plan and social insurance contributions) of CHF 51,309,606 for Raiffeisen Switzerland. This amount was paid out in full in cash, in non-deferred form. The total variable remuneration pool benefited 2,027 individuals at Raiffeisen Switzerland (previous year: 2,011).
Board of Directors
The Board of Directors regularly reviews the remuneration regulations. The remuneration rates for members of the Board of Directors have remained unchanged for the past four years. A total of CHF 1,678,400 in remuneration was paid in the 2016 financial year.
Raiffeisen's classification as a systemically important bank and increasing substantive complexity required the Board of Directors to conduct an in-depth examination of regulatory affairs and market issues during the current year. As a result, there was a substantial increase in the number of meetings attended by members of the Board of Directors. Furthermore, Laurence de la Serna and Prof. Dr Pascal Gantenbein were newly elected to the Board of Directors as part of succession planning for the years to come. It was against this backdrop that the rates for remuneration paid to members of the Board of Directors were reviewed and updated for future years as of 2017.
Members of Raiffeisen Switzerland's Board of Directors serving in 2017 received remuneration totalling CHF 2,408,412 for the current year. This includes all allowances and meeting attendance fees. The largest individual remuneration amount paid was to the Chairman of the Board of Directors, Prof. Dr Johannes Rüegg-Stürm, totalling CHF 548,300. In addition, social insurance contributions for members of the Board of Directors totalled CHF 481,147.
Members of the Executive Board (including members of the Extended Executive Board and the Head of Internal Auditing)
Total remuneration paid to members of the Raiffeisen Switzerland Executive Board, members of the Extended Executive Board and the Head of Internal Auditing for the current year (excluding employee and employer contributions to pension plans and social insurance) came to CHF 11,028,631. Of this, CHF 1,813,187 was paid to Dr Patrik Gisel, Chairman of the Executive Board of Raiffeisen Switzerland; this was the highest sum paid to an individual member of the Executive Board. Employee and employer contributions to pension plans and social insurance totalled an additional CHF 5,595,460. CHF 601,796 of this amount was paid for Dr Patrik Gisel. Fixed remuneration includes business-related Board of Directors’ fees for Executive Board members.
Loans granted to members of the Executive Board and the Extended Executive Board are disclosed in note 17 in the annual report. Loans to members of the Executive Board are approved by the Nomination and Remuneration Committee. The bank's Executive Board enjoys the same industry-standard preferential terms as other employees. No joining or severance payments were made in the current year.