Raiffeisen Switzerland remuneration report
The Board of Directors regularly reviews remuneration policy and remuneration regulations. In 2018, the Board of Directors thoroughly examined remuneration governance, the remuneration system and the amount of remuneration paid to the Board of Directors. The adjustments took effect on 1 January 2019.
The Nomination and Remuneration Committee is responsible for implementing regulations issued by the Board of Directors. It consists of at least three members of the Board of Directors. The Nomination and Remuneration Committee reviews proposals concerning the remuneration of the Executive Board and Board of Directors and submits recommendations to the Board of Directors for approval. In addition, the Nomination and Remuneration Committee and the Board of Directors jointly evaluate the CEO's performance and sit down with the CEO to jointly review the performance evaluations of the other Executive Board members.
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 the structure and implementation of its remuneration policy checked by external auditors on a regular schedule or by Internal Auditing as necessary
- –Regularly determining the amount of the total variable remuneration pool
- –Defining fixed and variable remuneration components for Executive Board members, including pension plan contributions
The Nomination and Remuneration Committee deals with remuneration topics at its meetings. At least four meetings are required each year. In 2018, the Nomination and Remuneration Committee held 21 meetings (including conference calls) with a general attendance rate of 99%. The Nomination and Remuneration Committee focused on the following areas in 2018:
- –Searching for seven new BoD members
- –Searching for a new CEO
- –Reviewing remuneration governance
- –Reviewing the remuneration system for the BoD
- –Intensive communications with internal and external stakeholders
The Chairman of the Nomination and Remuneration Committee decides whether to invite other members of the Board of Directors, the Executive Board, other experts, remuneration advisors and external legal advisors to attend the committee's meetings as needed. Committee members do not take part in discussions about their own remuneration. The committee also communicated extensively in 2018 with the coordination group of the regional union chairs and other representatives of the Raiffeisen banks who had been delegated to the Remuneration Working Group at the June 2018 Delegate Meeting.
The remuneration approval structure can be summarised as follows:
1 Together with CEO
The Board of Directors will move for the delegates to hold a consultative vote on the remuneration report at the 2019 Delegate Meeting.
Internal Auditing regularly evaluates the operational implementation of the remuneration regulations at Raiffeisen Switzerland to ensure compliance with Raiffeisen Switzerland's remuneration system. 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 2018. 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. The Board of Directors receives regular, comprehensive reports on changes in risk in accordance with Raiffeisen Switzerland's risk profile and accepts the risk and compliance reports.
Our remuneration policy is designed to align the interests of our employees with those of our clients. Raiffeisen Switzerland has an independent remuneration system. The remuneration system regulates the remuneration paid to members of the Board of Directors and the Executive Board in detail and lays out basic principles for the total remuneration paid to all employees. Raiffeisen Switzerland also issues remuneration 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. The remuneration system provides adequate incentives to drive and differentiate performance.
Being a cooperative, Raiffeisen Switzerland aims for stable returns and sustained success, which significantly affects the remuneration system. The remuneration policy aims for consistency. Incentives are designed to encourage appropriate business conduct and avoid potential conflicts of interest and excessive risk appetite.
The remuneration system is aligned with the business strategy. It gives due consideration to the Group's goals, values, cooperative culture and long-term, sustainable alignment.
Furthermore, Raiffeisen Switzerland places considerable emphasis on social responsibility and on having a remuneration system that is both simple and transparent. At the same time, Raiffeisen Switzerland believes in equal pay for equal work. The second study on wage equality, conducted at Raiffeisen Switzerland by the same independent partner as in 2014 and 2017, once again found that Raiffeisen Switzerland pays equal wages to men and women. The remuneration system must be attractive enough to recruit, motivate and retain talent over the long term.
The following table summarises the principles of our remuneration policy.
For all employees (including members of the Executive Board, senior management, additional risk takers and other controlling functions), 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. It is also based on the assessment of how much individual employees contribute to the corporate culture. It can be paid for all functions, including controlling functions. Special care is taken to prevent the remuneration system giving controlling functions incentives that could cause conflicts of interests with their duties. Employees generally have no contractual guarantee to be paid variable remuneration. Exceptions are listed in section "Other remuneration". All variable remuneration is paid in cash and in non-deferred form.
- –Fringe benefits are granted within the framework of applicable regulations, directives and industry standards.
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
Determination of the remuneration for the Board of Directors
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. The members of the Board of Directors do not receive variable remuneration. The Board of Directors has no performance indicators that would encourage unnecessary risk-taking.
The existing remuneration regulations remained generally valid in 2018. Accordingly, the Chairman of the Board of Directors at the time received an annual fixed remuneration of CHF 450,000 and was not entitled to receive committee fees. The full members of the Board of Directors received a fixed remuneration of CHF 100,000. The Chairman of the Board of Directors received an annual lump-sum expense allowance of CHF 9,000 for his representative duties.
Furthermore, the full members of the Board of Directors received:
- –CHF 30,000 per committee for being members of a Committee of the Board of Directors,
- –an additional CHF 30,000 per committee for chairing a Committee of the Board of Directors.
In addition, the members of the Board of Directors received a meeting attendance fee of CHF 1,500 for each meeting they attended and a lump sum expense allowance of CHF 200 for each meeting day. The remuneration tables below show the total remuneration paid to the individual members of the Board of Directors.
After the Delegate Meeting on 17 June 2018, the BoD decided to voluntarily reduce the remuneration for all members of the Board of Directors from 17 June to 31 December. This is why the basic and committee remuneration and meeting attendance fees actually paid from June to December were lower than the amounts shown in the regulations (cf. section "Remuneration for the BoD in 2018").
Determination of the remuneration for the Executive Board
The total remuneration for the Executive Board comprises four elements: Basic salary, variable remuneration, fringe benefits, and pension plan and social insurance contributions. Loans granted to members of the 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. Furthermore, the Executive Board enjoys industry-standard preferential terms, as do the other employees.
Fixed remuneration for Executive Board members 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. Each member of the Executive Board receives a fixed basic salary that is reviewed each year by the Nomination and Remuneration Committee. Fixed remuneration (excluding employee and employer contributions to pension plans and social insurance) is capped by the regulations at a maximum of CHF 1,200,000. The members of the Executive Board receive market-standard pension and fringe benefits.
The process of determining the performance-based allocation includes determining the total available pool of variable remuneration. Variable remuneration is allocated to individual members of the Executive Board as follows:
Individual variable remuneration is also allocated by the Board of Directors and cannot exceed two-thirds of the fixed remuneration (excluding employee and employer contributions to pension plans and social insurance) in any individual case. Variable remuneration is allocated based on the attainment of Raiffeisen, area, team and employee targets. Both qualitative and quantitative targets are used for this purpose. The targets are assigned varying weights depending on the employee's function and role.
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
Separate handling of risk-takers not on the Executive Board
The Board of Directors has identified another group of risk-takers other than the eight members of the Executive Board and the Head of Internal Auditing: 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 2018, this group consisted of 63 people (not counting Executive Board members or the Head of Internal Auditing).
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, performance reviews and the supervising manager's assessment of the employee's contribution to corporate culture 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 to ensure 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).
Remuneration for the BoD in 2018
Members of the Board of Directors investigated regulatory and market issues in great detail during the current year. Their investigation focused on reviewing the remuneration regulations, appointing seven permanent new members to the Board of Directors to replace outgoing members, and addressing the increasing complexity of regulatory requirements caused by Raiffeisen's systemic importance. Furthermore, regulators required the Board of Directors to split the Audit and Risk Committee into two separate committees. The thoroughness of these investigations was reflected in the increased number of meetings.
The Board of Directors remuneration system was reviewed during the current year and adjusted as of 1 January 2019. The total remuneration of the Board of Directors for the 2018 financial year is based on the system in effect in 2018, which used the following rates for the individual remuneration components: the effective rates specified in the regulations for the remuneration components were applied from 1 January to 16 June 2018. The Board of Directors decided to voluntarily reduce the remuneration from 17 June to 31 December 2018 and used the remuneration component rates from the remuneration regulations in effect in 2016. As a result, the members of the Board of Directors of Raiffeisen Switzerland received remuneration totalling CHF 2,707,748 for 2018 (previous year: CHF 2,561,270*). This includes CHF 1,449,210 for the period from 1 January to the Delegate Meeting on 16 June and CHF 1,258,538 for the period from 17 June to 31 December. In addition, the employer share of social insurance contributions for the members of the Board of Directors totals CHF 423,882 for 2018 (previous year: CHF 328,286*). The total amount for 2018 is primarily attributable to regulatory requirements and structural changes (one additional Board of Directors committee), new appointments and the high frequency of Board of Directors and committee meetings along with intensive discussions between committees.
* Figures are shown and calculated based on 2018 requirements to ensure year-on-year comparability.
Total amounts are distributed as shown in the following table:
Remuneration for the BoD in 2017
Remuneration for the Executive Board in 2018
Total remuneration paid to members of the Raiffeisen Switzerland Executive Board (including the Head of Internal Auditing) for the year under review (excluding employee and employer contributions to pension plans and social insurance) came to CHF 7,323,647. Of this, CHF 1,537,861 was paid to Rolf Olmesdahl, Member of the Executive Board and Head of the IT & Services department of Raiffeisen Switzerland; this was the highest sum paid to an individual member of the Executive Board. The total amount for Rolf Olmesdahl comprises the basic salary, variable remuneration and a performance-based joining payment of CHF 448,178*. Employee and employer contributions to pension plans and social insurance totalled CHF 4,020,090. CHF 649,496 of this amount was paid for Rolf Olmesdahl. Fixed remuneration includes business-related board of directors fees for Executive Board members.
*Contractually agreed obligation in 2015.
Further compensation 2018
Raiffeisen Switzerland understands further compensation to mean guaranteed bonuses and joining or severance payments. Such payments are only agreed to by Raiffeisen Switzerland within narrow limits and in justified exceptional cases. In this respect, joining payments are understood to mean compensation payments in the sense of compensation for disadvantages suffered. At Raiffeisen Switzerland, joining and severance payments must be approved in compliance with clear and transparent decision-making processes. In the current year, guaranteed bonuses totalling CHF 200,000 were paid to three employees. These were neither members of the Executive Board nor risk-takers. The total sums of the further compensation were paid in cash. With the exception of the joining payment for the Head of the IT & Services department disclosed in 2018 under remuneration for the Executive Board, neither joining nor severance payments were paid in the current year.