Annex 2 – Remuneration Policy for Managing Directors and Other Management Team Members The key purpose of IBA’s remuneration philosophy is to ensure the Company is able to attract, retain and engage the executive talent it requires to deliver on its promises towards its various stakeholders – including its clients, its shareholders, its employees and the communities in which it operates –, whilst aligning to their respective interests. The structure and levels of remuneration, in general, must be effective in meeting these objectives. In particular, remuneration programs and decisions at all times meet the following criteria: ➤ They appropriately balance external competitiveness with other organizations and internal equity, considering both the content of the position, and the personal competencies and effectiveness of the manager within IBA; ➤ They are affordable, sustainable and cost efficient, avoiding excesses; ➤ They reward performance – both individual and collective – aligned to the business strategy, considering short-term results and long-term focus, and supported by a robust performance management system; ➤ They provide transparency and predictability, whilst offering sufficient flexibility to swiftly respond to changing business needs, if and when required. The remuneration structure at IBA contains both monetary and non-monetary components. The monetary components consist of annual fixed remuneration, annual variable remuneration, long-term incentives and, where appropriate, other components – such as benefit programs and benefits in kind. At present, it is not anticipated that, in the next two years, the policy will fundamentally change. IBA does, however, continuously assess the appropriateness of its remuneration programs in view of evolving needs and insights, both externally and internally, which may result in an adjustment when deemed necessary or appropriate.
60 // Annual report 2012
Annual Fixed Remuneration Annual fixed remuneration is a cash component of remuneration, defined in accordance with an individual’s position, as well as his or her competencies and experience in the position. It is reviewed every year and not automatically increased, except where mandatory. Annual Variable Remuneration The annual variable remuneration program rewards performance against specified objectives. Payout levels currently are targeted at between 20% and 50% of annual base salary, depending on the position, except for the Chief Executive Officer, whose target is set at 100%. Objectives at group and/or business unit levels, as well as at individual levels are defined and formalized at the beginning of the performance period. At group and business unit levels, objectives include appropriate financial measures, currently related to profit. At the individual level, they include appropriate non-financial measures. All objectives are focused on delivering the business strategy. At the end of the performance period, for each measure, actual levels of achievement are positioned against the predefined – quantitative or qualitative – targets and are consolidated, resulting in an overall percentage of performance that is applied to the target payout levels. In addition, the managing directors and the Management Team members participate in an IBA global performance-based profit sharing plan, whereby the financial performance of the group, combined with individual performance, may lead to a supplementary payout. The maximum payout opportunity, combining both plans, is set at 300% of the target payout level under the variable remuneration program. The performance period is the fiscal year. In accordance with the articles of association the Compensation Committee has decided not to include performance targets over a period exceeding one year. The managing directors are not present at the Board and Compensation Committee meetings where their performance and variable payout levels are discussed and decided.