The remuneration and incentive policy is vital in attracting and retaining highly qualified resources. As our business grows in complexity, specialization and internationalization, recruiting skilled professionals is as crucial as pursuing prudent management, sustainable costs and long-term results.
Responsible, fair and transparent remuneration mechanisms improve and protect our reputation, credibility and standing over time and these form the basis of sustainable business development to create and preserve value for all our stakeholders.
- Attract and retain talent
- Ensure an adequate pay mix
Assess merit and performance
- Variable pay based on documented and sustainable performance
- Strong tie between results and remuneration
Avoid pay for failure and encourage long-term goals
- Deferred performance-based pay fully subject to performance targets, malus conditions and clawback clauses
- Significant portion of pay in the form of equity to align incentives with the creation of long-term value
Governance and compliance
- The remuneration structure is solidly in line with regulations, the Code of Conduct and the best practices of national and international companies.
Our pay packages are structured in such a way as to:
- balance base salaries with performance-based pay over time;
- take a flexible approach to remuneration;
- motivate employees to focus on performance according to their role in the company, without encouraging risky actions for short-term results;
- annually review the position of our resources’ pay packages compared to the benchmark market, with the assistance of expert advisors.
The base salary reflects responsibilities and technical, professional and managerial expertise. We constantly keep a close eye on the value of base salaries, which are adjusted for market trends and in order to prevent excessive reliance on performance-based pay.
Performance-based pay reflects and rewards the achievement of results and targets and is determined on a risk-adjusted basis. It is a key motivation driver and, in some business areas (such as the Wholesale Banking and Wealth Management divisions), constitutes a large part of overall remuneration, in line with market practices. Employees receive performance-based pay in cash and equity, partly up-front and partly in subsequent years based on the achievement of additional performance targets.
- We apply mechanisms that adjust for risk. We apply gateways linked to our risk appetite framework and grant overall bonuses calculated on the basis of operating profit.
- The bonuses are also subject to malus conditions, which, if met, result in the loss of bonuses.
- We have clawback clauses to protect against damage to our equity, income, financial earnings or reputation. They are contractual mechanisms that require the partial or full repayment of remuneration already paid.
LONG TERM APPROACH
- Performance targets are aimed at ensuring a solid capital base, adequate liquidity ratios, strong earnings and appropriate risk management.
- We require a holding period of one year for up-front stock grants and a holding period of one year after the vesting period for deferred stock grants.
- Linked to business targets set at the beginning of the financial year (budget targets and quantitative KPIs).
- We also set non-financial/qualitative targets to drive the creation of long-term value.
- We apply a cap to reduce the risk appetite.
- Deferred payment is compulsory.
- We do not have any golden parachutes or special treatment for directors in the event of their termination.
- The severance pay of executive directors and identified staff may not exceed 24 months of remuneration and is capped at €5 million.
Evolution of the remuneration policy
We updated our remuneration policy at the end of 2019 to reflect, inter alia, the Bank of Italy’s new provisions.
- A long-term incentive plan for senior managers of Mediobanca, Compass and CheBanca! was approved at the end of 2019 and is linked to the achievement of the targets in the 2019-2023 business plan.
- Furthermore, to reinforce our sustainability policies, we linked certain pay package components more closely to the achievement of CSR targets.
- We also improved our severance package policies and applied an adequately justified departure from the 2:1 cap on the ratio of performance-based pay to base salary for personnel working exclusively in Asset Management (which, in any case, caps the ratio at 5:1).