BBVA includes sustainability criteria in chairman and CEO compensation
BBVA today released its 2019 annual compensation report for its board members, the first that includes sustainability as a non-financial indicator in the variable compensation for the executive chairman. In 2020, the CEO will also have an indicator that will measure the bank’s strategic commitment to climate change and sustainable development. The 2019 compensation policy (applicable for 2019, 2020 and 2021) was already announced last year. It was approved with 94.8 percent of the votes at the Annual General Meeting in March last year.
Variable compensation for BBVA executive board members is incentive-based, paid annually, and reflects their performance as assessed against the fulfillment of objectives established to evaluate each year’s results, based on the strategic priorities defined by the Group and weighing risks incurred, as documented in the BBVA Board Member Compensation Policy.
The results and trend of the executive board members’ annual indicators for the four financial indicators (attributable profit, RORC, efficiency ratio, and tangible book value) improved. As for non-financial indicators, 2019 was the first year a new key management indicator, digital sales, was used, in addition to a set of individual indicators exclusively for the executive chairman, one of which is sustainability.
- Carlos Torres Vila has had compensation indicators related to employees’ commitment, strategic transformation and sustainability.
- As for Onur Genç, his objectives are related to competitive dynamics (ROE and efficiency), employees’ commitment, financials and (capital) risks, and strategic transformation.
For the purposes of calculating the variable compensation, BBVA measured the executive chairman’s sustainability objective using a responsible banking synthetic index. This is an objective metric, calculated by an independent third-party, based on the results of the main international sustainability agencies. The index calculates the average sustainability scores in order to identify the bank’s position compared to its competitors. It uses ratings from RobecoSAM (the sustainability analysis agency of the Dow Jones Sustainability Indices), MSCI, Bloomberg, Sustainalytics, and CDP (the Carbon Disclosure Project). As output from five specialized analytic firms, the index incorporates different methodologies into a single, aggregated, simplified, and objective view. This methodology allows for comparability and identifying the trends among competitors.
Compensation for the executive chairman and CEO in 2019
Compensation for Carlos Torres Vila and Onur Genç in 2019 covers their first year as chairman and CEO, respectively. It is therefore not comparable to the previous year when both held other position and responsibilities (BBVA CEO in the case of the current executive chairman; and CEO of BBVA USA and BBVA USA country manager in the case of the new CEO)
BBVA executive chairman Carlos Torres Vila earned a fixed salary in 2019 of €2.45 million, while his variable compensation was €3.18 million. Additionally, his payment in kind in 2019 was €0.18 million.
Carlos Torres Vila’s pension plan remains at €1.6 million – the annual retirement contribution that was set in 2017. His defined contribution plan includes annual contributions that are clearly established beforehand.
As for the CEO, Onur Genç received a fixed salary of €2.18 million, while his variable compensation for 2019 stood at €2.85 million. His payment in kind in 2019 was €0.14 million.
Additionally, the CEO earned €1.16 million as complementary forms of compensation given his condition of high-ranked international executive: A payment as ‘cash in lieu of pension’ and a relocation payment.
According to the compensation policy, 40 percent of the previously mentioned variable compensation is to be paid in the first quarter of 2020 – half in stock and the other half in cash. The remaining 60 percent is a deferred payment, which is subject to multi-annual indicators that can reduce, or even drop the amount to zero, but never increase it. This deferred component of the variable compensation will not start to be paid until 2023, and it will be 60 percent in stock and 40 percent in cash. The entire variable compensation is subject to malus clauses, which could limit or prevent its collection, and clawback clauses, which could allow the bank to recover payments that have already been made.
The BBVA Board last year presented the Annual General Meeting with an updated version of the compensation policy, with the aim to incorporate the contractual conditions of the Group’s chairman (Carlos Torres Vila) and the CEO (Onur Genç), as well as some technical improvements. This policy (applicable for 2019, 2020 and 2021) was approved with 94.8 percent of the votes at the Annual General Meeting in March last year.
Fixed compensation in 2019 was set at €2.45 million for executive chairman Carlos Torres Vila, and €2.18 million for CEO Onur Genç. The new policy also establishes that the annual fixed compensation can not increase more than 5 percent annually, on average, during the validity of said policy.
The CEO also received two complementary forms of compensation given his condition of high-ranked international executive:
- The first is an annual cash payment, equivalent to 30 percent of his annual fixed salary as ‘cash in lieu of pension’.
- The second is an annual cash payment of €600,000 as compensation for relocation.
As for the variable compensation for board members, this remained unchanged.
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