BBVA proposes new compensation policy for executive board members
- Changes: The new executive director compensation policy for the next three years envisages 1) an increase in the amounts to be deferred and the deferral period for the variable compensation. 60% of the variable compensation will be subject to a 5-year deferral period; 2) share-based remuneration increase: 60% of the deferred amount to be paid in BBVA shares, the remaining 40% in cash; and 3) variable compensation to be subject to reduction and clawback clauses
- Group Executive Chairman: Total remuneration of BBVA’s Group Executive Chairman for 2016 was €4.9 million, down 12% from 2015. The Chairman’s variable compensation dropped 18% with respect to 2015, mainly as a result of the impact on BBVA Group’s profit of the provision related to ‘floor clauses’ in Spain and exchange rate trends. The deferred variable remuneration is subject to the retribution policy in force in 2016, with multi-annual indicators based on which said remuneration can be reduced or even taken to zero, never increased, as well as malus clauses that could limit or even prevent its collection
- Chief Executive Officer: CEO Carlos Torres Vila’s remuneration was €4.4 million, and his variable remuneration is also subject to the same deferral period and conditions as that of the Chairman
The Board of Directors has approved a new Executive Director compensation policy for 2017, 2018 and 2019 to adapt to the new regulation related to compensation (Bank of Spain Circular 2/2016 and the European Banking Authority’s guidelines on sound adequate remuneration policies.) This new policy will be submitted for approval in the upcoming Annual General Meeting, on March 17.
The most noteworthy changes in this new policy are:
- An increase in the percentage of variable remuneration deferred over time (60%), as well as an increase in the deferral period (5 years for executive directors and senior managers). This deferred part may be reduced based on the result of multi-annual indicators tied to BBVA stock price trends and fundamental long-term profitability, liquidity and capital adequacy metrics.
- An increase in the variable remuneration part to be paid in shares. 50% of the non-deferred variable remuneration payment will be made in cash, and the remaining 50% in BBVA shares. The deferred part will be paid 60% in BBVA stock and the remaining 40% in cash.
- The review of the malus and clawback clauses – intended to, respectively, reduce or reclaim already paid amounts – in order to increase their alignment with the scenarios envisaged in the new regulation. Throughout deferral and share withholding period (6 years), these clauses may kick in as a result of a deficient financial performance of the Group, the unit, or the individual due to irregular conduct, risk mismanagement or restate of the financial statements, among other reasons.
- The share-based variable remuneration paid to executive directors will be unavailable during a one-year period starting on the date they are granted. Also, executive directors shall not transfer ownership of a number of shares equivalent to two times their fixed annual pay for a three year period starting on the date on which they are assigned, with the exception of sales required to cover the tax expense arising from their assignment.
- A change in the balance between the fixed-variable structure of the remuneration, to increase its alignment with applicable regulations and ease the application thereof, providing a higher level of flexibility in variable payment arrangements, compared to the fixed ones. This change will in no case entail an increase in the overall remuneration of its beneficiaries.
- A change in the CEO’s pension system, towards a simple and transparent model, fully aligned with the regulations. In this sense, the “defined benefit” system has been replaced by a new “defined contribution” system, where annual contributions to the pension plan are clearly established beforehand. Additionally, the possibility to perceive the retirement pension in advance has been eliminated. In compliance with new Bank of Spain regulations (Circular 2/2016), 15% of annual contributions will be considered “discretionary pension benefits.”
Remuneration generated in 2016
For 2016, BBVA Chairman Francisco González’s total remuneration stood at €4.9 million, 12% less than in 2015, with a deferred part (€1.5 million) that will be not paid until 2020. Variable remuneration dropped 18% from 2015, to €2.94 million, mainly as a result of the impact on BBVA Group’s profit of the provision related to ‘floor clauses’ in Spain and exchange rate trends. The deferred variable remuneration is subject to the retribution policy in force in 2016, with multi-annual indicators based on which it can be reduced or even taken to zero, never increased, as well as malus clauses that could limit or event prevent its collection.
Chief Executive Officer Carlos Torres Vila’s remuneration stood at €4.4 million, up from €3.8 million in 2015. His variable remuneration in 2016 amounted to €2.36 million, up 12% from the preceding year, although this comparison cannot be established in consistent terms as he was appointed CEO in May 2015. Comparing full-year periods, his variable pay would have dropped 13%. Payment of the deferred part of his variable remuneration (€1.2 million) will be withheld until 2020.
The determination on the number of shares that each one is to receive as variable remuneration for 2016 has been calculated with a price of 6.43 euros per share, which equals the average closing price of the BBVA share between Dec. 15, 2016 and Jan. 15, 2017, inclusive. 50% of these shares will be assigned now, with the remainder in three years, subject to the evolution of multi-annual indicators.