Performance-based remuneration within Swedbank

A well-functioning market-based remuneration structure is an important component for stability and sound risk-taking in the bank. A remuneration model should be unambiguous, consistent and performance-based, in addition to creating favourable conditions to recruit and retain talented employees. It should also harmonise the bank’s values. The purpose is to encourage results that create value for the bank, our shareholders, employees and customers.

Work on variable remuneration

Swedbank realised early on that the variable remuneration systems used in the financial sector were in need of reform. In September 2009 the Board approved a new incentive policy for variable remuneration that took into consideration the bank’s long-term business strategy and risk tolerance as well as the interests of shareholders. In January 2010 the Board made an unprecedented decision to revoke all variable remuneration for 2009 against the backdrop of the bank’s losses and the need for state support.

On 1 January 2010 the Financial Supervisory Authority’s new rules on variable remuneration (FFFS 2009:6) entered into force. During the summer the EU also presented new rules on variable remuneration, which will take effect in Sweden on 1 March 2011. Both sets of rules require, among other things, that a portion of variable remuneration be paid out in shares or other financial instruments. We share the opinion that the shareholders’ and the employees’ interests are connected, and that incentives that clearly illustrate this connection need to be developed. Based on these new rules, the Board in August 2010 approved a new performance and share based remuneration programme, called Programme 2010. It applies retroactively as of 1 January 2010 pending the approval of the 2011 AGM. With this new programme, which replaces older programmes, we go further than regulations require – e.g. by deferring the share based portion for those who both qualify as risk-takers and those who do not. The goal has been to combine regulatory requirements with our values, which serve as part of the qualitative evaluation criteria. For more information on the programme, see note G14.

Scope of the programmes

Programme 2010 covers around 6 400 participants, who are evaluated based on predetermined performance targets. In Programme 2011 around 10–20 per cent of employees will be evaluated based on predetermined individual performance targets, while broader personnel categories will be covered
by a collective variable remuneration programme based on general performance criteria.

Profit sharing plan

The Kopparmyntet profit sharing plan for the bank’s Swedish employees is one of the Swedbank’s largest shareholders. No contributions will be made to Kopparmyntet for 2010.

FFFS 2009:6 prescribes that companies maintain remuneration policies that promote effective risk management and avoid excessive risk-taking, while specifying which individuals in the company qualify as risk-takers. The rules require that part of the variable remuneration for these risk-takers is deferred and that the company has the option to revoke it.

The Financial Supervisory Authority is expected to clarify and complement its existing rules by directing that corporate remuneration systems integrate risks and introduce a requirement that at least half of the variable remuneration for certain categories of personnel consist of shares or other financial instruments.