Home > Compensation > BBVA: 2015 Compensation Report

BBVA: 2015 Compensation Report

BBVA has recently published the mandatory report on 2015`s Compensation for Directors which will be voted in the bank`s next Shareholders General Meeting.

In 2015, it also approved (apart from the 2014 Comp report), a report on its overall Compensation practices for directors, (public companies in Spain need to do this at least every three years).

The bank explains Executive and Non-Executive Directors` compensation in different sections.

I will try to depict the way they calculate variable pay accrued by Executive Directors, as this is critical to evaluate if incentives are correct, if there is a correlation between pay and performance, if the risk is somehow considered, etc.

Which are the metrics for which Executive Directors (EDs) are rewarded?

The metrics are: Net Profit excluded corporate transactions, Economic Profit, Return on (regulatory) Equity, Efficiency Ratio, Net Margin, Customer`s Satisfaction and Strategic Indicators.

These metrics are weighted differently for the Chairman, Ceo, and Gerpa (Global Economics, Regulation and Public Affairs) director. The last one receives a 40% weight for Strategic Indicators, whereas the Ceo receives only a 10% weight here.

What do EDs receive and when?

– Directors receive 50% of variable pay in cash and 50% in stock.

– They receive 50% of each part once approved, while the rest is deferred for a three year period.

– Deferred pay is conditioned to certain pluriannual evaluation tests in this period, regarding the stock price evolution, TSR and Operational Risk measures, (equity measures, Loan to Deposits metrics, etc).

– Every metric has different levels and consequently this part could finally be accrued totally, partially, or not accrued at all.

– Total variable pay is limited to 200% of fixed pay, (in line with EU regulatory limits for the banking sector).

– There is a Malus Clause, so that in certain cases deferred payments can be eliminated.

Restrictions on availability of shares granted.

Directors cannot sell the shares once they have been granted, for a period of time.

They can`t hedge them either, so that they are forced to align their economic interest to that of shareholders.

Other perceptions.

EDs have the right to receive, and the bank recognizes this cost every year, a retirement, death or disability pension.

Payments for cessation in their functions are also considered, up to two years of fixed pay in one case, in the form of retirement pension in other, etc.

The full report provided by the bank can be downloaded here, (in Spanish).

 http://accionistaseinversores.bbva.com/TLBB/fbinir/mult/12_Informeanualsobreremuneracionesdelosconsejerosdebbvapunto7_tcm926-557534.pdf

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