Leumi's Policy for Remuneration of Senior Executives for the Years 2013-2016
- In accordance with Bank of Israel directives, the total variable annual bonus to a senior executive shall not - in any case - exceed 50% of the total compensation for that executive
- A senior executive at Leumi shall not receive a variable annual bonus if the other employees of the Bank do not receive a bonus for that year, or if the Bank has not achieved a minimum of 7.5% return on equity, or if the Bank has not met the capital adequacy ratios required by the Bank of Israel
- 50% of the variable annual bonus will be paid in cash after the reporting of the financial results of the bonus year, while the remaining 50% will be awarded through blocked performance share units (PSU) to be allocated after the reporting of the financial results of the banking system in each of the three subsequent years
In accordance with Amendment 20 of the Companies Law, and pursuant to Directive 301A of the Supervisor of Banks regarding remuneration policy in a banking corporation, Leumi published today its remuneration policy for senior executives in the Bank for the years 2013-2016. The policy was formulated and approved by the Board of Directors of the Bank and the Remuneration Committee of the Board, after discussion at several meetings of the Board and its Committees, including the Remuneration Committee and the Audit Committee of the Board of Directors. The purpose of the remuneration policy is to reward senior executives of the Bank in accordance with the Bank's performance and profitability over time, the Bank's medium and long-term objectives, and the actual contribution of the executives in achieving these goals.
In addition, in accordance with the directives of the Supervisor of Banks, the fixed monthly salary and / or other fixed remuneration components, given to executives who are members of the Audit and Control functions, will be determined according to standards that take account of the importance and sensitivity of the duties carried out by these executives. These office holders will be rewarded in an appropriate manner, so that the Bank will be able to employ office holders with suitable training and experience which reflect their status and role as part of the Bank's management. Accordingly, the CEO and these executives will be entitled to a fixed annual bonus of one monthly salary. This bonus will slightly increase their fixed remuneration, at the expense of the variable remuneration component. In addition, the Bank announced that it intends to act after approval of the remuneration policy, to determine remuneration policy also for holders of personal contracts who are not senior executives, taking into account the principles of this remuneration policy, with the necessary adjustments.
The Board of Directors has set three preconditions for the variable annual bonus:
- An executive shall not receive a variable annual bonus if the other employees of the Bank do not receive a bonus for that year.
- An executive shall not receive a variable annual bonus if if the Bank has not achieved a minimum of 7.5% return on equity for that year.
- An executive shall not receive a variable annual bonus if the Bank has not met the capital adequacy ratios required by the Bank of Israel.
The remuneration given to executives of the Bank shall consist of two main components: a fixed remuneration component and a variable remuneration component. Pursuant to Bank of Israel directives, the total variable annual bonus for a senior executive shall not in any event exceed 50% of the total remuneration for that senior executive:
- Fixed remuneration component – fixed remuneration, including: (a) fixed salary; (b) employer social rights and related terms of salary; (c) terms of retirement that do not exceed the usual terms of employment of all employees of the Bank; (d) a fixed payment (one salary amount) for the CEO and senior executives who are members of the audit and control functions.
- Variable remuneration component – including remuneration that is not a fixed remuneration, such as an annual bonus contingent on performance, and remuneration in respect of termination of employment exceeding the usual terms of employment of all employees of the Bank.
The amount of the basic variable annual bonus for each of the senior executives shall be determined based on the Bank’s rate of return on equity for the bonus year, and in accordance with the role of each senior executive and their responsibilities in the Bank and the Group. The amount of the basic variable annual bonus will be adjusted according to a measurable score for the senior executive to be determined based on two parameters:
A comparison of the actual return on equity in the bonus year with the weighted return on equity of the four other major banks in Israel for that year.
According to the relevant measurement of performance of each senior executive and the departments they were in charge of in the bonus year.
The payment of the variable annual bonus will be spread over four years. 50% of the variable annual bonus will be paid in cash following the reporting of the financial results of the bonus year. The remaining 50% will be awarded through blocked performance share units (PSU) to be allocated after the reporting of the financial results of the banking system for the bonus year to each senior executive eligible for a bonus, in each of the three subsequent years.