Annual report 2006 - Dexia.com

CORPORATE GOVERNANCE
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
Activities of the Board of Directors
In addition to the items belonging to the ordinary competence
of the Board of Directors (follow-up of the results, approval of
the budget, appointment and compensation of the members
of the Management Board), the Board concentrated in
particular on the following matters:
• the definition of Dexia’s strategic direction over the next
3, 5 and 10 year periods and communication of the Group’s
strategy;
• the composition of the Board of Directors and its specialized
subcommittees;
• the Board of Directors’ self-assessment process and
the implementation of the specific recommendations for
improvement;
• compliance with the Lippens Code;
• the criteria for independent directors;
• the termination of private banking activities in the United
Kingdom;
• the sale of the Group’s ownership stake in Créatis;
• the sale of Banque Artesia Nederland, Flexia, Belstar and
Dexia Banque Privée France;
• the review and approval of the 2005 audit plan;
• the process for privatizing CEC;
• the equity investment in Banca Comerciala Romana;
• the acquisition of DenizBank;
• the report from the Chairman of the Board of Directors of
Dexia SA concerning the operations of the Board and the
internal controls for the Group;
• the discussion and reading of the internal audit report and
the report on risk assessment and monitoring in 2005;
• the monitoring of the Dexia Bank Nederland operation;
• the status of various procedures underway in connection
with the Lernout & Hauspie situation;
• the discussion on Dexia’s positioning and strategic stake in
the asset management area;
• the shareholding program for employees and Group staff,
as well as the 2006 stock option plan;
• the strategy for the buy-back of the company’s treasury
shares;
• discussion on Dexia’s management policy for its strategic
portfolio;
• the evaluation of the Group’s new organization, which
was implemented in 2006, and the changes in the Group’s
operational structure;
• the discussion of the Dexia Group’s policies on
subcontracting.
Conflicts of interest in 2006
As indicated previously, if a director has a proprietary interest
that is directly or indirectly opposed to a decision or transaction
that comes within the competence of the Board of Directors,
the director must notify the other Board members before the
matter is discussed by the Board. In addition, both the Board
member’s notification and the reasons justifying the conflicting
interest included in the notification heading must be recorded
in the minutes of the Board meeting during which a decision
must be made regarding the matter in question.
Below are extracts of the minutes of the Board of Directors’
Meeting on March 2, 2006, relating to the application of the
provisions of Article 523 of the Belgian Company Code.
During the meeting of March 2, 2006, the Board considered
the amount of compensation to be paid to members of the
Management Board. Since Axel Miller, the Chief Executive
Officer, is also Chairman of the Management Board, and since
the Board of Directors also decided the compensation of Pierre
Richard in his capacity as Chairman of the Management Board
in 2005, these two individuals abstained (in compliance with
Article 523 of the Company Code) from participating in the
Board of Directors’ deliberations and vote concerning their
own compensation. An excerpt of the minutes relating to the
matters concerning Pierre Richard and Axel Miller is provided
below.
A. Variable compensation 2005
The Meeting of the Board of Directors in February 2005
approved the principles for calculation of the variable
compensation 2005 of members of the Management Board.
The criterion retained for calculation was the 2004/5 evolution
of Dexia SA’s underlying net income* (the objective being
to compensate the ability of teams to respect the budget
provided to that effect last year). The year 2005 now over, the
Compensation Committee calculated and fixed the amount
of variable compensation 2005 for each member of the
Management Board applying those principles.
[...]
It is proposed to grant Pierre Richard an amount of EUR 950,000
and to grant Axel Miller an amount of EUR 587,080.
*The 2004/2005 evolution of the underlying met income is +11.3%.
[...].
C. Variable compensation 2006
It has been observed that the former system for calculation of
variable compensation does not permit any individualization
of personal situations (single formula applicable to all) and
only resulted year after year in a rather relative variability (the
result of the formula leading each year to percentages varying
between 65% and 75%). The Compensation Committee
therefore wishes to suggest a new system for calculation
of the variable compensation payable to members of the
Management Board.
The variable compensation would be calculated according to
three equally important criteria:
• an initial Group criterion based on a formula linked to the
results of Dexia SA which would be applicable in an identical
manner to all the persons concerned;
• a second criterion specific to the Management Board
based on the achievement of (joint) objectives of members.
Those objectives (for instance the completion of projects,
levels of indicators of performance achieved, strategy
implemented, priorities for 2006 and so on) would be fixed
by the Compensation Committee on proposals from the
Management Board;
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Dexia / Annual Report 2006