Annual report 2010 - Dexia.com

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements46 Dexia Annual report 2010The persons qualifying for this payment are those who weredirectors of the company as at 1 January 2005 for all socialinsurance contributions as well as any new director who meetsthe required conditions. The amount of the contributionsowed for the year 2010 and paid by Dexia totalled EUR20,471.39.Compensation paid to the Chief ExecutiveOfficerThe Chief Executive Officer does not receive any fee forhis position as director. However, he is remunerated for hisresponsibilities as Chief Executive Officer and Chairman of theManagement Board (see hereafter).Compensation of members of theManagement BoardIntroductionProcedureThe compensation of members of the Management Board isfixed by the Board of Directors of Dexia SA on proposals fromthe Appointment and Compensation Committee.The Appointment and Compensation Committee analyses thelevels of compensation of members of the Management Boardhaving regard to compensation granted in other companies inthe sector.In this respect, compensation consultants are used to obtaininformation on salary developments on the labour market forthe financial sector.In order to offer compensation in line with the market, everytwo years the Appointment and Compensation Committeeasks for a benchmarking study. This study was carried out in2010 with the support of Towers Watson, a specialist externalconsultant.The Appointment and Compensation Committee determinesthe reference group of companies to be included in thebenchmark and the positioning of Dexia vis-à-vis thatreference group.On analysing this benchmark, as regards members of theManagement Board of Dexia SA, the Appointment andCompensation Committee makes a proposal to the Boardof Directors on any increases in fixed compensation and, ifnecessary, adjustment of the extent of variable compensationand any changes justified by market developments.The year when the Appointment and CompensationCommittee does not require a benchmark, it will be informedby its external advisor (compensation specialist) of theevolution of the executive compensation market.Regulatory contextThe compensation of executives of companies in the financialsector has been subject to numerous regulations over the lasttwo years.The Board of Directors immediately undertook to observethis regulatory framework as it evolved on the basis ofnational and international provisions aimed at strengtheningCorporate Governance particularly in terms of compensation,as well as Circulars from the Banking, Finance and InsuranceCommission.Against that background, last year Dexia even anticipatedthe obligations weighing on the financial sector in particularregarding the deferment of variable compensation.During the year 2010, Dexia reviewed its compensation policyin the light of recent initiatives in the matter and sent theBanking, Finance and Insurance Commission details of aglobal compensation policy for the Dexia Group complyingwith Belgian and European regulations as well as recentprinciples of sound compensation practice.In accordance with the regulations, Dexia retroactively alteredthe conditions for variable compensation for 2010 paid in2011 and as a consequence amended its compensation policywith retroactive effect.Dexia’s compensation policy has been prepared by the HumanResources department in collaboration with the Audit, Riskand Legal Compliance & Tax departments and submitted tothe Appointment and Compensation Committee of Dexia SA.The proposals of the Appointment and CompensationCommittee were submitted to the Board of Directors ofDexia SA which validated the Group compensation policy.The compensation policy applicable to compensation paidfrom 2011 on the one hand states the general principlesapplicable to all members of staff of the Dexia Group. Onthe other hand, observing the principle of proportionality,it contains specific provisions, exclusively applicable to anidentified group as being likely to impact the risk profileof the Dexia Group by virtue of the nature or level of theirfunctions and/or compensation.Orientations adopted by the Board of Directors inaccordance with the regulationsConsidering the guidelines in particular included in theRoyal Decree of 22 February 2011 (1) , the Board of Directorsreviewed the balance of the compensation packages ofexecutives and senior management of the Group.That revision aimed to reduce the incentive to take excessiverisks which might assume recourse to variable compensationwhich is disproportionate in comparison to the fixedcompensation.It will also enable the extent of variable compensation to bereduced considerably, without any increase of costs, whilstmaintaining a competitive package for Group executives.CompensationFixed and variable compensationThe compensation of members of the Management Boardconsists of a fixed part and a variable part.The fixed and variable compensation of members of theManagement Board constitutes a whole from which, unlessthe Board of Directors decides otherwise on the proposalof the Appointment and Compensation Committee, will bededucted any Director’s fees or percentage paid to a memberof the Management Board by a company in the Dexia Groupor by a third party company in which a mandate is performedin the name and on behalf of Dexia.Compensation for the year 2010Fixed compensationBasic compensationBasic compensation is determined considering the natureand importance of the responsibilities assumed by each (andtaking account of market benchmarks for comparable posts).(1) Royal Decree approving the Regulations of the Banking, Finance andInsurance Commission dated 8 February 2011 concerning the compensationpolicy of financial institutions.