ICICI Bank 2015 Annual Report Download - page 38

36 Annual Report 2014-2015
Directors’ Report
b) Information relating to design and structure of remuneration processes and the key features and objectives
of remuneration policy
The Bank has under the guidance of the Board and the BGRNC, followed compensation practices intended to drive
meritocracy within the framework of prudent risk management. This approach has been incorporated in the Compensation
Policy approved by the Board on January 31, 2012, pursuant to the guidelines issued by RBI.
The key elements of the Bank’s compensation practices are:
Effective governance of compensation: The BGRNC has oversight over compensation. The BGRNC defines Key
Performance Indicators (KPIs) for wholetime Directors and equivalent positions and the organisational performance
norms for bonus based on the financial and strategic plan approved by the Board. The KPIs include both quantitative
and qualitative aspects. The BGRNC assesses organisational performance as well as the individual performance for
wholetime Directors and equivalent positions. Based on its assessment, it makes recommendations to the Board
regarding compensation for wholetime Directors and equivalent positions and bonus for employees.
Alignment of compensation philosophy with prudent risk taking: The Bank seeks to achieve a prudent mix of fixed and
variable pay, with a higher proportion of variable pay at senior levels and no guaranteed bonuses. Compensation is
sought to be aligned to both financial and non-financial indicators of performance including aspects like risk management
and customer service. In addition, the Bank has an employee stock option scheme aimed at aligning compensation to
long term performance through stock option grants that vest over a period of time. Compensation of staff in financial and
risk control functions is independent of the business areas they oversee and depends on their performance assessment.
c) Description of the ways in which current and future risks are taken into account in the remuneration processes
including the nature and type of the key measures used to take account of these risks
The Board approves the risk framework for the Bank and the business activities of the Bank are undertaken within this
framework to achieve the financial plan. The risk framework includes the Bank’s risk appetite, limits framework and policies
and procedures governing various types of risk. KPIs of wholetime Directors & equivalent positions, as well as employees,
incorporate relevant risk management related aspects. For example, in addition to performance targets in areas such as
growth and profits, performance indicators include aspects such as the desired funding profile and asset quality. The
BGRNC takes into consideration all the above aspects while assessing organisational and individual performance and
making compensation-related recommendations to the Board.
d) Description of the ways in which the Bank seeks to link performance during a performance measurement
period with levels of remuneration
The level of performance bonus, increments in salary and allowances and grant of stock options are determined based on
the assessment of performance as described above.
e) Discussion of the Bank’s policy on deferral and vesting of variable remuneration and the Bank’s policy and
criteria for adjusting deferred remuneration before vesting and after vesting
The quantum of bonus for an employee does not exceed a certain percentage (as stipulated in the compensation policy)
of the total fixed pay in a year. Within this percentage, if the quantum of bonus exceeds a predefined threshold percentage
of the total fixed pay, a part of the bonus is deferred and paid over a period. The deferred portion is subject to malus,
under which the Bank would prevent vesting of all or part of the variable pay in the event of an enquiry determining gross
negligence, breach of integrity or in the event of a reasonable evidence of deterioration in financial performance. In such
cases, variable pay already paid out is subject to clawback arrangements.
f) Description of the different forms of variable remuneration that the Bank utilises and the rationale for using
these different forms
The Bank pays performance linked retention pay (PLRP) to its front-line staff and junior management and performance
bonus to its middle and senior management. PLRP aims to reward front line and junior managers, mainly on the basis of
skill maturity attained through experience and continuity in role which is a key differentiator for customer service. The Bank
also pays variable pay to sales officers and relationship managers in wealth management roles while ensuring that such
pay-outs are in accordance with the requirement of RBI from time to time. The Bank ensures higher proportion of variable
pay at senior levels and lower proportion of variable pay for front-line staff and junior management levels.