My first Publication ocbc_ar17_fullreport_english | Page 71

Employee Remuneration
The total compensation packages for
employees comprise basic salary, fixed
bonus, variable performance bonus,
allowances, deferred share awards and
share options for eligible executives,
as well as benefits. Compensation is
tied to the achievement of business
and performance objectives based on
a balanced scorecard approach. Where
relevant, financial measurements -
adjusted as appropriate for the various
types of risk (such as market, credit and
operational risks) - include:
• Operating efficiency measures
covering revenue, direct and allocated
costs and operating profits, net
profits as well as efficiency indicators
such as unit costs.
• Economic efficiency measures such as
cost of capital. Capital is attributed to
each business based on the amount
of risk-weighted assets used and the
return on capital.
• Liquidity is factored into the
performance measurement of each
business through the application
of liquidity premiums charged or
credited according to the behavioural
maturity of each type of asset and
liability booked.
There were no significant changes to the
above measures during 2017.
Each business unit has its own
performance measures that match
their functions and objectives and
these objectives are consistent with
the Group’s risk appetite. In the
determination of remuneration of
senior executives, risk and control
indicators as well as audit findings and
compliance issues are taken into account
when assessing business performance.
Executives are remunerated based
on their own performance measures,
while taking into account market
compensation data for their respective
job roles.
The performance of risk and compliance
functions is measured independently of
the businesses they oversee. Employees
in these functions are assessed based
on achievement related to their
respective performance measures.
Market compensation data on risk and
compliance functions is also taken into
account for remuneration.
In determining the composition of
compensation packages, the Bank takes
into account the time horizon of risk
and includes, in the total compensation
for executives, a significant portion of
deferred payment in the form of deferred
shares and share options. All awards of
deferred shares or grants of share options
are subject to cancellation and clawback
if it is determined that they were granted
on the basis of materially inaccurate
financial statements and/or that the
employee has engaged in conduct that
results in financial loss, reputational
harm, restatement of financial results
and/or adverse changes to the Bank’s
risk profile/rating. To ensure that its
remuneration packages are competitive,
the Bank regularly reviews salary levels
and benefits packages based on market
data provided by recognised consultants
who conduct surveys on comparative
groups in the financial sector. The
determination of the Bank’s variable
bonus pool is fully discretionary and
the factors taken into consideration
include the Bank’s performance,
market conditions and competitive
market practices.
The Bank adopts a performance-
driven approach to compensation.
Compensation packages are linked to
personal performance, the performance
of the organisational function as a
whole and the overall performance of
the Bank. Compensation is reviewed
each year based on information from
market surveys provided by reputable
management consultants.
the long term performance of the Bank.
This group, identified as “Material Risk
Takers” comprises senior management
(the CEO and his direct reports), employees
of senior vice president rank and above,
key personnel at business units, senior
control staff, and employees who had
been awarded significant variable
performance bonuses. For the “Material
Risk Takers” with bonuses of at least
S$70,000 or more, at least 40% of their
variable performance bonuses are
deferred in the form of deferred shares
and share options. The Board approves
the compensation of the CEO, Chief
Financial Officer, Chief Operating Officer,
Chief Risk Officer, Chief Information
Officer (Head, Group Operations and
Technology) and Head, Global Treasury,
and the Remuneration Committee
approves the compensation of all other
senior executives of Senior Vice President
rank and above, as well as the top five
employees who had been awarded
significant variable performance
bonuses who are below the rank of
Senior Vice President.
The performance evaluation for senior
executives in 2017 has been conducted
in accordance with the above objectives
and considerations.
The remuneration practices for staff in
bargainable positions are established
through negotiation with the Bank’s unions.
As a consequence of the last financial
crisis, the Financial Stability Forum
(“FSF”) developed principles and
implementation standards for Sound
Compensation Practices for significant
financial institutions. The Remuneration
Committee made changes to the Bank’s
compensation structure to increase the
proportion of the deferred remuneration
component for senior executives.
The Bank’s compensation practices
are reviewed annually by McLagan
(a business division of Aon Hewitt)
which has confirmed for 2017 that the
Bank had met the FSF principles and
implementation standards. Share Schemes
OCBC Share Option Scheme 2001
The OCBC Share Option Scheme 2001
(“the Scheme”) seeks to inculcate in
all participants a stronger and long-
term sense of identification with the
OCBC Group, as well as to incentivise
participants to achieve higher standards
of performance. It forms a portion of
executives’ variable compensation and
serves to align the Bank’s compensation
with the sustained long-term performance
of the Bank. Group executives comprising
any employee of the OCBC Group holding
the rank or equivalent rank of Manager
and above and any Group Executive
Director selected by the Remuneration
Committee, as well as non-executive
Directors of the Group, are eligible to
participate in the Scheme.
The Bank has identified a group of senior
executives whose authority and actions
are deemed to have a major influence on The cumulative total number of new
ordinary shares to be issued by the
Bank in respect of options granted
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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