In order to fulfil the requirements of the Resolution No 258/2011 of the Polish Financial Supervision Authority of 4 October 2011 on detailed principles for functioning of risk management system and internal control system and detailed terms of estimating internal capital by banks and reviewing the process of estimating and maintaining internal capital, and the principles for determining the variable salary components policy for persons holding managerial positions in the Bank, the Bank implemented by resolutions of:
- the Supervisory Board: ‘The variable salary components policy for persons holding managerial positions in the Bank’ (constituting the basis of further regulation issue) and ‘The variable salary components policy for the Management Board’s members’,
- the Management Board: ‘The variable salary components policy for persons holding managerial positions’,
- Supervisory Boards of selected subsidiaries of the PKO Bank Polski SA Group (PKO Leasing SA, PKO TFI and PTE): ‘The variable salary components policy for the Management Board’s members’.
Cited Principles and Regulations issued on their basis, describe the procedure of granting variable salary components associated with the results and effects of work to the above mentioned persons. In accordance with the requirements of the cited resolution of the PFSA and in proportion specified in it, the variable salary components are granted in the form of:
- not deferred (in the first year after the calendar year constituting a period of assessment),
- deferred (for the next three years after the first year of the assessment period),and both the not deferred and deferred salary, is granted in equal parts in cash and in the form of a financial instrument, i.e. the phantom shares (in which conversion into cash is carried out after an additional period of retention).
Component of salary in the form of a financial instrument is converted into phantom shares after granting a particular component - including the median of the daily average prices of the Bank’s shares (Volume Weighted Average Price) on the Warsaw Stock Exchange, published in the Thomson Reuters or Bloomberg information system - from the fourth quarter of the assessment period. Next, after a period of retention and deferral period, shares are converted into cash - including the median of the daily average prices of the Bank’s shares (Volume Weighted Average Price) on the Warsaw Stock Exchange from the period of a third quarter preceding the payment (the Management Board) and a third quarter of a calendar year, in which the payment is made (other persons on managerial positions), published in the Thomson Reuters or Bloomberg information system.
The deferral salary may be reduced in the event of deterioration in the financial performance of the Bank or a Group Entity respectively, the loss of the Bank / Company or deterioration of other variables related to the effects of work during the evaluation of persons holding managerial positions and results of the performance of organisational units/cells supervised or managed by these persons, which revealed after a period of evaluation.
As at 31 December 2013 a provision for variable salary components for 2012 and 2013 amounted to PLN 28.5 million, of which PLN 16 million for persons holding managerial positions except from the Bank’s Management Board, PLN 9 million for the Bank’s Management Board, and PLN 3.5 million for the entities of the Group. As at 31 December 2012 the provision for variable salary components in 2012 amounted to PLN 15.7 million, of which for Management Board amounted to PLN 4.1 million and for the entities of the Group it amounted to PLN 2.4 million.
Under current regulations, in 2013, not deferred component was paid out - cash for persons holding managerial positions except for the Bank’s Management Board in the amount of PLN 3 million, for the Bank’s Management Board in the amount of PLN 1.6 million, and PLN 1 million for the entities of the Group.
Payment of phantom shares, calculated in accordance with law provisions, based on the share price for the third quarter of 2013 in the amount of PLN 36.93, was made in November 2013 for persons holding managerial positions except for the Bank’s Management Board in the amount of PLN 3.3 million, in January 2014 for the Bank’s Management Board (PLN 1.6 million), and PLN 0.7 million for the entities of the Group.