Incentive systems

Nordea offers competitive, but not market leading compensation packages. Nordea has a total remuneration approach to compensation that recognises the importance of well-balanced but differentiated remuneration structures based on business and local market needs, as well as the importance of remuneration being consistent with and promoting sound and effective risk management not encouraging excessive risk-taking or counteracting Nordea’s long-term interests.

Profit sharing VSP Bonus schemes EIP GEM EIP LTIP Profit sharing

Profit sharing scheme

The Profit Sharing scheme is capped and not based on the value of the Nordea share. It is a benefit through which employees receive a share of the profit to encourage sound performance and one Nordea team which, in turn, will lead to better profitability and make working for the Nordea Group more attractive.

In 2016, a total of EUR 35m was provided for under Nordea’s Profit Sharing scheme for all employees. For 2016, each employee can receive a maximum of EUR 3,200, based on a predetermined set of performance criteria including Return on Capital at Risk, Return on Equity relative to peers, Customer Satisfaction Index both absolute and relative to Nordic peers. If all performance criteria were met, the cost of the scheme would have amounted to a maximum of approximately EUR 97m. 

Updated: April 2017    
Source: Annual Report 2016

VSP

Variable Salary Part (VSP)

VSP may be offered to selected managers and specialists to reward strong performance and as means to recruit, motivate and retain strongly performing employees at the Nordea Group. VSP must be transparent and have predefined success criteria with clear weightings. A VSP must include financial and non-financial success criteria based on Nordea Group KPIs decided annually by CEO. In the event of weak or negative overall results for the Nordea Group, VSP outcomes can be adjusted downwards at the discretion of the CEO. 

A VSP agreement does not exceed a maximum outcome of 25% of annual fixed salary, except for a few managers and key specialists within specific areas, where the amount can be a maximum of 100% of annual fixed salary. The responsible GEM member may, in extraordinary cases, approve a VSP agreement up to 100% of annual fixed salary. 

Nordea adheres to the Grandparent principle when enrolling employees to any VSP scheme and approving the outcome. Nordea has introduced deferral programmes for the staff in the risk analysis defined as Identified Staff. 

Updated: March 2017   
Source: Annual Report 2016

Bonus schemes

Bonus schemes

Bonus schemes are only offered to selected groups of employees in specific business areas or units approved by the Board of Directors. Nordea pays bonuses linked to performance, with both divisional bonus pools and individual allocations being explicitly based on defined performance measures. Divisional financial performance is measured as risk-adjusted profits, explicitly incorporating capital and funding costs, and is adjusted for multi-period revenue effects and minimum required profit. In the event of weak or negative overall results for the Nordea Group, bonus pools can be adjusted downwards at the discretion of the Board of Directors. As such, individual compensation is determined based on detailed performance evaluations covering a range of financial and non-financial factors. 

Inappropriate individual bonuses are prevented through both caps on the percentage of risk-adjusted profit that can be paid out, as well as individual caps. No employee in Nordea has a variable remuneration that exceeds 200% of the fixed remuneration. The maximum ratio between the fixed and the variable remuneration for Identified Staff is currently 100%. Nordea has introduced deferral programmes for the staff in the risk analysis defined as Identified Staff. 

Care is taken to ensure that control and compliance staff employed in divisions with bonus schemes is competitively rewarded although not eligible for bonus. 

The Board of Directors decides on new or revised bonus schemes and the outcome of divisional bonus pools by proposal from BRC. GEM is responsible for the implementation of the agreed bonus schemes. Nordea also applies a stringent process to ensure that compensation for individuals does not encourage excessive risk-taking behaviour. To supplement the division-level assessment, there is an approval process for significant bonuses for individuals.

Updated: March 2017  
Source: Annual Report 2016

EIP

Executive Incentive Programme (EIP)

Nordea's Executive Incentive Programme 2016 ("EIP 2016") aims to strengthen Nordea’s capability of retaining and recruiting the best talents. Furthermore, the aim is to stimulate the managers and key employees whose efforts have a direct impact on Nordea’s result, profitability and long-term value growth. In 2017, Nordea will offer an EIP 2017 with similar aims and structure as EIP 2016.

EIP rewards performance that meets agreed predetermined targets at Group, business unit and individual level. The effect on the long-term result is to be considered when determining the targets. EIP shall not exceed the fixed salary.

EIP shall be paid in the form of cash and be subject to share price indexation, deferral, forfeiture clauses and retention as per relevant remuneration regulations. The main part of EIP 2016 is paid no earlier than October 2020.

Participation in the programme will be offered to up to 400 managers and key employees, except GEM, at the Nordea Group. Since 2013, EIP has been offered instead of Nordea's LTIP and VSP for invited employees.

Updated: April 2017     

Source: Annual Report 2016

GEM EIP

GEM Incentive Programme (GEM EIP)

Variable salary to the executive officers will be offered as an Executive Incentive Programme 2016 (“GEM EIP 2016”) to reward performance that meets predetermined targets at Group, business area/group function and individual level (GEM members responsible for 2nd line of defence, Head of Group Risk Management and Head of Group Compliance, do not have Group targets). The effect on the long term result is to be considered when determining the targets. The outcome from GEM EIP 2016 will be paid over a five-year period in cash and be subject to forfeiture clauses, Total Shareholder Return indexation and retention based on the SFSA’s regulations on remuneration systems, taking account of domestic rules and practices where relevant. GEM EIP 2016 has a one year performance period and the outcome shall not exceed the fixed salary. The executive officers were offered a similar programme in 2013, 2014 and 2015 (GEM EIP 2013, GEM EIP 2014 and GEM EIP 2015). 

Updated: April 2017  
Source: Annual Report 2016

LTIP

Long Term Incentive Programme (LTIP)

Nordea offered Long-Term Incentive Programmes (LTIP) years 2007-2012.

More information on Nordea LTIPs is presented in the table in note G7 in Nordea’s Annual report and in Annual reports of previous years.

Updated: March 2017