Nordea’s Remuneration Policy
The Board of Directors decides on the Group Board Directive on Remuneration (Nordea's internal Remuneration Policy), based on an analysis of the possible risks involved, and ensures that it is applied and followed-up as proposed by the Board Remuneration and People Committee.
Information about the number of meetings held by the Board of Directors and its committees.
Nordea's internal Remuneration Policy is applicable to the whole group and is also approved by the Board of Directors of each legal entity respectively.
Aim of Nordea’s Remuneration Policy
Nordea’s Remuneration Policy (internally referred to as the Group Board Directive on Remuneration):
- Supports Nordea’s ability to recruit, develop and retain highly motivated, competent and performance-oriented employees and hence support the Group strategy
- Ensures that employees are offered a competitive and market-aligned total reward offering
- Supports sustainable results and the long-term interests of shareholders by including goals directly linked to the performance of Nordea and by awarding parts of variable remuneration in shares or other instruments
- Supports through application of Nordea's pay principles that pay decisions are made ensuring equal pay for equal work and that observed gender pay gaps are addressed
- Ensures that remuneration at Nordea is aligned with effective risk management, the Nordea purpose and values and applicable regulations.
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 having remuneration that is consistent with and promotes sound and effective risk management and that does not encourage excessive risk-taking or counteract Nordea’s long-term interests.
The link between performance, risk and variable remuneration in Nordea’s remuneration components is assessed annually to ensure business relevance, to ensure that all risks are addressed appropriately and to ensure compliance with applicable international and local regulations. This includes non-financial risks related to operational risks, compliance risks, reputational risks and specific remuneration-related risks. Most remuneration-related risks concern variable remuneration which, if not appropriately considered, could lead to excessive risk-taking. Risks are addressed through the regular reviews of remuneration structures as well as individual remuneration components, participants in variable remuneration plans and the potential size of potential awards and by disclosing relevant information.
Fixed remuneration components
Fixed base salary should remunerate for role and position and is affected by job complexity, responsibility, performance and local market conditions.
Allowance is a predetermined fixed remuneration component tied to the employee’s role and position. The fixed base salary is, however, the cornerstone of all fixed remuneration. Allowances are not linked to performance and do not incentivise risk-taking.
Pension and insurance aim at ensuring an appropriate standard of living for employees after retirement as well as personal insurance coverage during employment. Pension and insurance provisions are in accordance with local laws, regulations and market practice and are either collectively agreed schemes or company-determined schemes or a combination. Nordea aims to have defined contribution pension schemes.
Benefits at Nordea are awarded as part of the total reward offering that is either individually agreed or based on local laws, market practice, collective bargaining agreements and company-determined practice.
Profit Sharing Plan (PSP)
Profit Sharing Plan (PSP) is offered Group-wide to all Nordea employees but not to employees who are eligible for any of Nordea’s other formal annual variable remuneration plans. For eligible employees, the Profit Sharing Plan is offered irrespective of position and salary and aims to collectively reward employees based on achievement in relation to predetermined financial goals as well as goals relating to customer satisfaction. The Profit Sharing Plan is capped financially, and the outcome is not linked to the value of Nordea’s share price.
Recognition Scheme is offered to employees to recognise extraordinary performance. The individual performance is assessed based on a predetermined set of goals. Employees eligible for other formal annual variable remuneration plans, excluding the Profit Sharing Plan, are not eligible for Recognition Scheme awards.
Variable Salary Part (VSP)
Variable Salary Part (VSP) was offered to selected people leaders and specialists to reward strong performance. The assessment of individual performance is based on a predetermined set of well-defined financial as well as non-financial goals. The VSP maximum outcome for 2021 should normally not exceed a maximum outcome of 50% of the annual fixed salary and will not exceed the annual fixed salary. Awards from VSP are paid in cash. For material risk takers, VSP awards are partly delivered in instruments with subsequent retention. Parts of the awards for material risk takers and certain other participants from VSP are subject to at least a four-year pro rata deferral period, in certain exceptions three years, with forfeiture conditions applying during the deferral period.
Bonus schemes were offered only to selected groups of employees in specific business areas or units as approved by the Board of Directors, e.g. in Large Corporates & Institutions, Nordea Asset Management, in Nordea Funds and within Group Treasury. The aim is to ensure strong performance and to maintain cost flexibility for Nordea. Individual awards are determined based on detailed performance assessments covering a range of financial and non-financial goals. 2021 bonus awards from bonus schemes are paid in cash. For material risk takers, awards are partly delivered in instruments with subsequent retention. Parts of the awards for material risk takers and certain other participants in a bonus scheme are subject to a four-to-five-year pro rata deferral period, in certain exceptions three years, with forfeiture conditions applying during the deferral period.
Executive Incentive Programme (EIP)
Executive Incentive Programme (EIP) is offered to recruit, motivate and retain selected people leaders and key employees outside of the GLT and aims to reward strong performance and efforts. The assessment of individual performance is based on a predetermined set of well-defined financial as well as non-financial goals. Individual EIP awards will not exceed the annual fixed salary. Awards from the EIP 2021 are normally, and always for material risk takers, allocated partly in cash and partly in instruments with subsequent retention. Parts of the awards for participants in the EIP are subject to a four-to-five-year pro rata deferral period, in certain exceptions three years, with forfeiture conditions applying during the deferral period.
Executive Incentive Programme (EIP 2021) for GLT
The Executive Incentive Programme (EIP 2021) for GLT members has a one-year performance period and includes pre-determined performance goals and targets at Group, business area/Group function (BA/GF) and individual level. The impact on long-term results was considered when determining the targets.
The outcome from the EIP 2021 has been based on the Board of Director’s assessment of performance against the pre-determined targets.
The outcome from the EIP 2021 will be paid to GLT members in equal portions of cash and Nordea shares, and will be subject to forfeiture clauses. 40% of the confirmed outcome of the EIP 2021 will be delivered in equal portions of cash and Nordea shares in 2022. The remaining 60% of the EIP 2021 outcome is deferred for annual pro rata delivery over a five-year period, meaning that a significant portion of the outcome remains to be delivered at the time of the award. No dividends are paid during the deferral period. Nordea shares will be subject to 12 months' retention when delivered to the GLT members. The maximum outcome of the EIP 2021 for GLT members participating in the LTIP 2021–2023 was 75% of the annual fixed base salary.
Performance goals at Group level included financial goals measuring return on equity, income and cost-to-income ratio as well as non-financial goals measuring employee engagement and customer satisfaction. BA/GF goals included BA/GF-specific financial and non-financial goals. At individual level, performance was measured in relation to the individually agreed goals and targets including risk and compliance.
The weighting of Group, BA/ GF and individual goals is determined individually for the CEO, reflecting his overall responsibility for the Nordea Group, as well as for the members heading a business area or a Group function. The overall ambition for 2021 was to deliver on Nordea’s strategic priorities. Any awards were determined on the basis of achievement in relation to the agreed goals and targets following appropriate risk adjustments.
Long-Term Incentive Programme 2021–2023
In 2021 the Board of Directors decided to continue the long-term incentive programme by launching the LTIP 2021–2023 for the GLT and to a maximum of 50 senior leaders and key employees whose efforts have a direct impact on Nordea’s results, profitability, customer vision and long-term growth.
The main purpose of the LTIP 2021–2023 is to further align GLT members’ interests with those of shareholders. The LTIP 2021–2023 has a three-year performance period from 1 January 2021 to 31 December 2023 and subsequent deferral and retention according to regulations.
The total maximum number of shares that can be granted under the LTIP 2021–2023 was nominally allocated to the participants in 2021 as conditional share awards. In 2024, based on Nordea’s performance against pre-established performance criteria, the maximum number of shares or a proportion of the shares will be awarded individually to the participants.
The first portion of shares of the potential award will be delivered in 2024. The rest of the shares will be deferred and delivered annually in five equal portions during 2025–2029. Each share delivery is subject to a 12-month retention period.
Share grants may be reduced in part or full subject to risk and compliance adjustments. The LTIP 2021–2023 performance requirements have been set so that the maximum outcome will require achieving exceptional performance from a shareholder perspective. The assessment of performance during the performance period will be based equally on the following performance criteria:
- Relative total shareholder return (rTSR) measured against selected Nordic and European peer banks
- Absolute total shareholder return (absolute TSR)
- Absolute cumulative earnings per share (absolute EPS).
- A risk-adjustment underpin is also included.
Furthermore, the GLT members must hold a significant number of the shares subsequently granted until the total value of the GLT member’s shareholding in Nordea in total corresponds to 100% of the GLT member’s annual gross salary. Such shares must be held until the GLT member steps down from the GLT position.
Long-Term Incentive Plan (LTIP) 2020-2022
In 2020, the Board of Directors decided to launch a LTIP 2020-2022 to Nordea's Group Leadership Team (GLT) in accordance with the remuneration policy for governing bodies adopted by an advisory vote at Nordea's 2020 AGM. The main purpose of the LTIP 2020-2022 is to further align the GLT's interests with those of shareholders.
The LTIP 2020-2022 has a three-year performance period from 1 January 2020 to 31 December 2022 and deferral and retention periods, according to regulations.
The total maximum number of shares that can be granted under the LTIP 2020-2022 was nominally allocated to the participants in 2020 as conditional share awards. In 2023, based on Nordea's performance against pre-established performance criterial the maximum number of shares or a proportion of the shares will be awarded to the participants. The first portion of the shares of the potential award will be delivered in 2023. The rest of the shares are deferred and delivered annually in five equal portions during 2024-2028. Each share delivery is subject to a 12-month retention period.
Supporting sound risk management
Nordea performs an ongoing risk assessment of remuneration risks conducted within the framework of the Compliance, Conduct and Product Committee (CCPC), the non-financial risk forums of each business area and Group functions as well as the risk and control self-assessment.
Nordea also mitigates relevant risks by means of our internal control framework, which is based on the control environment and includes the following elements: values and management culture, goal orientation and follow-up, a clear and transparent organisational structure, three lines of defence, the four eyes principle, the quality and efficiency of internal communication and an independent assessment process.
The following principles are further examples of how sound risk management is supported:
- Applying a group variable remuneration funding mechanism which considers prudential and appropriate risk adjustments when setting a group pool for each performance year.
- Ensuring that the Board of Directors approves the total outcome of variable remuneration before award, which allows for adjustments in outcome if deemed appropriate by the Board of Directors, e.g. considering risk limits.
- There is an appropriate balance between fixed and variable remuneration.
- Relevant control functions provide input on the setting of a Group variable remuneration pool, performance goals and the outcome of such, to ensure that the impact on staff behaviour and risks of business undertaken are addressed.
- The effect on long-term results is considered when determining goals and targets for variable remuneration.
- No employee at Nordea can earn variable remuneration exceeding 200% of their annual fixed remuneration. The maximum ratio between fixed and variable remuneration for material risk takers was 200% in 2021 in accordance with the 2019 AGM’s decision. In practice, however, a ratio between the fixed and the variable remuneration above 100% of annual fixed remuneration only applies to a very limited number of employees as the outcome of Nordea’s variable remuneration plans is capped at certain levels.
- The risks set out in Nordea’s Risk Appetite Statement are linked to forfeiture conditions to ensure that breaches of risk limits influence variable remuneration awards.
- Payments related to early termination of employment should reflect performance achieved over time and should be designed to not reward failure or misconduct.
- Employees engaged in control functions are compensated independently of the performance of the business unit(s) they control and predominantly through fixed remuneration.
Sustainability risk in Nordea’s remuneration policy
Good and responsible investment and insurance advice is a key part of the way we work, and it includes providing our customers with information about the potential risks involved. These risk considerations also cover the downturn effect that environmental, social or governance events can have on the value of the investment. Good and responsible investment and insurance advice is also promoted through Nordea’s variable remuneration programmes.
Employees eligible for variable remuneration, who provide investment or insurance advice to customers, are either rewarded through specific performance goals and targets linked to good quality advice or quality of advice is considered as part of the holistic performance assessment. Independent control functions are involved in setting performance goals and targets and they provide input to individual performance assessments. Furthermore, people leaders also have performance goals linked to risk and compliance performance which require adherence to high standards in customer service and advice quality, as well as our Code of Conduct.
Similarly, variable remuneration for those making investment decisions is linked to the impact, positive and negative, that environmental, social or governance events can have on the value of the investment. There are specific performance goals and targets which link the value of the managed investments to the remuneration outcome for investment managers. Additionally, in some cases there are also specific performance goals and targets supporting sustainable investment choices. These elements support the integration of sustainability risk in investment decisions.
Audit of Nordea’s Remuneration Policy
The BRPC follows up on the application of the Remuneration Policy and supplementary instructions within Nordea through an independent review by Group Internal Audit. This audit is conducted at least annually.