Board Human Resources and Remuneration Committee Report

Composition of the Committee

The Board appointed Human Resources and Remuneration Committee as at the end of the year comprised of the following members:

• Mr. D.S. Weerakkody - Chairman
• Mr. K.G.D.D. Dheerasinghe
• Prof. U.P. Liyanage
• Mr. W.M.R.S. Dias - Managing Director/CEO - (By invitation)

Except for the Managing Director/CEO who is an Executive Director, all other Directors are Non-Executive Directors.

The Managing Director who is responsible for the overall management of the Bank provides information to the Committee and participates in all deliberations. The Managing Director took part in all deliberations except in relation to those matters where the outcome had an impact on him.

Brief profiles of each member are given under the profiles of Board of Directors.

 

Charter of the Committee

The Committee is vested with power to evaluate, assess, decide and recommend to the Board of Directors on any matter that may affect the Human Resources Management of the Bank and shall specifically include -

• Determining the compensation of the Chairman, Deputy Chairman, Managing Director and other members of the Board of Directors of the Bank, while ensuring that no Director is involved in setting his or her own remuneration.
• Determining the compensation and benefits of the Key Management Personnel and establishing performance parameters in setting their individual goals and targets.
• Formulate guidelines, policies and parameters for the compensation structures for all Executive staff of the Bank and oversee the implementation thereof.
• Review information related to executive pay from time to time to ensure same is in par with the market/industry rates or as per the strategy of the Bank.
• Evaluate the performance of the Managing Director and Key Management Personnel against the pre-agreed targets and goals.
• Make recommendations to the Board of Directors from time to time of the additional/new expertise required by the Bank.
• Assess and recommend to the Board of Directors of the promotions of the Key Management Personnel, address succession planning and issues connected to the Organisational Structure.
• Evaluate, assess and make recommendations and provide directions pertaining to the Board of Trustees and the management of the Private Provident Fund of the Bank.
• Make recommendations/ decisions/directions pertaining to the statutory payments made by the Bank on behalf of its employees (EPF, ETF, Terminal Benefits, etc.), ensuring the effective fulfilment of all commitments arising as a result of the employer-employee relationship.
• Recommend/decide/give directions on disciplinary matters resulting in a significant financial loss to the Bank caused by Key Management Personnel of the Bank.
• Formulating formal and transparent procedures for developing policy on remuneration for Directors and Executives.
• Approving annual salary increments, bonuses, changes in perquisites and incentives.

Guiding Principles of the Committee

The overall focus of the Committee:

• Setting guidelines and policies to formulate compensation packages, which are attractive, motivating and capable of retaining qualified and experienced employees in the Bank. In this regard, the Committee sets the criteria such as qualifications, experience and the skills and competencies required, to be considered for appointment or promotion to the post of Managing Director and to Key Management positions.
• Setting guidelines and policies to ensure that the Bank upholds and adhere to the provisions of the Laws of the Land particularly those provisions of the Banking Act No. 30 of 1988, including the Directions issued by the Monetary Board/Director of Bank Supervision in accordance of the provisions of such Act.
• Providing guidance and policy direction for relevant matters connected to general areas of Human Resources Management of the Bank.
• Ensuring that the performance related element of remuneration is designed and tailored to align employee interests with those of the Bank and its main stakeholders and support sustainable growth.
• Structuring remuneration packages to ensure that a significant portion of the remuneration is linked to performance, to promote a pay for performance culture.
• To develop a robust pipeline of rising talent capable and available to fill key positions in the Bank.

Committee Meetings

The Committee held five. meetings during the year under review. The attendance of Committee members at meetings is stated under the Corporate Governance section. The Chairman of the Committee can convene a special meeting in the event a requirement arises provided all members are given sufficient notice of such special meeting. The quorum for a meeting is three members.

Members of the Corporate Management were invited to participate at the sittings of the Committee meetings as and when required by the Chairman, considering the topics for deliberation at such meetings. The proceedings of the Committee meetings were regularly reported to the Board of Directors.

 

Methodology used by the Committee

The Committee recognised rewards as one of the key drivers influencing employee behaviour, thereby impacting business results. Therefore, the Bank's compensation philosophy is designed to pay for performance and promotional increases are based on performance and potential.

The Committee evaluates the performance of the Managing Director and Key Management Personnel against the pre-agreed targets and goals that balance short-term and long-term financial and strategic objectives.

The Bank’s variable (bonus) pay plan is determined according to the overall achievements of the Bank and pre-agreed individual targets, which are based on various performance parameters. The level of variable pay is set to ensure that individual rewards reflect the performance of the Bank overall, the particular business unit and individual performance.

Further, the Committee may seek external agencies to carry out salary surveys to determine the salaries paid to staff vis-à-vis the market position, enabling the Committee to make informed decisions regarding the salaries in the Bank. Moreover, the Committee also ascertains the engagement levels of staff through Staff Engagement Surveys. A staff engagement survey was carried out during the year.

During the year, the Committee further focused on strengthening the leadership quality and advised the Management to prepare a leadership competency framework with specific behavioural indicators for the Executive Officers in Grade IV and above (Chief Manager to Corporate Management), grades. This framework will be rolled out in 2014 as a further step in addressing matters relating to the development of the Leadership Talent and Succession Management. The Committee also focused on the need to develop strategic thinking at the leadership level in the Bank and directed the Corporate Management of the Bank to undergo a key strategy programme with an eminent resource person from a leading international business school. This was with a view to ensure that the top team is provided with necessary tools to face the challenging times ahead in the financial services industry. The Committee also initiated Executive Coaching for identified senior leaders of the Bank. These efforts will continue to gear the team with sufficient exposure so that they are equipped to face the future business challenges. The Committee further initiated action to develop a set of customer service competencies and all training of the front
line staff to be based on those competencies from 2014 onwards.

The Committee believes that the quality of leadership will drive performance both inside and outside the organisation. Therefore building leadership depth to respond to changing business conditions, execute strategy, increase investor confidence and anticipate customer requirements and set more relevant and impactful leadership standards will continue to be a top priority for the Committee in 2014.

D.S. Weerakkody
Chairman
Human Resources and Remuneration Committee

Colombo
February 24, 2014